Re: Uncertainty and Liquidity Preference

[John Vertegaal <vertegaa@xxxxxxxxx>]

Paul Davidson wrote:

>If you would read my Post Keynesian Macroeconomic Theory book you would
>see that money is defined by two functions and two properties.

>The two functions are :
>1.THE MEDIUM OF CONTRACTUAL SETTLEMENT. (this is not the same as the
>conventional  theory's medium of exchange)
>2. A store of value.

>The two properties are :
>1.Its elasticity of production is approximately zero, i.e., [dlog money
>supply/dlog labor]  = zero.; accordingly when the demand for money (or
>any liquid asset [see below] increases, entrepreneurs can not hire more
>workers to produce additional quantities of money --- In other words,
>NONEY DOES NOT GROW ON TREES!!!!
>2. Its elasticity of substituion with the producible goods of industry is
>zero

>All other liquid assets (stocks, bonds, derivatives, etc ALSO POSSESS the
>second function (BUT NOT THE FIRST CONTRACTUAL SETTLEMENT FUNCTION) and
>they also possess the two elasticity properties.

>These elasticity properties were called "The ESSENTIAL Properties" of
>money and all liquid assets in Chapter 17 of the GT.

>Paul.

>How many times must I repeat this???

I know that you have been repeating this a lot, but what I'd like to know
is how particularly the second function squares with the "Uncertainty" of
the world we live in?
Isn't there a fundamental contradiction between these two axioms?

John V.