Keynes's Approach To Money: An Assessment After 70 Years
AbstractThis paper first examines two approaches to money adopted by Keynes in the General Theory (GT). The first is the more familiar "supply and demand" equilibrium approach of Chapter 13 incorporated within conventional macroeconomics textbooks. Indeed, even Post Keynesians utilizing Keynes's "finance motive" or the "horizontal" money supply curve adopt similar methodology. The second approach of the GT is presented in Chapter 17, where Keynes drops "money supply and demand" in favor of a liquidity preference approach to asset prices that offers a more satisfactory treatment of money's role in constraining effective demand. In the penultimate section, I return to Keynes's earlier work in the Treatise on Money (TOM), as well as the early drafts of the GT, to obtain a better understanding of the nature of money. I conclude with policy implications.
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Bibliographic InfoPaper provided by Levy Economics Institute, The in its series Economics Working Paper Archive with number wp_438.
Date of creation: Jan 2006
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-03-11 (All new papers)
- NEP-CBA-2006-03-11 (Central Banking)
- NEP-HIS-2006-03-11 (Business, Economic & Financial History)
- NEP-HPE-2006-03-11 (History & Philosophy of Economics)
- NEP-MAC-2006-03-11 (Macroeconomics)
- NEP-MON-2006-03-11 (Monetary Economics)
- NEP-PKE-2006-03-11 (Post Keynesian Economics)
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- James Tobin, 1956. "Liquidity Preference as Behavior Towards Risk," Cowles Foundation Discussion Papers 14, Cowles Foundation for Research in Economics, Yale University.
- Antonio Carlos Macedo e Silva, 2006. "Detalhes Extraviados E Ausências Conspícuas: Do Treatise À General Theory," Anais do XXXIV Encontro Nacional de Economia [Proceedings of the 34th Brazilian Economics Meeting] 114, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
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