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Classical Political Economy of Money and Credit

In: Political Economy of Money and Finance

Author

Listed:
  • Makoto Itoh

    (Kokugakuin University)

  • Costas Lapavitsas

    (University of London)

Abstract

The classical theory of money and credit is characterised by the underlying assumption that natural harmony prevails in the operations of the market economy, a harmony that extends to the realm of money and credit. Two distinct traditions can be discerned within classical theory in this respect. On the one hand the quantity theory of money (or the currency school) emphasises the harmonious equilibration of the total quantity of commodity output and the total quantity of commodity money, provided no state or other interference has taken place with the domestic and international operations of the capitalist markets. In this view money is a secondary aspect of capitalist exchange, a Veil’ on real economic activities. Credit money created by banks could upset the presumed harmony, resulting in commodity price disturbances. Thus this tradition supported the introduction of the English Bank Act of 1844 in the hope that the tight quantitative regulation of credit money created by the Bank of England would eradicate capitalist market disturbances.

Suggested Citation

  • Makoto Itoh & Costas Lapavitsas, 1999. "Classical Political Economy of Money and Credit," Palgrave Macmillan Books, in: Political Economy of Money and Finance, chapter 1, pages 4-32, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-37578-9_1
    DOI: 10.1057/9780230375789_1
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    Cited by:

    1. Bruce Bueno de Mesquita & Alastair Smith, 2010. "The Pernicious Consequences of UN Security Council Membership," Journal of Conflict Resolution, Peace Science Society (International), vol. 54(5), pages 667-686, October.
    2. Hristos Doucouliagos & Martin Paldam, 2009. "The Aid Effectiveness Literature: The Sad Results Of 40 Years Of Research," Journal of Economic Surveys, Wiley Blackwell, vol. 23(3), pages 433-461, July.
    3. Jean-Paul Azam & Véronique Thelen, 2010. "Foreign Aid Versus Military Intervention in the War on Terror," Journal of Conflict Resolution, Peace Science Society (International), vol. 54(2), pages 237-261, April.
    4. Maria S. Basílio, 2014. "The Determinants of Multilateral Development Banks’ Participation in Infrastructure Projects," Journal of Infrastructure Development, India Development Foundation, vol. 6(2), pages 83-110, December.

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