Classical Perspectives on Investment: An Exegesis of Behavioural Assumptions

There is a mechanistic view of investment commonly attributed to classical writers, from Smith to Marx. Josef Schumpeter summarizes this view: ‘the important thing was to have something to invest: the investment itself did not present additional problems either as to promptness — it was normally sure to be immediate — or as to direction — it was sure to be guided by investment opportunities that were equally obvious to all men’ (Schumpeter, 1954, p. 572; italics in original). The purpose of this chapter is to qualify the image of investment as automatic reaction. The discussion focuses on classical statements as to the motives behind the act. The first two sections are on the role this question plays in the ‘general glut’ debate between Ricardo and Malthus. The other two sections are on Marx’s explanation of investment. The common theme is that the various perspectives on investment rest on different assumptions as to what motivates individuals, and these assumptions fall beyond the conventional subject matter of economics.