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The Quantity Theory of Money

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  • Howden, David

Abstract

For an innocuous statement based on a trivial tautology, the quantity theory of money is sorely battered. This paper has three goals. First, it exposes the various flavours of the quantity theory as special cases of a simple application of the law of diminishing marginal utility. Second, it provides an overview of some typically controversial aspects of the quantity theory. Finally, it reformulates the quantity theory in light of these now resolved controversies. Although I use the term “quantity theory of money”, by the end of this article I reformulate the concept as an “exchange theory of velocity”.

Suggested Citation

  • Howden, David, 2013. "The Quantity Theory of Money," MPRA Paper 79601, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:79601
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    References listed on IDEAS

    as
    1. Laidler, David, 1969. "The Definition of Money: Theoretical and Empirical Problems," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(3), pages 508-525, August.
    2. Philipp Bagus & David Howden, 2011. "Monetary equilibrium and price stickiness: Causes, consequences and remedies," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 24(4), pages 383-402, December.
    3. Milton Friedman, 1971. "A Theoretical Framework for Monetary Analysis," NBER Books, National Bureau of Economic Research, Inc, number frie71-1, March.
    4. Bagus, Philipp & Howden, David, 2012. "The Continuing Continuum Problem and Future Goods," MPRA Paper 79595, University Library of Munich, Germany.
    5. Philipp Bagus & David Howden, 2012. "Monetary equilibrium and price stickiness: A rejoinder," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 25(3), pages 271-277, September.
    6. Milton Friedman & Anna J. Schwartz, 1963. "A Monetary History of the United States, 1867–1960," NBER Books, National Bureau of Economic Research, Inc, number frie63-1, July.
    7. Leland B. Yeager, 1994. "Tautologies in Economics and the Natural Sciences," Eastern Economic Journal, Eastern Economic Association, vol. 20(2), pages 157-169, Spring.
    8. Howden, David, 2009. "Fama's Efficient Market Hypothesis and Mises' Evenly Rotating Economy: Comparative Constructs," MPRA Paper 79586, University Library of Munich, Germany.
    9. Robinson, Joan, 1970. "Quantity Theories Old and New," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 2(4), pages 504-512, November.
    10. Laidler, David, 1991. "The Quantity Theory Is Always and Everywhere Controversial--Why?," The Economic Record, The Economic Society of Australia, vol. 67(199), pages 289-306, December.
    11. Glenn M. MacDonald, 1982. "The Size and Structure of Union-Nonunion Wage Differentials in Canadian Industry: Corroboration, Refinement and Extension," University of Western Ontario, Departmental Research Report Series 8218, University of Western Ontario, Department of Economics.
    12. Philipp Bagus & David Howden, 2009. "The Legitimacy of Loan Maturity Mismatching: A Risky, but not Fraudulent, Undertaking," Journal of Business Ethics, Springer, vol. 90(3), pages 399-406, December.
    13. Bagus, Philipp & Howden, David, 2013. "Some Ethical Dilemmas with Modern Banking," MPRA Paper 79599, University Library of Munich, Germany.
    14. David Laidler, 1982. "Radcliffe and the Quantity Theory," University of Western Ontario, Departmental Research Report Series 8207, University of Western Ontario, Department of Economics.
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    Cited by:

    1. Howden, David, 2016. "A Refinement to the Typology of “Goods”," MPRA Paper 79799, University Library of Munich, Germany.
    2. Bagus, Philipp & Howden, David, 2016. "Central Bank Balance Sheet Analysis," MPRA Paper 79801, University Library of Munich, Germany.
    3. Pavel Ciaian & d'Artis Kancs & Miroslava Rajcaniova, 2018. "The Price of BitCoin: GARCH Evidence from High Frequency Data," Papers 1812.09452, arXiv.org.

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    More about this item

    Keywords

    quantity theory of money; velocity; equation of exchange; inflation;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)

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