Reply: Keynes on the Interest Rate and Redistribution

After generously praising the summary of my book on Keynes, Meltzer (1996), and the book itself, Mr. Hill ventures that I rely on a passing thought and have a "muddled explanation of Keynes's views regarding the optimal size of the capital stock." He then offers his own explanations that draw on "left-wing neoclassical ideas."

He is wrong on both counts. My summary of Keynes's argument about default risk is neither muddled, as Hill claims, nor one of the many passing thoughts in Keynes's active stream of consciousness. And what I take to be Hill's main alternative does not, as it stands, satisfactorily explain why the capital stock is below the maximum attainable stock.