The ‘Overdraft Economy’, the ‘Auto-economy’ and the Rate of Interest

J. M. Keynes devoted less space in his work to the classification of financial systems than to the various motives for holding money balances. He did not try to expand on the distinction between a cash economy, a simple credit economy and a complex credit economy that was so important in Wicksell’s analysis.1 Neither did he expressly concern himself in his work with the recently proposed distinction between an ‘overdraft’ economy and an ‘auto-economy’.2 This distinction was first suggested by Hicks (1974), and was subsequently the subject of more thorough investigation in France. In my opinion it is a valuable framework for understanding some significant aspects of Keynes’s analysis and its post-Keynesian interpretation, in particular concerning the formation and the role of interest rates, and the policies designed to influence them.