I will respond to the Barkan and Belkin points seriatim. On government control of investment: There have been, and are, selective credit controls in many capitalist countries, and the “lobbying hordes” that Barkan and Belkin fear have not swept down to sabotage the system. Indeed, the states of the East Asian tigers (particularly, South Korea) have influenced investment through access to credit from state banks. Granted, any system of selective credit controls will induce some rent-seeking activity; but these costs have to be weighed against the
substantial benefits of investment planning in the absence of a full set of futures and insurance markets.
Will capital “seek the highest return”? Of course! The point of interest-rate differentials is to make otherwise unprofitable sectors attractive for investment, should society decide that growth of such sectors is socially desirable. Barkan and Belkin have in mind a...
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