Abstract

Keynes provocatively mentioned, but did not elaborate upon, what he called ‘the functionless[ness of] the [modern] investor,’ ‘the [future?] euthanasia of the rentier,’ and ‘the [future?] socialization investment’ in his General Theory of 1936. What might he have meant? I think I might know, and in this piece provide both (a) a positive account of contemporary finance-capital and the markets through which it flows, and (b) a normative case for specific reforms in the spirit of a more ‘radical’ Keynes than is currently taught. I call the upshot a ‘Capital Commons.’ The argument starts from a simple observation with which I think both the Keynes of the General Theory and, yet more surely, the Keynes of the (Wicksellian) Treatise on Money would agree: That is that the overwhelmingly greater part of any contemporary ‘developed’ country’s finance capital is now publicly generated even when privately managed. This arrangement features certain advantages where capitalizing (pun intended) on the comparative advantages of the public and private sectors in financing production is concerned. But it also poses a problem. The problem that current arrangement poses is that pervasive yet still underappreciated recursive collective action predicaments endemic to all exchange economies, combined with the decoupling of profits from production made possible by Wicksellian money endogeneity and stratified capital markets in such economies, render this division of labor both vulnerable to counterproductive speculative excess and sustainable, when at all, only by luck. The only way to get public finance-capital allocation reliably right, and thus to get credit modulation and long-term productive investment reliably right, is to manage public capital publicly and private capital privately. I show how to do this, and hence how to ‘socialize investment’ along Keynesian lines in a manner sufficiently attentive to both public and private sector comparative advantage, through the simple organizing framework of a public balance sheet conceived as a central bank balance sheet.

About the Author

Robert Hockett is cofounder of Cornell Research Academy of Development, Law, and Economics (CRADLE). Hockett's principal teaching, research, and writing interests lie in the fields of organizational, financial, and monetary law and economics in both their positive and normative, as well as their national and transnational, dimensions. His guiding concern in these fields is with the legal and institutional prerequisites to a just, prosperous, and sustainable economic order.

Publication Details

Year: 2024