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A Monetary Explanation of Distribution in a Gold Money Economy

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  • Smith, Matthew

Abstract

A monetary explanation of distribution consists of the conception that the distribution of income between wages and profits is primarily determined by the money rate of interest on the basis as an institutionally determined policy variable, it systematically governs the rate of profit, which, for a given technique of production, determines the real wage as a residual of net income. This paper shows that consistent with a Sraffa model in which the real wage is not determined by the 'subsistence' of workers, a monetary explanation of distribution is as historically plausible in a gold money economy of , ‘old' nineteenth century capitalism as it is in a fiat money economy of 'modern' twentieth century capitalism. It is shown that such a explanation is logically different in a gold money economy to that which is proposed in a fiat money economy mainly because of the different manner in which the real wage (or price-wage ratio) is residually determined. The paper then examines the implications of this fundamental difference for the relationship between the interest rate, money wage bargaining and the price level in the two different kinds of monetary systems.

Suggested Citation

  • Smith, Matthew, 1995. "A Monetary Explanation of Distribution in a Gold Money Economy," Working Papers 223, University of Sydney, School of Economics.
    • Handle: RePEc:syd:wpaper:2123/7471
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    Cited by:

    1. Smith, Matthew, 2018. "Demand-Led Growth Theory in a Classical Framework: Its Superiority, Its Limitations, and Its Explanatory Power," Centro Sraffa Working Papers CSWP29, Centro di Ricerche e Documentazione "Piero Sraffa".
    2. Cucciniello, Maria Chiara & Deleidi, Matteo & Levrero, Enrico Sergio, 2022. "The cost channel of monetary policy: The case of the United States in the period 1959–2018," Structural Change and Economic Dynamics, Elsevier, vol. 61(C), pages 409-433.
    3. Ciccone, Michele, 2022. "Some notes on Ricardo's analysis of the convergence process of the market rate of interest to the natural rate," MPRA Paper 112887, University Library of Munich, Germany.

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