Modern Monetary Macroeconomics

Modern Monetary Macroeconomics

A New Paradigm for Economic Policy

New Directions in Modern Economics series

Edited by Claude Gnos and Sergio Rossi

This timely book uses cutting-edge research to analyse the fundamental causes of economic and financial crises, and illustrates the macroeconomic foundations required for future economic policymaking in order to avoid these crises.

Chapter 3: Money, effective demand, and profits

Bernard Schmitt

Subjects: economics and finance, financial economics and regulation, post-keynesian economics


In this chapter we consider the main arguments presented by Bailly, Gnos, and Bradley and Piégay in their contributions to this volume, and provide some clarifications that, hopefully, will help the reader to better understand quantum macroeconomic analysis as it has been developed since the publication of La formation du pouvoir d’achat (Schmitt, 1960). The role played by money in our economies and in quantum analysis is such that it will not be amiss to insist on the crucial distinction between money and credit, as well as on that between nominal and real money. Another argument considered by the above-named contributors to this volume refers to Keynes’s contribution to the analysis of unemployment and particularly to the concept of effective demand. This is also a subject in need of clarification, too many economists being still convinced that unemployment may be brought about by a lack in effective demand. The last topic we dwell on is one of the most difficult of our science: the formation of profit. Economists have repeatedly attempted to reconcile the existence of profit as a positive income included in national income with the undisputed fact that profit is costless. At the same time, they have unsuccessfully attempted to explain how positive profits may form without surrendering the necessary equivalence–accepted by the Classics as well as by Walras and Keynes–between values and prices. Profit remains a stumbling block for most economists, including those who have chosen to develop their analysis within the quantum macroeconomic framework. The aim of the section on ‘Profit’ below is to single out the main obstacles towards a correct understanding of how profit can be explained in accordance with facts and with the tenets of quantum macroeconomic analysis.

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