Banking and Financial Circuits and the Role of the State
Edited by Louis-Philippe Rochon and Mario Seccareccia
Chapter 3: A historical perspective on the theory of the monetary circuit: from Schumpeter to Parguez
Alain Parguez (1975, 1996, 2001) and a few other academics, notably Alain Barrère (1979, 1990a, 1990b) and Bernard Schmitt (1960, 1966,1984) in France, and Augusto Graziani (1989, 2003) in Italy, have developed what is today known as the theory of the monetary circuit. In doing so, they have drawn heavily on ideas defended by John Maynard Keynes. In particular, circuitists refer to Keynes’s 1933 writings on ‘the monetary economy of production’ (Keynes 1973a , 1973b ), to the ‘principle of effective demand’ that he set out in the General Theory (Keynes 1971b ) and to the ‘finance motive’ that he defined in his 1937 papers on the interest rate (Keynes 1973c , 1973d ). These references have been extensively cited in the literature. This chapter is intended to present another reference that can be considered, along with Keynes, as influential in the development of key elements of the monetary circuit, notably what Schumpeter (1954, p. 276–88) called an ‘interlude of monetary analysis’ that took place sometime before A. Smith (1976 )imposed what is known as ‘real analysis’.
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