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Hume and Endogenous Money

Author

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  • Maria Pia Paganelli

    (Yeshiva University)

Abstract

David Hume’s monetary theory has three standard yet inconsistent readings. As a forefather of the quantity theory of money, Hume sees money as neutral. As an inflationist, Hume sees an active positive role for monetary policy. As a monetarist, Hume sees an active positive role for monetary policy only in the short run. This paper reads Hume consistently instead by showing that for Hume money is endogenous and demand-driven. Hume would read the money equation in terms of reverse causation and the co-movement of inflation and output growth as driven by demand. The tenets of 18th century monetary theory corroborate this reading.

Suggested Citation

  • Maria Pia Paganelli, 2006. "Hume and Endogenous Money," Eastern Economic Journal, Eastern Economic Association, vol. 32(3), pages 533-547, Summer.
    • Handle: RePEc:eej:eeconj:v:32:y:2006:i:3:p:533-547
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    File URL: http://web.holycross.edu/RePEc/eej/Archive/Volume32/V32N3P533_547.pdf
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    References listed on IDEAS

    as
    1. Berdell, J F, 1995. "The Present Relevance of Hume's Open-Economy Monetary Dynamics," Economic Journal, Royal Economic Society, vol. 105(432), pages 1205-1217, September.
    2. L. R. Wray, 1990. "Money and Credit in Capitalist Economies," Books, Edward Elgar Publishing, number 474.
    3. N. Jayaram & Surendra K. Gupta & A.P. Barnabas & Sachchidananda & P.S. Pachauri & M.L. Khattar & B.N. Sampath & H. R. Khanna, 1985. "India," India Quarterly: A Journal of International Affairs, , vol. 41(1), pages 177-179, January.
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    Cited by:

    1. Jorge Streb, 2010. "Hume: The power of abduction and simple observation in economics," CEMA Working Papers: Serie Documentos de Trabajo. 417, Universidad del CEMA.
    2. Madarász, Aladár, 2012. "Adósság, pénz és szabadság [Taxation, money and freedom]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(5), pages 457-507.
    3. Simon Bilo, 2018. "Lucas and Hume on Monetary Non-neutrality: A Tension between the Logic and the Technique of Economics," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 44(3), pages 364-380, June.
    4. Laurent Le Maux, 2014. "Cantillon And Hume On Money And Banking: The Foundations Of Two Theoretical Traditions," Journal of Economic Surveys, Wiley Blackwell, vol. 28(5), pages 956-970, December.
    5. Maria Pia Paganelli, 2014. "David Hume on Banking and Hoarding," Southern Economic Journal, John Wiley & Sons, vol. 80(4), pages 968-980, April.

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