Primary and Secondary Markets

Levy Economics Institute of Bard College Working Paper No. 741

28 Pages Posted: 16 Dec 2012

See all articles by Egmont Kakarot-Handtke

Egmont Kakarot-Handtke

University of Stuttgart - Institute of Economics and Law

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Date Written: December 14, 2012


The analytical starting point determines the course of a theoretical investigation and, ultimately, the productiveness of an approach. The classics took production and accumulation as their point of departure; the neoclassics, exchange. Exchange implies behavioral assumptions and notions like rationality, optimization, and equilibrium. It is widely recognized that this approach has led into a cul-de-sac. To change a theory means to change its premises; or, in Keynes’s words, to “throw over” the axioms. The present paper swaps the standard behavioral axioms for structural axioms and applies the latter to the analysis of the emergence of secondary markets from the flow part of the economy. Real and nominal residuals at first give rise to the accumulation of the stock of money and the stock of commodities. These stocks constitute the demand-and-supply side of secondary markets. The pricing in these markets is different from the pricing in the primary markets. Realized appreciation in the secondary markets is different from income or profit. To treat primary and secondary markets alike is therefore a category mistake. Vice versa, to take a set of objective propositions as the analytical starting point yields a comprehensive and consistent theory of market exchange and valuation.

Keywords: New Framework of Concepts, Structure-Centric, Axiom Set, Residuals, Real and Monetary Stocks, Money, Credit, Financial Saving, Nonfinancial Saving, Net Worth, Financial Profit, Nonfinancial Profit, Retained Profit, Appreciation, Wealth

JEL Classification: D40, D50

Suggested Citation

Kakarot-Handtke, Egmont, Primary and Secondary Markets (December 14, 2012). Levy Economics Institute of Bard College Working Paper No. 741, Available at SSRN: or

Egmont Kakarot-Handtke (Contact Author)

University of Stuttgart - Institute of Economics and Law ( email )

Keplerstrasse 17

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