Marx's interest rate determinism
Marx's interest rate determinism is based on the analysis of the nature of interest rate and scientifically reveals the decisive factors of interest rate. Starting with the division of surplus value among different capitalists, this theory holds that interest is a part of the surplus value divided by the capitalist who lends capital from the capitalist who intervenes in capital. Surplus value is expressed as profit, so the amount of interest depends on the total profit, and the level of profit depends on the average income statement. Because interest is only a part of profit, profit itself becomes the highest limit of interest. Under normal circumstances, the interest rate will not be completely equal to the average profit rate, nor will it exceed the average profit rate. In short, the interest rate varies between zero and the average profit rate.
Within the range of interest rate changes, there are two factors that determine the interest rate level, one is the profit rate, and the other is the proportion of total profit distributed between borrowers and borrowers.
The profit rate determines the interest rate, which has the following characteristics.
1. With the development of technology and the improvement of the organic composition of capital, the average profit rate has a downward trend, which also affects the trend of the average interest rate changing in the same direction.
Although the average profit rate has a downward trend, it is a very slow process, in other words, the average interest rate is relatively stable.
3. Because the interest rate depends on the result of profit distribution between the two types of capitalists, the decision of interest rate is very accidental. In other words, the average interest rate cannot be determined by any law, but traditional habits, legal provisions and competition can directly or indirectly affect the interest rate.
It should be noted that the average interest rate is a purely theoretical concept. In real life, people face the market interest rate, not the average interest rate. The fluctuation of market interest rate directly depends on the comparison between supply and demand of capital lending. As for the proportion of total profits distributed between lenders and borrowers, different situations may also occur. If the total profit ratio between the lender and the borrower is fixed, the interest rate will increase with the increase of the profit rate, on the contrary, it will decrease with the decrease of the profit rate.
Several viewpoints of western interest rate determination theory
Looking back on the development of western interest rate system, it can be divided into three stages: the earliest laissez-faire period, the middle period of state monopoly, and the interest rate system combining regulation with modern market economy.
1. On the interest rate of savings and investment
The interest rate depends on the balance between savings and investment. Interest rate is the price at which the supply and demand of capital tend to be equal, while savings constitute the supply of capital and investment constitutes the demand of capital. Therefore, the interest rate is determined by savings and investment.
R is the interest rate, S is the capital supply, I is the capital demand, and R is the equilibrium interest rate.
When s i, r decreases. When the supply of funds exceeds the demand for funds, the interest rate will fall.
S "I, R rises. When the capital supply is less than the capital demand, the interest rate will rise.
S=i is r0. When the capital supply equals the capital demand, the interest rate is the equilibrium interest rate.
Investment demand depends on "marginal productivity of capital", that is, I(r)
And saving depends on "time preference" (that is, consumption), that is, s(r).
Classical school believes that under the adjustment of interest rate, s=i, interest rate depends on the equilibrium point of marginal savings curve and marginal investment curve, so that the total social supply is equal to the total social demand, so that the market economy will automatically achieve full employment.
The classical school believes that interest rates are completely determined by practical factors such as technical level, labor supply, capital and natural resources, and are not affected by monetary factors. The defect of this theory is that it does not consider the monetary factor, but only considers the equilibrium of the commodity market.
Liquidity preference theory of Keynesian School
Haines liquidity preference theory is one of the interest rate determination theories. Liquidity preference theory of Keynesian school thinks that interest rate is not determined by the interaction between savings and investment, but by the relationship between supply and demand of money. The interest rate theory of Keynesian school is a monetary theory.
According to the theory of liquidity preference interest rate, interest rate is determined by two factors: the amount of money and the liquidity preference of ordinary people. Keynes believed that when people choose the holding form of their wealth, most people tend to choose money, because money has complete liquidity and minimal risk, and usually, the money supply is limited. In order to get money, people must pay the price. Therefore, interest is the return of giving up money and sacrificing liquidity in a certain period of time. Interest rate is an indicator to measure people's preference for liquidity and their reluctance to release funds on their behalf. Discipline is to make the amount of wealth that the public is willing to hold in the form of money (that is, money demand) completely equal to the price of the existing money stock (money supply). When the public has a strong preference for liquidity and the amount of money they are willing to hold is greater than the money supply, interest rates will rise, and vice versa.
The defect of this theory: only the equilibrium of money market is considered.
The theory of loanable funds of neoclassical school
He is a supplement to the classical interest rate theory. According to this theory, the market interest rate is not determined by investment and savings, but by supply and demand in loanable funds. The demand between waiting and waiting includes the actual capital demand of investors (which decreases with the increase of interest rate), the increase of money demand of families and enterprises, and the increase of capital demand of government deficit. Loanable funds's supply includes the real savings of households and enterprises (rising with the increase of interest rates) and the increase of real money supply, as well as the capital inflow caused by interest rate changes.
Ld: loanable funds demand = investment+increase in money demand+fiscal deficit.
Ls: loanable funds's supply = savings+money supply increase+capital inflow.
Defects of this theory:
1. The equilibrium interest rate r0 determined by the total demand and total supply of funds to be paid is balanced, but it does not necessarily guarantee that the commodity market and the money market are balanced at the same time. This will inevitably have an impact on national income and economic activities, making it impossible for interest rates to remain stable.
2. Do not consider the impact of income on R ..
Advantages of this theory:
At the same time, it overcomes the defects of classical school and Keynesian school's interest rate theory, synthesizes their advantages, and considers the influence of I, S, LS and LD on R.
IS-LM interest rate theory
According to this theory, the whole social and economic activities can be divided into two markets, the physical market and the money market. The main objects of physical market research are investment I and savings S, and the main objects of money market research are money demand L and money supply M. The condition of plant market equilibrium is investment I= savings S. The condition of money market equilibrium is money demand L= money supply M, and the whole social and economic equilibrium must reach equilibrium in both physical market and money market. In the physical market, investment is negatively correlated with interest rate, while savings is positively correlated with income. According to the relationship between investment and savings, we can get a downward inclined IS curve, and any point on the curve represents the local equilibrium point when investment and savings are equal in the physical market. In the money market, money demand is negatively correlated with interest rate, and money supply is positively correlated with interest rate. When the money supply is controlled by the central bank, an upward sloping LM curve can be derived, and any point on the curve represents the local equilibrium point when the money demand and money supply are equal in the money market. Neither LS curve nor LM curve can independently determine the interest rate and income level in the comprehensive equilibrium state. Only when twelve markets reach equilibrium at the same time, that IS, when the IS curve and the IM curve intersect, the intersection point E can determine the interest rate and income level.
When investment, savings, government purchase expenditure and taxes change, it will lead to the shift of IS curve. If the LM curve remains unchanged, the IS curve moves to the right, which will increase the equilibrium income and the equilibrium interest rate, and vice versa.
When the reserve ratio and open market operations change, the LM curve will move. If the IS curve remains unchanged and the LM curve moves to the right, the equilibrium income will increase and the equilibrium interest rate will decrease, and vice versa.
It overcomes the defects that classical school and interest rate theory only consider commodity market equilibrium, Keynesian school's interest rate theory only considers money market equilibrium, and neoclassical school's interest rate theory ignores their respective equilibria when considering two markets.