The Classical Dynamics of Hume, Smith, Ricardo and Malthus
Chapter 5: The Present Relevance of Hume’s Open Economy Monetary Dynamics
5 The Present Relevance of Hume’s Open Economy Monetary Dynamics I Doctrines and Dynamics Hume’s seminal formulation of the quantity theory of money within a startlingly efficient automatic mechanism of international adjustment has ensured that his text remains a touchstone for monetary economists. If his right to a place within the development of monetary theory is not in question, his exact placement is under considerable dispute. He has been claimed as precursor to monetary, monetarist, and post-Keynesian analysis. Frenkel and J o h m o n (1976) accorded Hume an important role in the historical origins of the monetary approach to the balance of payments. Friedman’s (1987) exposition of the quantity theory of money continues to prominently cite Hume’s essays, while Perlman (1987) has recently advanced a textual and analytical analysis of Hume which finds him firmly in support of only transient effects of money on real income. In Keynes’s ( 1964, 343n) view, however, Hume kept ‘half a foot’ outside the ‘classical’ world by remaining sensitive to the disequilibrium output effects of monetary adjustment. Indeed, Kregel (1 989) has argued that Hume’s proper place in the history of monetary theory is as a precursor to the post-Keynesian analysis of inflation and incomes policies developed by Sydney Weintraub. Where does Hume belong within the history of‘monetary theory, and what can we learn from the persistent coexistence of such divergent interpretations? In pursuit of these questions :[ present a model and interpretation which provides one avenue for accurately and consistently situating...
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