Uneasy Money

In the introductory chapter of my book Studies in the History of Monetary Theory: Controversies and Clarifications, I list eight main ideas to which I often come back in the sixteen subsequent chapters. Here they are:

1. The standard neoclassical models of economics textbooks typically assume full information and perfect competition. But these assumptions are, or ought to be, just the starting point, not the end, of analysis. Recognizing when and why these assumptions need to be relaxed and what empirical implications follow from relaxing those assumptions is how economists gain practical insight into, and understanding of, complex economic phenomena.
2. Since the late eighteenth or early nineteenth century, much, if not most, of the financial instruments actually used as media of exchange (money) have been produced by private financial institutions (usually commercial banks); the amount of money that is privately produced is governed by the revenue generated and the cost incurred by creating money.
3. The standard textbook model of international monetary adjustment under the gold standard (or any fixed-exchange rate system), the price-specie-flow mechanism, introduced by David Hume mischaracterized the adjustment mechanism by overlooking that the prices of tradable goods in any country are constrained by the prices of those tradable goods in other countries. That arbitrage constraint on the prices of tradable goods in any country prevents price levels in different currency areas from deviating, regardless of local changes in the quantity of money, from a common international level.
4. The Great Depression was caused by a rapid appreciation of gold resulting from the increasing monetary demand for gold occasioned by the restoration of the international gold standard in the 1920s after the demonetization of gold in World War I.
5. If the expected rate of deflation exceeds the real rate of interest, real-asset prices crash and economies collapse.
6. The primary concern of macroeconomics as a field of economics is to explain systemic failures of coordination that lead to significant lapses from full employment.
7. Lapses from full employment result from substantial and widespread disappointment of agents’ expectations of future prices.
8. The only – or at least the best — systematic analytical approach to the study of such lapses is the temporary-equilibrium approach introduced by Hicks in Value and Capital.

Here is a list of the chapter titles

1. Introduction

Part One: Classical Monetary Theory

2. A Reinterpretation of Classical Monetary Theory

3. On Some Classical Monetary Controversies

4. The Real Bills Doctrine in the Light of the Law of Reflux

5. Classical Monetary Theory and the Quantity Theory

6. Monetary Disequilibrium and the Demand for Money in Ricardo and Thornton

7. The Humean and Smithian Traditions in Monetary Theory

8. Rules versus Discretion in Monetary Policy Historically Contemplated

9. Say’s Law and the Classical Theory of Depressions

Part Two: Hawtrey, Keynes, and Hayek

10. Hawtrey’s Good and Bad Trade: A Centenary Retrospective

11. Hawtrey and Keynes

12. Where Keynes Went Wrong

13. Debt, Deflation, the Gold Standard and the Great Depression

14. Pre-Keynesian Monetary Theories of the Great Depression: Whatever Happened to Hawtrey and Cassel? (with Ronald Batchelder)

15. The Sraffa-Hayek Debate on the Natural Rate of Interest (with Paul Zimmerman)

16. Hayek, Deflation, Gold and Nihilism

17. Hayek, Hicks, Radner and Four Equilibrium Concepts: Intertemporal, Sequential, Temporary and Rational Expectations