The long-period theory of employment

  • Robinson J
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The article presents the author's response to the comments made on his article "General Theory of Employment, Interest and Money," which appeared in the November 1936 issue. According to the author, he completely agrees with the important point critics of his article make that the increased demand for money resulting from an increase in activity has a backwash, which tends to raise the rate of interest. According to the author, it is a significant element in his theory of why booms carry within them the seeds of their own destruction. The author believes that money serves two principal purposes. By acting as a money of account it facilitates exchanges without its being necessary that it should ever itself come into the picture as a substantive object. Moreover, it is a store of wealth. The author claims that the difference from the traditional theory concerns its apparent conviction that there is no necessity to work out a theory of the demand and supply of output as a whole. According to the author, the rate of interest measures the premium, which has to be offered to induce people to hold their wealth in some form other than hoarded money.

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  • Joan Robinson

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