Classical Monetary Theory and the Quantity Theory

David Glasner ()

Chapter Chapter 5 in Studies in the History of Monetary Theory, 2021, pp 113-134 from Palgrave Macmillan

Abstract: Abstract This chapter responds to criticisms by (Blaug, M. (1995). Why is the quantity theory the oldest surviving theory in economics? In M. Blaug (Ed.), The quantity theory of money: From Locke to Keynes and Friedman. Edward Elgar.) and (O’Brien, D.P. (1995). Long-run equilibrium and cyclical disturbances: The currency and banking controversy over monetary control. In M. Blaug (Ed.), The quantity theory of money: From Locke to Keynes and Friedman. Edward Elgar.) of the distinction drawn in earlier chapters between the quantity theory and classical (anti-quantity) monetary theory. The criticisms of Blaug are shown to be largely semantic while those of O’Brien are shown to be based on a particular interpretation of the idea of an international price level under the gold standard in contrast to the one used in this volume: equality of tradable goods prices measured in terms of gold. A further response to O’Brien introduces a non-tradable-goods sector which allows for national price-level differences under the gold standard without fundamentally altering the basic propositions of the classical money model presented preceding chapters.

Keywords: Classical monetary theory; Quantity theory; International commodity arbitrage; Price-specie-flow mechanism; Non-tradable goods; Balance of payments (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/978-3-030-83426-5_5

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