A Reinterpretation of Classical Monetary Theory

David Glasner ()

Chapter Chapter 2 in Studies in the History of Monetary Theory, 2021, pp 21-50 from Palgrave Macmillan

Abstract: Abstract This chapter suggests that a model of a costlessly produced, competitively supplied, convertible money is compatible with a macroeconomic model with a determinate price level, a classical dichotomy between the real and monetary sectors, in which Say’s Law (Identity) is valid, the latter being equivalent to the law of reflux upheld by the Banking School. Such a model differs from the naïve quantity theory often attributed to the classical economists. The chapter also suggests that Smith, Say, Ricardo, Mill, and the Banking School had an intuitive understanding of such a model in contrast to David Hume and the Currency School who espoused the quantity theory.

Keywords: Classical monetary theory; Quantity theory; Price-specie-flow mechanism; Competitive money supply; Classical dichotomy; Say’s Law (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pshchp:978-3-030-83426-5_2

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DOI: 10.1007/978-3-030-83426-5_2

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