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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. Brookfield, Vermont: Edward Elgar, 1995. Pp. ix, 139. $63.95.
Yes Virginia, there may be a quantity theory, but will we know it when we see it?
The issue tying together the six essays that comprise this book is the identity of the quantity theory of money: its main tenets; how they relate to monetarism; and what role the quantity theory played in early monetary debates. Mark Blaug's introduction and his essay, "Why is the Quantity Theory of Money the Oldest Surviving Theory in Economics?", provide the fulcrum for considering this issue. Don Patinkin, as commentator on the essays, devotes more attention to Blaug's than to any of the other essays.
The particular foci for the other authors are varied. Walter Eltis writes about John Locke, sketching his biography and summarizing the contents of Locke's writings on money. Eltis credits Locke with the first coherent statement of the relationship between the quantity of money and the price level. Denis O'Brien provides a review of the currency-banking school controversy and illustrates the danger of ignoring adjustment to disturbances from long-run equilibrium. O'Brien refers to the error of relying solely on long-run equilibrium theory as the Ricardian Telescope. One is able to discern only long-run outcomes through the telescope, missing much of what is important.
Robert Skidelsky traces J. M. Keynes's struggle to escape from the quantity theory. He argues that Keynes wanted to escape because he came to view the quantity theory as inadequate for stabilization policy. Skidelsky judges that Keynes's escape was partial. Geoffrey Wood brings the discussion closer to the present with his argument that conventional wisdom notwithstanding, the quantity theory was not overturned by events of the 1980s. Wood contends that if more attention was paid to the history of the quantity theory, mistakes of applying it mechanically could have been avoided and it would have come as less surprise when institutional changes upset historical relationships between money and income.
Blaug provides the definition of the quantity theory which the others use to determine if their subjects were quantity theorists. He gives two versions of the definition. The...