Money in Market Clearing

Mohammad Gani (ganiosman@hotmail.com)

Macroeconomics from University Library of Munich, Germany

Abstract: Market clearing is the central issue in macroeconomics. Two centuries of debate on Say’s Law indicates that the issue is not yet settled. This essay proposes that double coincidence is a necessary condition for market clearing, in addition to the equality of demand and supply at equilibrium prices. However, the literature does not recognize necessity of double coincidence. Jevons (1875) gave shape to the conventional wisdom on double coincidence. The idea is that it is peculiar to barter, and that money overcomes this inconvenience. This is a fallacy. It prevents the development of a theory of money as a necessary medium of indirect exchange. It hides the role of money in market clearing. By recognizing double coincidence as a necessary condition for any trade, and the role of money in market clearing, economics can become a much stronger and practically more useful science. Monetary reform can correct the perverse circulation of money and prevent involuntary unemployment, undue instability, and excess debt.

Keywords: Market clearing; neutrality of money; double coincidence; unemployment; instability; debt. (search for similar items in EconPapers)
JEL-codes: B41 C67 C68 D46 D51 D71 D74 E41 E52 J64 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2004-10-25
New Economics Papers: this item is included in nep-mon
Note: Type of Document - pdf; pages: 21. A fresh new monetary theory makes classical, Austrian, Keynesian, monetarist, and Lucasian models obsolete.
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpma:0410009

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