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Contributions to Political Economy Advance Access published online on August 1, 2006
Contributions to Political Economy, doi:10.1093/cpe/bzl003
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© The Author 2006. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved

Article

ON INTEREST AND PROFIT: THOMAS TOOKE'S MAJOR LEGACY TO ECONOMICS

Matthew Smith 1

1 University of Sydney


  Abstract

This paper argues that Thomas Tooke's (1773-1858) most important legacy to economics is not his conception of "endogenous money", however important, but is instead his original proposition that the long-run "average" rate of interest entered into the normal cost of production and, therefore, the normal prices of commodities, reflecting the notion that the interest rate systematically governs the normal rate of profit. The paper shows that this conception of an "autonomous" rate of interest advanced by Tooke contributes to overcoming the long-run neutrality of monetary forces which has traditionally characterized economic theory within the framework of "modern" classical analysis.


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