Introduction to a General Theory of Money and Capital

By Patrick Castex

The ISLM model is a fiction because Keynes’ market for money reserves does not stand up to examination. Moreover, demand of money for speculative purposes is just as much of a myth at the macroeconomic level. It is necessary to reconsider speculation on financial markets as well as the link between interest rate and profit rate. This paper proposes element of an eclectic model that includes investment savings and employment profitability (ISEP). The model is dubbed "eclectic" because it blends classical theory about the value of labor and hence of profit offered by classical economists, including Marx, with a radicalized Keynes stressing the outlet constraint and the introduction of money, or "finance-money," as a catalyst into the real sphere and financial markets. Based on the dialectic between flows (means of transaction) and stock (reserve of value, including capital), this static equilibrium model can be made to behave dynamically and explain both fluctuations and growth.


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