Reconstructing the Quantity Theory (I)

Kakarot-Handtke, Egmont (2011): Reconstructing the Quantity Theory (I).

Abstract

The quantity theory is disjunct to the hard core of general equilibrium theory. It does not relate to the formal foundations of standard economics and, vice versa, from the behavioral axioms of standard economics a rationale for using money cannot be derived. The present paper leaves the standard axioms aside and reconstructs the quantity theory from entirely new structural axiomatic foundations. This yields a coherent view of the interrelations of quantity of money, transaction money, saving–dissaving, liquidity–illiquidity, rates of interest, leverage, allocation, prices, profits, unit of account, and employment.

• Item Type: MPRA Paper
• Language: English
• Keywords: New framework of concepts; Structure-centric; Axiom set; Money-credit symmetry; Endogeneity; Accommodation; Neutrality; Store of value; Overlapping generations; Full gold-backing; Declarative changes of the unit of account; Contract equation; Perfect inflation; Real balance effect
• Subjects: E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E10 - General; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E40 - General; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E20 - General

References

Arrow, K. J., and Hahn, F. H. (1991). General Competive Analysis. Amsterdam, New York, NY, etc.: North-Holland.

Blaug, M. (1995). Why is the Quantity Theory of Money the Oldest Surviving Theory in Economics? In The Quantity Theory of Money, pages 27–49. Aldershot: Edward Elgar.

Brissimis, S. M., and Magginas, N. S. (2008). Inflation Forecasts and the New Keyenesian Phillips Curve. International Journal of Central Banking, 4(2): 1–22.

Desai, M. (1989). Endogenous and Exogenous Money. In J. Eatwell, M. Milgate, and P. Newman (Eds.), Money, The New Palgrave, pages 146–150. London, Basingstoke: Macmillan.

Graziani, A. (1996). Money as Purchasing Power and Money as a Stock of Wealth in Keynesian Economic Thought. In G. Deleplace, and E. J. Nell (Eds.), Money in Motion, pages 139–154. Houndmills, Basingstoke, London: Macmillan.

Gurley, J. G., and Shaw, E. S. (1960). Money in a Theory of Finance. Washington: Brookings Institution.

Hahn, F. (1982). Money and Inflation. Oxford: Blackwell.

Kakarot-Handtke, E. (2011a). Keynes’s Missing Axioms. SSRN Working Paper Series, pages 1–29. URL http://ssrn.com/abstract=1841408.

Kakarot-Handtke, E. (2011b). The Pure Logic of Value, Profit, Interest. SSRN Working Paper Series, pages 1–21. URL http://ssrn.com/abstract=1838203.

Kakarot-Handtke, E. (2011c). Schumpeter and the Essence of Profit. SSRN Working Paper Series, pages 1–25. URL http://ssrn.com/abstract=1845771.

Kakarot-Handtke, E. (2011d). Unemployment Out of Nowhere. SSRN Working Paper Series, pages 1–21. URL http://ssrn.com/abstract=1885544.

Keynes, J. M. (1973). The General Theory of Employment Interest and Money. The Collected Writings of John Maynard Keynes Vol. VII. London, Basingstoke: Macmillan. (1936).

Lavoie, M. (2003). A Primer on Endogenous Credit-Money. In L.-P. Rochon, and S. Rossi (Eds.), Modern Theories of Money, pages 506–543. Cheltenham, Northampton, MA: Edward Elgar.

Minsky, H. P. (2008). Stabilizing an Unstable Economy. New York, NY, Chicago, IL, San Francisco, CA: McGraw Hill, 2nd edition.

Patinkin, D. (1989). Neutrality of Money. In J. Eatwell, M. Milgate, and P. Newman (Eds.), Money, The New Palgrave, pages 273–287. London, Basingstoke: Macmillan.

Phillips, A. W. (1958). The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861-1957. Economica, 25: 283–299. URL http://www.jstor.org/stable/2550759.

Schmitt, B. (1996). A New Paradigm for the Determination of Money Prices. In G. Deleplace, and E. J. Nell (Eds.), Money in Motion, pages 104–138. Houndmills, Basingstoke, London: Macmillan.

Skidelsky, R. (1995). J. M. Keynes and The Quantity Theory of Money. In The Quantity Theory of Money, pages 80–96. Aldershot: Edward Elgar.

Wicksell, K. (1936). Interest and Prices. London: Macmillan.