Classical Theories of Money, Output and Inflation A Study in Histori
This book challenges the conventional view that monetarism is a necessary part of classical economics and shows, in an historical account of monetary controversy, that the framework upon which classical analysis is based suggests an alternative account of
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Classical Theories of Money, Output and Inflation A Study in Historical Economics
Roy Green Senior Lectllrer in Economics University of Newcastle. New South Wales Australia
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St. Martin's Press
© Roy Green 1992 Softcover reprint of the hardcover 1st edition 1992 All rights reserved. No reproduction. copy or transmission of this publication may be made without written permission. No paragraph of this publication m"ay be reproduced. copied or transmitted save with written permission or in accordance with the provisions of the Copyright. Designs and Patents Act 1988. or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency. 90 Tottenham Court Road. London WI P 9HE. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. First published in Great Britain 1992 by THE MACMILLAN PRESS LTD Houndmills. Basingstoke. Hampshire RG21 2XS and London Companies and representatives throughout the world This book is published in Macmillan's Stlldie.f i/l Political £CO/lOIll)' series General Editor: John Eatwell A catalogue record for this book is available from the British Library. ISBN 978-1-349-22390-9 ISBN 978-1-349-22388-6 (eBook) DOI 10.1007/978-1-349-22388-6
First published in Ihe United Slales of America 1992 by Scholarly and Reference Division. ST. MARTIN'S PRESS. INC .• 175 Fifth Avenue. New York. N.Y. 10010 ISBN 978-0-312-08556-8 Library of Congress Cataloging-in-Publication Data Green. Roy. 1951Classical theories of money. output and innation: a study in historical economics I Roy Green. p. cm. Includes index. ISBN 978-0-312-08556-8 I. Money. 2, Innation (Finance) 3. Credit. I. Title. HG220.A2G68 1992 332.4-dc20 92-20308 CIP
To Deidre, Otto and Claude
Contents xi
Preface
PART I 1
INTRODUCTION
3 4
Aim of the Inquiry Structure and approach
2
8 9
The Classical Framework Theory and Method Separability Equation of Exchange The short-run Historical periodisation Price behaviour
PART II 3
4
12 14 15 17
19
METALLIC CURRENCY
Mercantilism and the Quantity Theory of Money
25
Origin of Quantity Theory Early attempts A new philosophy International context Hume's Essay Specie-flow doctrine Transmission mechanism A 'Neo-Mercantilist' Critique Indeterminacy Young's reconciliation
26 28 31 33 35 38 41 42 45 48
Classical Theory of the Metallic System
51
Money and the 'Real Economy' Output and circulation Wages share Social surplus
52 54
vii
58 59
viii
Contents Money and Price Formation Smith's framework Classical circulation law Ricardo's value theory Money and circulation Invariable measure Marx's approach Functions of money Prices and profits The Inflationary Process Ricardo's quantity theory Classical alternative Ambiguity in Smith Marx's hoarding principle Money and crises Falling rate of profit
62 64 67 68 70 72
75
77
79 83 85 87 89 91 94 97
PART III CURRENCY AND CREDIT
5
6
Credit and Fiduciary Money Case for banking Fractional reserve The Real Bills Doctrine Law'
