IDEAS home Printed from https://ideas.repec.org/a/fip/fedrer/y1984isepp13-22nv.70no.5.html
   My bibliography  Save this article

Algebraic quantity equations before Fisher and Pigou

Author

Listed:
  • Thomas M. Humphrey

Abstract

Readers of this Review are doubtlessly familiar with the famous equation of exchange, MV=PQ, frequently employed to analyze the price level effects of monetary shocks. One might think the algebraic formulation of the equation is an outgrowth of the 20th century tendency toward mathematical modeling and statistical testing. Indeed, textbooks typically associate the transaction velocity version of the equation with Irving Fisher and the alternative Cambridge cash balance version with A. C. Pigou, two early 20th century proponents of the application of mathematics to economic analysis. The equation, however, is considerably older, as Thomas M. Humphrey demonstrates in Algebraic Quantity Equations Before Fisher and Pigou. Humphrey traces the origins and prehistory of the equation in both its variants, showing that Fisher and Pigou were the inheritors of a long tradition. In fact, by 1900 the equation of exchange was over 120 years old and at least nineteen writers in five countries had presented versions of the equation. Certain versions were even more intricate than the equations of Fisher and Pigou. As early as 1771, writers had produced formulas showing that excessive growth of the money stock causes inflation.

Suggested Citation

  • Thomas M. Humphrey, 1984. "Algebraic quantity equations before Fisher and Pigou," Economic Review, Federal Reserve Bank of Richmond, vol. 70(Sep), pages 13-22.
    • Handle: RePEc:fip:fedrer:y:1984:i:sep:p:13-22:n:v.70no.5
    as

    Download full text from publisher

    File URL: https://fraser.stlouisfed.org/files/docs/publications/frbrichreview/rev_frbrich198409.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. A. C. Pigou, 1917. "The Value of Money," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 32(1), pages 38-65.
    2. Reghinos D. Theocharis, 1983. "Early Developments in Mathematical Economics," Palgrave Macmillan Books, Palgrave Macmillan, edition 0, number 978-1-349-04949-3, December.
    3. Arthur W. Marget, 1931. "Leon Walras and the "Cash-Balance Approach" to the Problem of the Value of Money," Journal of Political Economy, University of Chicago Press, vol. 39(5), pages 569-569.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. L. Johnson & Thomas Cate, 2000. "The analytical preconditions for Keynes' theory of money," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 6(1), pages 84-94, February.
    2. Shinji MIURA, 2016. "Unified Money Circulation Equation and an Analogical Explanation for Its Solvability," Journal of Economics Bibliography, KSP Journals, vol. 3(1), pages 28-37, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:fip:fedrer:y:1984:i:sep/oct:p:13-22:n:v.70no.5 is not listed on IDEAS
    2. Dallas S. Batten & Daniel L. Thornton, 1985. "Weighted monetary aggregates as intermediate targets," Working Papers 1985-010, Federal Reserve Bank of St. Louis.
    3. Jack High, 2011. "Dr. Anderson and the Austrians: Price formation as a cumulative process," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 24(2), pages 199-211, June.
    4. Gianfranco Gambarelli & Guillermo Owen, 2004. "The Coming of Game Theory," Theory and Decision, Springer, vol. 56(1), pages 1-18, April.
    5. Scharnagl, Michael, 1996. "Monetary aggregates with special reference to structural changes in the financial markets," Discussion Paper Series 1: Economic Studies 1996,02e, Deutsche Bundesbank.
    6. Michel Rosier, 2002. "The logic of Keynes' criticism of the Classical model," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 9(4), pages 608-643.
    7. I L Awad & A M Soliman, 2016. "The stability of the demand for money function in Islamic and non-Islamic monetary policy regimes," Economic Issues Journal Articles, Economic Issues, vol. 21(1), pages 67-85, March.
    8. James A. Dorn, 2010. "Editor's Note," Cato Journal, Cato Journal, Cato Institute, vol. 30(3), Fall.
    9. Bozhechkova Alexandra & Trunin Pavel & Sinelnikova-Muryleva Elena & Petrova Diana & Chentsov Alexander, 2018. "Building of monetary and currency markets models," Research Paper Series, Gaidar Institute for Economic Policy, issue 175P, pages 1-96.
    10. Shinji MIURA, 2016. "Unified Money Circulation Equation and an Analogical Explanation for Its Solvability," Journal of Economics Bibliography, KSP Journals, vol. 3(1), pages 28-37, March.
    11. Hassan, Sherif Maher, 2016. "A Historical Retrieval of the Methods and Functions of Monetary Policy," MPRA Paper 75648, University Library of Munich, Germany.
    12. Sholihin, Muhammad & Shalihin, Nurus & Putra, Apria, 2021. "Paper money in Sheikh Ahmad Khatib Al-Minangkabawi’s thought: a comparative and critical commentary," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 29, pages 67-83.
    13. Aaron GRECH, 2014. "The Demand For Currency In Malta," Theoretical and Practical Research in the Economic Fields, ASERS Publishing, vol. 5(1), pages 49-55.
    14. Felix S. Nyumuah, 2017. "An Investigation into the Interest Elasticity of Demand for Money in Developing Countries: A Panel Data Approach," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(3), pages 69-80, March.
    15. Chi-Wei Su & Jiao-Jiao Fan & Hsu-Ling Chang & Xiao-Lin Li, 2016. "Is there Causal Relationship between Money Supply Growth and Inflation in China? Evidence from Quantity Theory of Money," Review of Development Economics, Wiley Blackwell, vol. 20(3), pages 702-719, August.
    16. Aleš Michl, 2019. "Peníze a inflace: ztracená kointegrace [Money and Inflation: Lost Cointegration]," Politická ekonomie, Prague University of Economics and Business, vol. 2019(4), pages 385-405.
    17. Kundu, Nobinkhor & Mollah, Muhammad Musharuf Hossain, 2014. "Empirical Approaches to the Post-Keynesian Theory of Demand for Money: An Error Correction Model of Bangladesh," MPRA Paper 65727, University Library of Munich, Germany, revised 14 Oct 2014.
    18. Sehati , Elham & Mousavi Jahromi , Yeganeh & Mehrara , Mohsen & Najafizadeh , Abbas, 2018. "Non-Linear Inflationary Dynamics based on the Concept of Missing Money in Iran," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 13(2), pages 221-243, April.
    19. Sedlarski, Teodor, 2012. "Монетаристко Развитие На Теорията На Търсенето На Пари [Monetarist development of the money demand theory]," MPRA Paper 56694, University Library of Munich, Germany.
    20. James W. Friedman, 2000. "The legacy of Augustin Cournot," Cahiers d'Économie Politique, Programme National Persée, vol. 37(1), pages 31-46.
    21. John Bosco Nnyanzi, 2018. "The Interaction Effect of Financial Innovation and the Transmission Channels on Money Demand in Uganda," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(12), pages 1-1, December.

    More about this item

    Keywords

    Price levels; Money;

    Lists

    This item is featured on the following reading lists, Wikipedia, or ReplicationWiki pages:
    1. Ecuación de Cambridge in Wikipedia Spanish

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedrer:y:1984:i:sep:p:13-22:n:v.70no.5. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Pascasio (email available below). General contact details of provider: https://edirc.repec.org/data/frbrius.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.