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Keynes's Approach to Money: An Assessment After Seventy Years

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  • L. Wray

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Abstract

This paper first examines two approaches to money adopted by Keynes in the General Theory. 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 General Theory 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 as well as the early drafts of the General Theory to obtain a better understanding of the nature of money. I conclude with policy implications. Copyright IAES 2006

Suggested Citation

  • L. Wray, 2006. "Keynes's Approach to Money: An Assessment After Seventy Years," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 34(2), pages 183-193, June.
  • Handle: RePEc:kap:atlecj:v:34:y:2006:i:2:p:183-193 DOI: 10.1007/s11293-006-9005-2
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    File URL: http://hdl.handle.net/10.1007/s11293-006-9005-2
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    References listed on IDEAS

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    1. Davidson, Paul, 1972. "A Keynesian View of Friedman's Theoretical Framework for Monetary Analysis," Journal of Political Economy, University of Chicago Press, vol. 80(5), pages 864-882, Sept.-Oct.
    2. L. Randall Wray, 1998. "Modern Money," Macroeconomics 9810002, EconWPA.
    3. Kregel, J A, 1976. "Economic Methodology in the Face of Uncertainty: The Modelling Methods of Keynes and the Post-Keynesians," Economic Journal, Royal Economic Society, vol. 86(342), pages 209-225, June.
    4. Victoria Chick, 1983. "Macroeconomics after Keynes: A Reconsideration of the General Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262530457, January.
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    Cited by:

    1. Georgios Argitis & Stella Michopoulou, 2011. "Are Full Employment and Social Cohesion Possible Under Financialization?," Forum for Social Economics, Taylor & Francis Journals, pages 139-155.
    2. Ariel Dvoskin & German Feldman, 2010. "The Exchange Rate and Inflation in Argentina: A Classical Critique of Orthodox and Heterodox Policy Prescriptions," Forum for Social Economics, Springer;The Association for Social Economics, pages 145-169.

    More about this item

    Keywords

    E12; E41; E43; E51;

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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