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Commodity money, natural values, and central banking in Ricardo

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  • Costabile, Lilia

Abstract

Ricardo studied the effects of alternative institutions on natural relations and ranked alternative monetary systems according to their ability to equalise the value of money to the natural value of gold. Pure commodity money is at the top of his normative hierarchy, only surpassed by his own "perfect" system. In commodity money systems, the price level is equal to the relative price of gold for "commodities in general", and money is endogenous. The quantity theory, by contrast, comes in operation in monetary system where the gold anchor is lost or works imperfectly. The supposed contradictions of Ricardo's monetary theory disappear within the interpretative framework adopted here. This framework builds on Pasinetti's insights in the role of natural values in Classical economics; develops Ricardo's own type-of-economy approach to monetary analysis; and shows that, far from being a commodity like any other, commodity money is a specific, complex institutional system.

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  • Costabile, Lilia, 2022. "Commodity money, natural values, and central banking in Ricardo," Structural Change and Economic Dynamics, Elsevier, vol. 63(C), pages 104-111.
    • Handle: RePEc:eee:streco:v:63:y:2022:i:c:p:104-111
    DOI: 10.1016/j.strueco.2022.09.011
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • B12 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Classical (includes Adam Smith)
    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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