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David Hume and Irving Fisher on the quantity theory of money in the long run and the short run

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  • Robert W. Dimand

Abstract

David Hume's classic statement of the quantity theory of money and the specie-flow mechanism of international adjustment in 1752 and Irving Fisher's authoritative restatement of the quantity theory in 1911 shared a concern with simultaneously upholding both the long-run neutrality and the short-run non-neutrality of money. This paper compares their approaches to attempting this reconciliation of the long run and short run, noting their shared emphasis on ‘illusion’ as the basis of short-run non-neutrality, and places their contributions in historical context. I argue that Hume and Fisher shared the same view of how automatic adjustment of the balance of payments worked under the gold standard, with Fisher's monetary reform proposals being an attempt to prevent the working of Hume's automatic adjustment mechanism.

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  • Robert W. Dimand, 2013. "David Hume and Irving Fisher on the quantity theory of money in the long run and the short run," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 20(2), pages 284-304, April.
  • Handle: RePEc:taf:eujhet:v:20:y:2013:i:2:p:284-304 DOI: 10.1080/09672567.2012.758760
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    References listed on IDEAS

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    1. Jérôme De Boyer Des Roches & Rebeca Gomez Betancourt, 2013. "American quantity theorists prior to Irving Fisher's purchasing power of money," Post-Print halshs-00823362, HAL.
    2. Hall, Robert E, 1997. "Irving Fisher's Self-Stabilizing Money," American Economic Review, American Economic Association, vol. 87(2), pages 436-438, May.
    3. Robert W. DIMAND, 2003. "Competing Visions For The U.S. Monetary System, 1907-1913: The Quest For An Elastic Currency And The Rejection Of Fisher'S Compensated Dollar Rule For Price Stability," Cahiers d’économie politique / Papers in Political Economy, L'Harmattan, issue 45, pages 101-121.
    4. Robert J. Shiller, 2002. "Indexed Units of Account: Theory and Assessment of Historical Experience," Central Banking, Analysis, and Economic Policies Book Series,in: Fernando Lefort & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Serie (ed.), Indexation, Inflation and Monetary Policy, edition 1, volume 2, chapter 4, pages 105-134 Central Bank of Chile.
    5. F. W. Taussig, 1913. "The Plan for a Compensated Dollar," The Quarterly Journal of Economics, Oxford University Press, vol. 27(3), pages 401-416.
    6. Hall Robert, 2002. "Controlling the Price Level," The B.E. Journal of Macroeconomics, De Gruyter, vol. 2(1), pages 1-21, July.
    7. Rebeca Gomez Betancourt, 2010. "E. W. Kemmerer's contribution to the quantity theory of money," The European Journal of the History of Economic Thought, Taylor & Francis Journals, pages 115-140.
    8. Dimand, Robert W., 2000. "Irving Fisher and the Quantity Theory of Money: The Last Phase," Journal of the History of Economic Thought, Cambridge University Press, vol. 22(03), pages 329-348, September.
    9. Gomez Betancourt, Rebeca, 2010. "Edwin Walter Kemmerer And The Origins Of The Fed," Journal of the History of Economic Thought, Cambridge University Press, vol. 32(04), pages 445-470, December.
    10. E. W. Kemmerer, 1905. "The Establishment of the Gold Exchange Standard in the Philippines," The Quarterly Journal of Economics, Oxford University Press, vol. 19(4), pages 585-609.
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