The Foundations of Monetary Theory

Frank Hahn

Chapter 2 in Monetary Theory and Economic Institutions, 1987, pp 21-43 from Palgrave Macmillan

Abstract: Abstract To the pure theorist, at the present juncture the most interesting and challenging aspect of money is that it can find no place in an Arrow-Debreu economy. This circumstance should also be of considerable significance to macroeconomists, but it rarely is. Much of current macroeconomics is written as if the ‘real’ economy could be looked at as an equilibrium of an Arrow-Debreu economy. It is true that these economists have given the economy a sequential characterisation, but they believe that the postulate of rational expectations renders this inessential: the underlying economy could just as well be that described by Debreu. In this, I believe, they are not only careless (since the matter is never given proof) but also mistaken. It is one of my central concerns in what follows to argue this. Indeed, I shall wish to maintain the view that from our present standpoint Keynes’s theory, and in particular his monetary theory, is best understood as a denial of the realism and relevance of Arrow-Debreu equilibrium. Of course, Keynes did not and could not have put it in this way and in any case, while he had a poet’s insight, he lacked the seriousness and care of a theoretician.

Keywords: Price Level; Real Wage; Rational Expectation; Monetary Economy; Money Stock (search for similar items in EconPapers)
Date: 1987
References: Add references at CitEc
Citations: View citations in EconPapers (7)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:intecp:978-1-349-08781-5_2

Ordering information: This item can be ordered from
http://www.palgrave.com/9781349087815

DOI: 10.1007/978-1-349-08781-5_2

Access Statistics for this chapter

More chapters in International Economic Association Series from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().