This paper is concerned with the stock approach to the theory of interest, i.e., the theory of asset prices. Its purpose is to show how theoretical and statistical treatments of the demand for assets may be judged in respect of whether or not they make allowance for all relevant variables.' A simple example will show what this means. Suppose that a particular owner of wealth can hold his wealth in the form of any of four assets, A, B, C and D. In order to explain his holding of any one of them, say A, it is necessary to know five besides their prices: the attractiveness of each of the four and the total amount of wealth (his initial holdings) which he can allocate between them. A statement that his holding of A is determined only by its price and attractiveness and the attractiveness and prices of B and C would, in general, be inadequate since it takes no account of the attractiveness of D, the fourth alternative, or of his total wealth. Thus the statement must either be abandoned or treated as being a ceteris paribus statement. In the latter case it is preferable that the ceteris paribus reservation be made explicitly rather than implicitly. The point here is not that one can always know what the other things held equal are, but merely that when it is possible, these other should be clearly listed. Theoretical statements can therefore be examined to see whether this has been done, and econometric results to see whether their derivation implicity assumed the constancy of other things that did not in fact remain unchanged. Let us consider the simple Liquidity Preference theory of interest. This is couched in terms of the quantity of money, the liquidity preference schedule and the rate of interest, so evidently presupposes that there is only a single group of wealth-owners who have a single liquidity preference schedule and that there is only one interest-bearing asset.2 If we call the group of wealth-owners the Public and the asset Bonds , the monetary system to which the theory applies may therefore be described as in Table I, where L stands for liability and A for asset.