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Contributions to Political Economy, Vol. 17, No. 1, pp. 39-52, 1998

research-article

THOMAS TOOKE AND THE INFLUENCE OF THE RATE OF INTEREST ON PRICES: IMPLICATIONS FOR DISTRIBUTION THEORY

MASSIMO PIVETTI*

Università di Roma ‘La Sapienza’

Abstract

Thomas Tooke included money interest among the determinants of normal money production costs, together with money wages and production techniques. This inclusion permitted him to explain the existence, in actual fact, of a direct relationship between the rate of interest and the level of prices. He did not develop the implications for distribution theory of his view of the influence of the rate of interest on the price level. In the present article it is maintained that the rate of interest emerges from Tooke's analysis as the regulator of the ratio of prices to money wages, with the corollary that there is implicit in it a causal relationship between money interest and normal profit that goes from the former to the latter. This may be connected with Sraffa's suggestion of a determination of the rate of profit by the money rate of interest and lend it the support of Tooke's scrupulous analysis of facts.


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