Working Paper No. 261 | January 1999

Theories of Value and the Monetary Theory of Production

This paper extends earlier work that argued that liquidity preference theory should be interpreted as a theory of value. Here I will argue that two theories of value are needed for analysis of a monetary production economy: the labor theory of value and the liquidity preference theory of value. Both Keynes and Marx were trying to develop a monetary theory of production; Marx, of course, adopted a labor theory of value in his analysis, and it was previously argued that Keynes adopted a liquidity preference theory in his. A monetary theory of production should adopt both, however, and I will argue that Keynes seems to have recognized this. Further, Keynes did adopt labor hours as the measure of value and said he agreed that labor produces all value. I admit it is still a leap to claim that Keynes accepted both theories of value. Instead, I argue he should have adopted both and will show that this is consistent with the purposes of the General Theory.

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