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An Unorthodox Genealogy on the Relation Between the Markets for Currency Exchange and Credit in Steuart, Thornton, Tooke, and Keynes (1923)

In: Research in the History of Economic Thought and Methodology: Including a Symposium on Sir James Steuart: The Political Economy of Money and Trade

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  • Ghislain Deleplace

Abstract

The chapter first emphasizes the aspects whichSteuart (1767),Thornton (1802),Tooke (1844,1838–1857), andKeynes (1923)have in common about the relation between the exchange rate and the short-term rate of interest: they all considered a temporary unfavorable foreign balance caused by an asymmetrical exogenous shock, which called for a discretionary policy favoring international short-term capital inflows to overcome the consequences of the deficit. These aspects draw an unorthodox genealogy on this issue between the four authors, contrary to the tradition originating in Hume and developed later by the British monetary orthodoxy. Secondly, the chapter shows that there was an analytical progress fromSteuart (1767)toKeynes (1923), which however faced a limit: if it reinforced an unorthodox genealogy, it did not integrate the modern idea according to which international short-term capital movements may themselves be a source of external disequilibrium. The origin of this limit was probably in the question raised, which was the adjustment to an exogenous asymmetrical shock.

Suggested Citation

  • Ghislain Deleplace, 2020. "An Unorthodox Genealogy on the Relation Between the Markets for Currency Exchange and Credit in Steuart, Thornton, Tooke, and Keynes (1923)," Research in the History of Economic Thought and Methodology, in: Research in the History of Economic Thought and Methodology: Including a Symposium on Sir James Steuart: The Political Economy of Money and Trade, volume 38, pages 87-104, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:rhetzz:s0743-41542020000038c008
    DOI: 10.1108/S0743-41542020000038C008
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