Chapter 1: From Bimetallism to Monetarism: The Shifting Political Affiliation of the Quantity Theory
1. From bimetallism to monetarism: the shifting political aﬃliation of the quantity theory David Laidler* INTRODUCTION Exponents of particular political agendas often deploy economic theories as tools of persuasion. That might mean that such theories are inherently politically loaded, or merely that politicians sometimes ﬁnd them useful. In recent history, the quantity theory of money has been inextricably linked to the politics of the right. The ‘monetarism’ that was associated with the economic policies of Ronald Reagan and Margaret Thatcher had a version of that theory at its very heart. But a century before the monetarist controversy, there was a debate about bimetallism in which the quantity theory was an important theoretical tool of the political left, albeit a populist rather than a socialist left. In the following pages, I shall explore these associations. After a brief reminder of what the quantity theory of money says, I shall discuss its role in the monetarist controversy, and go on to describe the part it played in the debate about bimetallism. I shall then take up aspects of the development of monetary economics in the 1920s and early 1930s, when the quantity theory seems to have migrated from the left to the right of the political spectrum. I shall conclude with the suggestion that, in this story, inﬂuence has run primarily from broader developments in economics to politics rather than in the opposite direction, and that, as a result of these developments, the quantity theory, which has changed remarkably little...
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