When you look up Abba Lerner in Wikipedia you will learn that he is the real person who invented Keynesian economics. I read Keynes general theory including the supplement which is more original than the socialist diatribe in the main part of the book but you will never find what is called the modern Keynesian fiscal model. Lerner invented it.
The Wikipedia entry does not mention one of Lerner's important contributions to economics. I was a graduate student in economics in the early 1960s at UC Berkeley.
I learned that Lerner offered a theory of interest rate that suggested that real interest rate, the prime rate on long-term bonds minus the cost of living, was the key driver of investment. This of course is inherently true because return on investment includes an interest-rate calculation.
Lerner contended that at low real interest rates investments would be over a very long term, infrastructure such as bridges, railroad stations and tall buildings. In periods of high real interest rates investments will all be very short-term, quick profits and instant gratification.
I look at the current interest rate milieu, where real interest rate is probably negative and I wonder what Lerner would say. I suspect that in these negative real interest rate periods we are bouncing between low return infrastructure investments in capital and no investment whatsoever.
I don't think Lerner discussed a negative real interest rate. But we are there right now and have been for 3 1/2 years.
