John Wheatley’s Contribution to Monetary Thought - From Strict Monetary Neutrality to Real Effects of Monetary Policy and the Role of the Payment System

This paper reassesses John Wheatley’s contribution to the development of monetary doctrine at the beginning of the nineteenth century. His contribution is still underrated, despite an advanced methodological approach and his radical refinement of bullionist arguments. His contributions to theoretical monetary policy and international monetary economics deserve more attention as his often harsh criticism of fellow bullionists demonstrates his uncompromising adherence to methodological principles, his independence and his originality. However, he was willing to reassess his own conclusions in the light of contradicting evidence. Based on his “An Essay on the Theory of Money and Principles of Commerce” (1807) historians of economic thought portray him as a proponent of strict monetary neutrality. But his less popular pamphlets of 1816 and 1819 elucidate a more differentiated position. There, he highlights the role of the payment system in the propagation of monetary shocks to the real economy. In the light of the crises of 1814-16 he emphasises the pronounced real effects a reduction of the quantity of money can have due to a disruption of the payment system.