Abstract
Central bankers are a maligned lot. They are castigated for creating too much money and inflation, chided for too little money and unemployment, denounced as too committed to fixed exchange rates in the past, and flayed for being too receptive to floating exchange rates now. Judging from the brickbats they do practically everything wrong. Their wisdom is held in such low esteem that Professor Friedman would supplant them by a low-level clerk - of undoubted integrity to be sure - acting under strict instructions to augment the money supply by an abiding rule of 3 (or 4 or 5) per cent per annum. Discretion would be superseded; an inexorable rule would be mandated.
This chapter, written with Sidney Weintraub in 1974, has not previously been published. For perspective, it may be remarked that this is conceived as a sequel to our article on ‘Money as Cause and Effect’. (Chapter 9 in this volume).
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References
This scarcely requires documentation. See, e.g. ‘A Theoretical Framework for Monetary Analysis’, Journal of Political Economy, (March–April 1970), p. 195. Or: ‘Inflation is always and everywhere a monetary phenomenon …’, in ‘What Price Guideposts’, George Shultz and Robert Aliber (eds), Guidelines, Informal Controls, and the Market Place, (Chicago: University of Chicago Press, 1966), p. 18.
On the persistent refusal of economists to apprehend the wage-price events, and modify their Quantity Theory or Monetarist preconceptions, see the lament of Peter Wiles, ‘Cost Inflation and the State of Economic Theory’, Economic Journal, (June 1973).
Joan Robinson, The Accumulation of Capital, (London: Macmillan, 1956).
This position is developed as the central thesis in Paul Davidson, Money and the Real World, (London: Macmillan, 1974).
Also see F. Knight, Risk, Uncertainty and Profit, (New York: Houghton Mifflin, 1921)
See Milton Friedman, The Optimum Quantity of Money, and Other Essays, (Chicago: Aldine, 1969), chapter 1. Also Keynes ‘The Ex Ante Theory of the Rate of Interest’, Economic Journal, 1937.
Cf. J. M. Keynes, The General Theory of Employment, Interest, and Money, (London, 1936).
See Sidney Weintraub, A General Theory of the Price Level, (Philadelphia: Chilton Book Co., 1959).
Cf. John Hoiton, International Comparisons of Money Velocity and Wage Mark-Ups, (New York: Augustus Kelley, 1968).
S. Weintraub and Hamid Habebazaki, ‘Money Supplies and Price-Output Indeterminateness’, Journal of Economic Issues, (June 1972). Reprinted in Keynes and the Monetarists., (New Brunswick, Rutgers University Press, 1973).
For an outline of a market-oriented incomes policy, cf. Henry Wallich and Sidney Weintraub, ‘A Tax Based on Incomes Policy’, Journal of Economic Issues, (June 1971). (Reprinted in, Keynes and the Monetarists), (New Brunswick, Rutgers University Press, 1973).
Cf. A. J. Brown, The Great Inflation, (Oxford, Oxford University Press, 1955).
M. Friedman, Optimum Quantity of Money, (Chicago, Aldine Publishing, 1969).
See M. Friedman ‘A Theoretical Framework For Monetary Analysis’ in Milton Friedman’s Monetary Framework, ed by R. G. Gordon (Chicago, University of Chicago Press, 1974).
Cf. J. M. Keynes, Treatise on Money, (London, 1930).
See Keynes, Treatise on Money, (London, Macmillan, 1930) vol. 2, p. 223–224 on the bismuth-magnesia cycle.
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© 1990 Paul Davidson
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Davidson, L. (1990). The Theory of Monetary Policy Under Wage Inflation. In: Davidson, L. (eds) Money and Employment. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-11513-6_11
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DOI: https://doi.org/10.1007/978-1-349-11513-6_11
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