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NEOCLASSICAL CONCEPT OF INVESTMENT PARTICIPATION IN THE PROCESS
OF ECONOMIC REPRODUCTION.
Salamov Farrukh Fattoevich
Acting Professor of the Department of Economic Theory at the
Samarkand Institute of Economics and Service.
E-mail:
Key words:
sphere of production , reproduction, investment, loan capital, rate of income, market
interest rate.
Abstract:
the article is devoted to the neoclassical theory of the investment process .
Representatives of neoclassical theory were less critical of the importance of trade in obtaining
profit. They believed that it can be mutually beneficial, but not equivalent in the traditional sense
of this definition, which allows the parties to the transaction to gain a gain due to a higher
subjective assessment of the acquired good compared to the one given. The famous Austrian
economist O. Böhm-Bawerk believed that the price formed on the market is the price at which
the consumer will be able to purchase this good in the future, but since this future is uncertain, it
is necessary to constantly revise the assessment of the good. Changing the assessment of future
goods leads to constant fluctuations in the prices of capital goods.
Within the framework of the positive theory of capital, O. Böhm-Bawerk understands the latter
as a set of monetary resources, “productively used for roundabout methods of increasing the
quantity of goods in the future, which can take such forms as commercial, industrial and loan
capital”
. It should be noted that Böhm-Bawerk estimates the marginal utility of goods available
in the current period much higher than the marginal utility of the future volume of goods. From
his point of view, the refusal to consume goods at the present moment must be compensated by a
certain reward
.
The investment process described by O. Böhm-Bawerk clearly demonstrates that the ideas of
researchers of the late 19th century are based on fundamentally different approaches, according
to which the consumption sphere is given a leading role, including in the process of forming
investment sources. Authors increasingly argue that capital as a stock category and investments
as a flow category should be determined not by the cost method, but by assessing future income,
which is most clearly demonstrated in the works of I. Fisher. He is confident that income is the
excess of cash flow over the initially available stock. The key form of income is interest, which
permeates all economic relations, acting as a link between the present and the future. The main
incentive for investment is the difference between the rate of income and the market interest rate.
An increase in the rate of income, which contributes to the expansion of investment opportunities,
is a consequence of scientific and technological progress.
Fisher, studying the nature of capital and interest, believes that their emergence is connected with
the process of price formation, determined by the size of the money supply. Thus, it can be
concluded that, according to I. Fisher, investments can also arise in the sphere of circulation.
1
Böhm-Bawerk , O. Selected works on value, interest and capital / -M .: OOO Izd-vo EKSMO, 2009. P. 76-78.
2
O. Böhm-Bawerk relies in his theory of positive capital on the concept of abstinence proposed by W.N. Senior ,
who also defines interest as a compensatory income for the capitalist’s refusal of current consumption of goods.
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volume 4, issue 5, 2025
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The idea that investments are a function of the interest rate, and that it is of a decreasing nature,
is also reflected in the works of A. Marshall. The founder of neoclassicism, the core of which is J.
B. Say's position on the equality of supply and demand
, considers the principle of equilibrium
through the categories of investments and savings. Accumulation in A. Marshall's views is the
source of the birth of savings
, which are formed as a certain excess of income received from the
sale of various factors of production. In his opinion, one can save from wages, rent, profit. In the
short term, savings lead to an imbalance between production and consumption. But thanks to the
financial market, the size of planned investments can be aligned with the volume of savings. The
interest rate is a balancing mechanism for savings and investments, regulating their size. Thus,
according to A. Marshall, investments can exist only in the long term. Due to the use of
economies of scale, firms will receive a positive quasi-rent , creating conditions that stimulate
the investment process. Only equality between past and current investment costs, on the one
hand, and the discounted value of future income, on the other, will ensure a stationary
equilibrium in the long term. It is clear that this is an ideal model that is not feasible in practice.
Another representative of the neoclassical direction, A. Pigou, more closely links the investment
activity of economic entities with the amount of money in circulation. If, according to I. Fisher,
equality in the economy is ensured by the supply of money, then A. Pigou discusses the demand
for money as an equilibrium factor, which makes his theory more realistically reflect the
motivation of economic entities in the process of accumulating savings and investments. The
coefficient of liquidity preference, introduced into the exchange equation of I. Fisher, clearly
illustrates the degree of influence of accumulation on the investment activity of actors .
Neoclassical theories are characterized by a synthetic approach to the study of the investment
process; they study not only the objective factors of the formation of real investments, but also
the subjective, often irrational motives for the implementation of investment activities by
macroeconomic agents, while using the methodology of equilibrium analysis.
Conclusion:
It should be noted that within the framework of the neoclassical approach,
questions of the formation of macroeconomic investment models are beginning to be raised (the
theory of general equilibrium by L. Walras, the social optimum by V. Pareto, the theory of cash
balances by A. Pigou , etc.), but they are based on microeconomic analysis. The authors, using
the method of analogy, transfer the ordinal functions of utility and productivity to the
macroeconomic level, completely depriving it of specific patterns
Bibliographic list
1.
M.M.Mukhammedov . , N.A.Kamilova // Economic theory / textbook. Samarkand 2023
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3
Say's law , named so by J. M. Keynes , states that the supply of a product always creates demand for it, and,
therefore, production is equal to consumption, income is equal to expenses, prices are equal to costs. This model is
built by Say for a barter economy, money exists, but its functionality is very limited, money acts only as a measure
of value and a means of circulation. The neoclassical school tries to apply Say's law to a monetary economy, using
the interest rate mechanism.
4
“As the opportunities for investing capital expand, there is a constant increase in the surplus of production over the
necessary means of subsistence, which generates the ability to save” (Marshall A. Principles of Economic Science /
Moscow: Progress, 1993. (p. 302).
5
Thus, according to J. B. Clark, the natural distribution of income inherent to economic entities at the micro level
can also be used to substantiate conclusions of a social nature. Clark introduces two categories: "social capital" and
"social labor", which are the total functions of the marginal productivity of these factors of each economic entity. A
set of such functions on a plane form an "indifference zone", which characterizes the state of equilibrium in the
economy (Clark J. B. Distribution of wealth / M.: Helios ARV, 2000. pp. 345-380.), which is similar to the
reasoning of F. Edgeworth when describing a transaction between economic actors at the micro level.
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2.
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– M.: INFRA-M, 2004.
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problems of economic transformation. Makhachkala - 2013 - No. 1 - pp. 239-246
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