The Place of Money in the Theory of Development

  • Lord Robbins


I have now passed in review the main features of the history of thought in regard to what the classical economists would have called productive factors and their organisation in the process of economic development. But so far I have said nothing, save incidentally, about money and credit and their functions in this respect. This clearly is an omission which must be remedied. The part played by money and its vicissitudes in promoting or retarding economic development has probably occupied more space in the relevant literature than any other single subject, indeed perhaps more than all the other single subjects put together. Needless to say, I shall not attempt to cover this material in all its bewildering variety. My aim is only to exhibit the main issues in the broadest historical perspective. I shall deal first with thought concerning the qualitative functions of money and monetary institutions in regard to development, and then with discussions of the effect of variations in its quantity.


Precious Metal Money Supply Full Employment Classical Economist Cash Payment 
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  36. Joplin, An Illustration of Mr. Joplin’s Views on the Currency (1825) pp. 28 ff.; Views on the Currency (1828) p. 146. Since Joplin’s tracts are so rare and inaccessible, a quotation from this last may not be inappropriate: The notes of the bank thus issued always represent the savings of income, or answer the same purpose. If the issues of the bank are not increased by any loan it makes at interest, an equal amount of money must have been previously saved out of income, and paid into the bank, in which case, the party borrows the income previously saved; but if not, and the issues of the bank are increased by the loan, prices rise, and the party who has borrowed the money obtains value for it by depriving the holders of the money in previous circulation, of a proportionate power of purchasing commodities. An economy is thus created, though a forced economy, but it answers all the purpose of a voluntary one. It makes no difference to the party borrowing the money, whether the value he obtains for it, be previously and voluntarily saved, or saved by the power of consumption on the part of those who held the money in previous circulation, being limited. Hence, when the bank lends money at interest, it always lends the savings of income; it lends savings which either have been, or will be made.’Google Scholar

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© Lord Robbins 1968

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