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B Methodology and History of Economic Thought
The quantity theory of money: From Locke to Keynes and Friedman. By MARK BLAUG, WALTER ELTIS, DENIS O'BRIEN, DON PATINKIN, ROBERT SKIDELSKY, AND GEOFFREY E. WOOD. Aldershot, U.K.: Elgar; distributed in the U.S. by Ashgate, Brookfield, Vt., 1995. Pp. ix, 139. $63.95. ISBN 1-85898177-8. JEL 95-1423
The essays in this conference volume should interest anyone concerned with monetary theory and policy, though historians of monetary thought will be the most intensely interested. As Mark Blaug (p. 1) rightly remarks,
whether we like it or not, the views we take of current economic issues influence our interpretation of the history of economic thought-and of course, vice versa.
Blaug (p. 29) usefully defines the quantity theory of money as the combination of three propositions: (1) causality runs from an exogenous change in the nominal quantity of money to an endogenous (equilibrating) change in prices, (2) the desired ratio of money balances to transactions or income is determined by real factors, independent of the nominal quantity of money, and (3) the real volume of transactions or income is determined by real factors, independent of the nominal quantity of money. With Milton Friedman (1987, p. 249), one might add a proviso to (2) and (3): except for the transitory effects of money supply disturbances. From these propositions follows the ceteris paribus proportionality of the price level to the nominal quantity of...