Abstract
The aim of this work is two-fold. It is intended first, to challenge the prevailing view that monetarism, or the quantity theory of money, is a necessary part of classical economic analysis, and, second, to show that the framework upon which classical (and Marxian) analysis is based suggests an alternative account of the inflationary process. This may be seen as an exercise in the history of economic thought, but the conclusions are also relevant to modern debate. In particular, the converse of the argument is that the monetarist approach to inflation is a logically necessary component of neoclassical analysis, and that consequently any attempt to criticise that approach in a fundamental way must involve an explicit rejection of the conceptual structure of neoclassical economics.
Of all the constituent parts of the science of Political Economy none is perhaps so inseparably bound up with the totality of the general theory as is the theory of money.
Karl Helfferich, Das Geld (1903)
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References
This distinction is not the same as that made by Baumol and Becker (1960) who use it to denote two lines of approach within the framework of neoclassical analysis.
‘[T]he theoretical foundations of monetarism... do not lie in the realm of monetary theory, but in theories of the determination of real output’ (Eatwell, 1983, p. 203; see also Green, 1982a and 1987a).
Schumpeter has argued, rightly in my view, that, ‘Nobody can hope to understand the economic phenomena of any, including the present, epoch who has not an adequate command of... what may be described as historical experience (1954, pp. 12–13); cf. Hegel’s Philosophy of Right, where ‘the concept develops itself out of itself.... Its development is a purely immanent progress...’ (1821, p. 34).
Rubin has noted the ‘two-sided nature’ of this task: it would be necessary to impart ‘at one and the same time an exposition of both the historical conditions out of which the different economic doctrines arose and developed, and their theoretical meaning, i.e., of the internal logical relationship of ideas’ (1929, p. 10).
It should be borne in mind that the ‘supply and demand framework’ which occupies our attention in the following pages is quite distinct from supply and demand theory, i.e., the neoclassical theory of prices: see Eatwell (1982), p. 207.
As Postan has noted, ‘Every historical fact is a product of abstraction...’ (1971, p. 51).
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© 1992 Roy Green
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Green, R. (1992). Aim of the Inquiry. In: Classical Theories of Money, Output and Inflation. Studies in Political Economy. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-22388-6_1
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DOI: https://doi.org/10.1007/978-1-349-22388-6_1
Publisher Name: Palgrave Macmillan, London
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