F iedman, Benjamin M.
A icle
The Theo e ical Nondeba e Abou Mone a ism
K edi und Kapi al
P o ided in Coope a ion wi h:
Duncke & Humblo , Be lin
Sugges ed Ci a ion: F iedman, Benjamin M. (1976) : The Theo e ical Nondeba e Abou Mone a ism,
K edi und Kapi al, ISSN 0023-4591, Duncke & Humblo , Be lin, Vol. 9, Iss. 3, pp. 347-367,
h ps://doi.o g/10.3790/ccm.9.3.347
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The Theo e ical Nondeba e abou Mone a ism
By Benjamin M. F iedman, Camb idge/Mass.*
Du ing he wo decades since he publica ion o "S udies in he
Quan i y Theo y o Money" [20], he deba e o e he con en and
ela i e me i s o wha has subsequen ly come o be called "mone a ism"
i s ipened, hen ma u ed, and has now e en begun o mellow. The
h us o Thomas Maye 's [28] excellen axonomical su ey is ha
pe haps he ime o a measu ed s ock- aking has come. Wha , hen, has
" he mone a is deba e" been all abou ?
One key o he o e all h us o he discussions in ol ed in he
mone a is deba e is ha mos economis s oday iew he mac oeconomic
p ocess di e en ly han hey would ha e done wen y yea s ago. In
s ong con as o he iews which p edomina ed in he wake o he
Ox o d [3, 29] and Ha a d Business School [15] su eys, mos
economis s now belie e ha wha happens in inancial ma ke s does
play a majo ole in de e mining non inancial economic ac i i y. The
nexus o p ices and yields and quan i ies o asse s — no excluding
"money" — does "ma e ".
Wha oo o en becomes los in any economic discussion, howe e , is
he dis inc ion be ween empi ical p oposi ions and heo e ical ones. This
dis inc ion is especially impo an in making an assessmen o he
mone a is deba e because, as key pa icipan s in he deba e ha e
p og essi ely elabo a ed exac ly wha hey hink on pa icula ques ions,
i has become inc easingly clea ha he dis inguishing con en o
mone a ism is a se o empi ical p oposi ions. One co olla y o his
si ua ion is ha , while he deba e has encou aged esea che s on bo h
sides o sha pen and ex end hei heo e ical analysis, hose lessons which
economis s ha e hus a lea ned and accep ed om mone a ism a e
* The au ho , who is Associa e P o esso o Economics, Ha a d Uni e si y,
is g a e ul o he Na ional Science Founda ion o suppo unde g an SOC
74 - 21027, and o James Duesenbe yy Michael Hambu ge , Thomas Maye
and Allan Mel ze o help ul commen s on a p e ious d a o his pape .
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348 Benjamin M. F iedman
p ima ily lessons abou empi ical issues. Ano he co olla y is ha he
emaining poin s in dispu e oday — he mone a is deba e is no , and
p obably ne e will be, o e — a e also p ima ily empi ical issues o
compa ing ela i e a iances and elas ici ies, dis inguishing i s -o de
om n- h o de e ec s, and he like. F om a heo e ical s andpoin he
deba e has by oday achie ed he s a us o a nondeba e.
I. Theo y and Empi icism in Maye 's Taxonomy
Maye 's su ey se o h wel e p oposi ions as he basic building
blocks in he belie s uc u e o oday's "mone a is " economis .
Al hough much o his pape ca e ully de eloped he in e ela ionships
among hese wel e p oposi ions, showing why a belie e in one may
well be a belie e in o he s on he same lis , Maye also wen o
conside able e o o no e ha belie in o ejec ion o all wel e
p oposi ions oge he is no a necessa y condi ion o consis en ana-
ly ical hinking.
O Maye 's wel e p oposi ions, no one is heo e ical in i s dis in-
guishing con en . In o he wo ds, while each o hese p oposi ions es s
on some unde lying heo e ical s uc u e, in e e y case ha heo e ical
base is nei he mo e no less han wha mos "Keynesian" economis s
also belie e oday. Wha dis inguishes mos o hese "mone a is "
p oposi ions om wha a "Keynesian" economis would be likely o
belie e, is hei explici s a emen abou he magni ude o one o mo e
pa ame e s o he common unde lying heo e ical amewo k accep ed
by bo h mone a is s and Keynesians.1 Fo he emainde o Maye 's
p oposi ions, he dis inguishing con en is o a pe sonal-p e e ence
na u e; such p e e ences ei he a e implici s a emen s abou posi i e
issues, like he magni ude o pa ame e alues, o a e nondeba able and
non-explainable gus es o he non-dispu andes kind.
1 One can, o cou se, i ialize he empi ical/ heo e ical dis inc ion by
saying ei he ha all models a e special cases o a mo e gene al model wi h
ce ain pa ame e s se equal ei he o ze o o o in ini y, o ha many heo e-
ical p oposi ions a e subjec o empi ical es ing. To do so, howe e , is o
disca d a use ul concep which seems especially ele an o conside ing he
de elopmen o he mone a is deba e in gene al and Maye 's cu en su ey
in pa icula . To a ce ain ex en , he p ocess o scien i ic deba e consis s o
esol ing heo e ical disag eemen s abou di e en pa adigms in o ag eemen
on a common pa adigm (which, i app op ia e, may be subjec o empi ical
es ing).
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The Theo e ical Nondeba e abou Mone a ism 349
A b ie e iew o ele en o Maye 's p oposi ions, de e ing o he
momen his ea men o " he mone a is model o he ansmission
p ocess", indica es he empi ical o pe sonal-p e e ence essen ial na u e
o each:
The quan i y heo y o money, in he sense o he p edominance o
he impac o mone a y ac o s on nominal income (Maye 's p oposi ion
* 1) is clea ly an empi ical no ion. I ules ou no nonmone a y in-
luences bu a he simply asse s hei subo dinance o mone a y
ac o s, p esumably in he sense o explana ion o a iance.2 Fu he -
mo e, as Maye 's discussion o he quan i y heo y makes clea , wha is
ele an he e is he ne esul o mone a y in luences on nominal income,
and no he pa icula way in which hese in luences come abou . In he
concep ual amewo k o o mal models o causa ion, his is a p oposi-
ion abou he magni udes o educed- o m coe icien s and abou he
a iances o ac o s aken o be exogenous, bu no abou he speci ica-
ion o he unde lying s uc u al sys em.
The s abili y o he p i a e sec o (# 3) is also an empi ical issue, a
leas in he con ex o he mone a is deba e.3 A gi en sys em is ypically
s able o uns able, and in ei he case oscilla o y o mono onic, acco ding
o he magni udes o ce ain o i s pa ame e s.4 Jus as impo an ly, in
ligh o he ele ance o he s abili y ques ion o he mone a is deba e,
he ime equi ed o a pe u bed s able sys em o e u n o equilib ium
also depends on ce ain key pa ame e magni udes. Hence he ques ion
o he s abili y o he p i a e sec o is an empi ical issue om he ou se .
The ejec ion o he signi icance o alloca i e de ail (e en in he sho
un), oge he wi h he co olla y belie in a " luid" capi al ma ke (# 4),
is again a basically empi ical ma e o sepa a ing i s -o de om
seconda y e ec s. Su ely Maye would no wan o asse ha mone-
a is s belie e he economic sys em o be wholly wi hou ic ion —
2 Subdeba es o e whe he he ele an a iable o be explained is he
a iance o nominal income o he a iance abou end, o o e he ele an
ime uni o use in compu ing hese a iances, do no al e he undamen ally
empi ical na u e o he quan i y heo y p oposi ion.
3 Following Clowe [13] and Leijonhu ud [27], a numbe o w i e s ha e
ecen ly explo ed his ques ion in a heo e ical con ex which has no ye
in e sec ed wi h he mone a is deba e. Tobin's [45] con ibu ion o his li e a-
u e comes closes o ela ing i o ques ions aised by mone a ism.
4 See F iedman [17] o a discussion o his s abili y issue in he con ex o
Cagan's [12] demand- o -money model.
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350 Benjamin M. F iedman
i. e., ha o e e y disappoin ed would-be homebuilde , unable o ind
a mo gage loan when sho - e m ma ke in e es a es exceed h i
deposi in e es a e ceilings, someone else s eps in wi h an exac ly equal
amoun o nominal expendi u e elsewhe e in he economy; o ha e e y
medical s uden li ing in s apped ci cums ances does so because o
pe sonal p e e ence o doub s abou u u e ea ning powe , a he han
because o isk a e sion e lec ed in bank lending p ac ices. Maye
iden i ied he mone a is app oach in his espec as iewing expendi u es
as de e mined by he ne excess demand o a single s ock ( eal balances),
bu a quick e e ence o F iedman's [21] "Res a emen " shows ha ne
excess demands o o he s ocks (e. g., p oduc i e capi al, in en o ies,
houses, consume du ables) can heo e ically ma e also. Like accep ance
o he quan i y heo y, dismissing he speci ic composi ional de ail
e lec s empi ical a he han heo e ical judgmen s,5
Since Maye 's i s ou p oposi ions a e he mos amilia — and he
mos undamen al — elemen s o oday's "mone a ism", i is possible o
deal e en mo e b ie ly wi h he emaining eigh .
Focusing on he o e all p ice le el ins ead o on indi idual sec o
p ices (#5) and using small a he han la ge econome ic models (# 6)
a e elemen s o esea ch s a egy which ollow na u ally om he
empi ical dismissal o he impo ance o alloca i e de ail.6
Using he ese e base as he ins umen o mone a y policy (# 7)
and using he money s ock as he in e media e a ge (#8) cons i u e
op imal mone a y policy p ocedu es only gi en ce ain pa ame e
magni udes, as Poole [38] and Pie ce and Thomson [37], espec i ely,
ha e shown in hei analyses o hese wo issues,7'"
A cons an money g ow h ule (#9) cons i u es op imal mone a y
policy i and only i he a iance o some ele an inal- o m pa ame e
o he economic sys em is in ini e (o i he e is in ini e isk a e sion),
5 A eading o Maye 's own discussion o his p oposi ion sugges s ha
"unimpo ance" may desc ibe wha he had in mind be e han "i ele ance"
which he used.
6 Pa s o Maye 's discussion o he p ice le el ques ion seem o sugges a
undamen al heo e ical issue, bu he discussion is highly inconclusi e in his
ega d.
7 The "indica o " issue has no unambiguous meaning, and no impo ance
o mone a y policy, unless he "indica o " is iden ical o he ins umen which
he cen al bank ixes; see F iedman [16].
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The Theo e ical No idcba e abou Mone a ism 351
jus as a ully ac i is ce ain y-equi alen policy cons i u es op imal
mone a y policy i and only i he a iances o all ele an inal- o m
pa ame e s o he economic sys em anish (o i he e is ze o isk
a e sion). As B dina d [8] has shown, whe he he op imal deg ee o
policy ac i ism in he gene al case lies close o he cons an no-disc e ion
ule o close o ce ain y equi alence depends di ec ly upon he
a iance-co a iance s uc u e o he sys em's inal- o m pa ame e s,8
and so p e e ence o a cons an no-disc e ion policy ule (as a i s
app oxima ion o he op imal policy) is implici ly a s a emen abou
pa ame e alues.
Belie in he absence o an in la ion-unemploymen ade-o (#10)
is la gely an empi ical p oposi ion ela ing o money wage illusion, as a
compa ison o he Phelps-F iedman [23, 35, 36] and Tobin [44] iews
o he Phillips cu e indica es.
G ea e conce n o e in la ion han o e unemploymen (#11) and
dislike o go e nmen in e en ion (#12) a e clea ly pe sonal p e-
e ences. They may e lec empi ical judgmen s — o example, ha he
economy e u ns o ull-employmen equilib ium apidly a e a
con ac iona y pe u ba ion, o ha a combina ion o cupidi y and
s upidi y ypically leads democ a ically elec ed o icials o do he w ong
hing — o hey may e lec mo e abs ac philosophical p inciples. In
ei he case, hey a e emp y o heo e ical con en in a mac oeconomic
sense.
Wi h he excep ion o " he mone a is model o he ansmission
p ocess", hen, none o Maye 's cha ac e is ic "mone a is " p oposi ions
has a heo e ical mac oeconomic issue as i s undamen ally dis inguishing
con en .
II. Maye on Mone a is s on he T ansi ion Mechanism
Wha abou he " ansmission mechanism"? In he con ex o he
deba e o e mone a ism, his e m has become a amilia sho hand o
he speci ica ion o ha pa o he s uc u al economic sys em which
ela es o he e ec o money on nominal income (o any hing else which
money is p esumed o a ec ). Almos by de ini ion, he e o e, discussion
o he " ansmission mechanism" is he hea o wha e e heo e ical
con en he mone a is deba e has had.
8 F iedman's [19] classic ea men o his p oblem summa izes he ele an
pa o he a iance-co a iance s uc u e in a single co ela ion coe icien .
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352 Benjamin M. F kdman
Maye 's ea men o " he mone a is model o he ansmission
p ocess" iden i ies ou elemen s which a e a iously desc ibed as
"... subs an i e di e ence[s] be ween he Keynesian and mone a is
ansmission p ocesses" and "... links be ween he hypo hesis o he
p imacy o changes in he quan i y o money and he mone a is — as
opposed o he Keynesian — e sion o he ansmission p ocess": (1)
he s abili y o he demand o money, (2) he ela i e measu abili y o
money e sus in e es a es, (3) he ange o asse s conside ed, and (4)
he ela i e p ice e ec s and s ock e ec s discussed by B unne and
Mel ze . Because o he cen ali y o he ansmission p ocess p oposi-
ion o he whole ques ion o he heo e ical con en — o lack he eo
— o he mone a is deba e oday, i is use ul o examine each o hese
ou sub-p oposi ions sepa a ely.
Fi s , a quick glance a page 199 o he "Gene al Theo y" [26] im-
media ely imposes he bu den o p oo on o any aspi ing exege e pu po -
ing o iden i y a belie in he heo e ical ins abili y o he demand o
money as pa o he usual Keynesian baggage. Once i is possible o
speci y he a gumen s o a beha io al unc ion, as Keynes did in his
amous M = Li (Y) + L2 ( ) exp ession, hen he wo mos amilia
no ions o he s abili y o ha ela ionship — he a iance o he
implici addi i e esidual dis u bance and he a iance-co a iance
s uc u e o he igh -hand-side coe icien s — a e bo h empi ical
ques ions.
Maye 's dis inc ion be ween "nume ical" and " unc ional" s abili y
is a i s oo simply a ques ion o wha a iables belong on he igh -
hand side o he beha io al ela ionship. Mos economis s would a gue
ha he simple money demand unc ion M = / (Y) used by F iedman
[22], o example, is uns able in he sense ha i omi s he sys ema ic
in luence o he cu en in e es a e as in he in en o y- heo e ic
model o Baumol [4] and Tobin [40]; he s able ela ionship
would be M = (Yy ). Simila ly, a s ic in e p e a ion o Keynesy
specula i e demand model would imply ha he unc ion M = / (Yy )
is also uns able in ha i omi s he di e ence be ween he cu en in-
e es a e and he expec ed u u e in e es a e; he s able ela ionship,
acco ding o his a gumen , would be M = / (Yy y — e). The a gumen
wi h espec o o he heo e ically o ien ed a iables, such as he
an icipa ed a e o p ice in la ion, o mo e s ic ly ins i u ional in-
luences on money demand, such as deposi in e es ceilings (including
he ze o nominal yield on demand deposi s), is exac ly analogous. Once
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The Theo e ical Nondeba e abou Mone a ism 353
he e is ag eemen on he speci ica ion o he beha io al ela ionship,
ques ions o s abili y become empi ical issues in he analysis o a iance.
Since F iedman's "Res a emen " p esen s a heo e ical speci ica ion o
he money demand unc ion which admi s o many igh -hand-side
a iables, and since mos empi ical wo k on money demand by mone-
a is s9 has included in e es a es as igh -hand-side a iables jus as in
he Keynesian app oach summa ized mos ecen ly by Gold eld [25], i
is clea ha he s abili y o he money demand unc ion, in any o i s
a ious disguises, is an empi ical a he han a heo e ical issue.10
Wha abou ei he he liquidi y ap, which was he objec o much
a en ion in he demand- o -money li e a u e o some yea s ago, o he
mo e ecen ly discussed "c owding ou " e ec s associa ed wi h deb -
inanced iscal policy? Bo h in ol e essen ially empi ical ques ions
abou he s abili y o he money-demand unc ion as i ela es o he
p esence o a weal h a iable, o o al po olio cons ain . The Key-
nesian liquidi y ap equi es a o m o he M = / (Yy ) unc ion which
is no single- alued a some poin * and is no de ined o < *.11
By con as , he con inuous and uni e sally de ined unc ion M =
/ (Y, , W) e lec s a liquidi y ap i = 1 o < *. Simila ly, as
Blinde and Solow [5, 6] and Tobin [46] ha e shown, he mechanics
o he "c owding ou " analysis hinge on a shi in he M = (Y, )
unc ion as he sys em ecei es an injec ion o ou side bonds. Simply
es a ed, he poin he e is ha he M = (Yy ) unc ion is uns able
because he co ec ly speci ied money demand unc ion should be M =
(Yy , W). The issue, once again, is no whe he he demand o money
is a s able beha io al ela ionship o an unsys ema ic ou come bu ,
ins ead, whe he a pa icula speci ica ion o his ela ionship is made o
appea "uns able" by a ibu ing o he addi i e esidual and he se e al
included igh -hand-side coe icien s e ec s due o sys ema ic a ia ion
o an excluded a iable. Ques ions o his kind a e empi ical and lie a
9 Fo an ea ly example, see Mel ze [30].
10 A esul es ablished in F iedman [16] is ha using he money s ock as
a s aigh o wa d in e media e a ge a iable cons i u es he op imal mone a y
policy p ocedu e only i he money demand unc ion is bo h in e es inelas ic
and pe ec ly s able in he sense o ze o esidual a iance.
11 Concep ualizing he p oblem in his way a oids he di icul ies o
Pa inkin's [34, Ch. 14] discussion, which de e mines ha he liquidi y ap
no ion is inhe en ly a logical con adic ion.
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354 Benjamin M. Fniedman
om he sense o he "s abili y" issue as Maye ela ed i o he
mone a is deba e.12
The second issue aised in Maye 's ea men o he " ansmission
mechanism" is he ela i e deg ee o measu emen di icul y associa ed
wi h "money" e sus " he in e es a e". As is clea om Maye 's discus-
sion, nei he o hese wo concep s necessa ily co esponds o a quan i y
o p ice which is eadily obse able. Va ia ion o expec ed u u e p ice
in la ion and o asse isk di e en ials complica e he iden i ica ion o
" he in e es a e". Va ia ion o asse p e e ences and o ins i u ional
a angemen s complica e he iden i ica ion o " he money s ock".
The e is no way o knowing, a p io i, which sou ces o a ia ion a e
mo e se e e in any gi en economy. The answe mus e lec empi ical
judgmen s. Fu he mo e, e en i he p ecise a iances o he wo
espec i e measu emen e o s we e known, how would one e alua e
hei ela i e impo ance, i. e., hei ela i e con ibu ion o he a iance
o p edic ion o con ol o nominal income o wha e e o he key
a iable p o ides he ul ima e c i e ion o choice? Is a measu emen
e o a iance o X pe -cen -pe -annum-squa ed o he in e es a e
mo e o less oublesome han a measu emen e o a iance o X2 bil-
lions-o -dolla s-squa ed o he money s ock? The answe equi es
empi ical in o ma ion abou ele an aspec s o he o e all economic
sys em.
Ye ano he po en ial p oblem in his con ex , also no p ecluded on
a p io i g ounds, is ha he espec i e sou ces o in e es a e and
money s ock measu emen e o may bea di e en compa isons in di -
e en ime uni s. How is one o choose i he in la ion expec a ions
which lead o measu emen e o in iden i ying " he in e es a e"
change only slowly each qua e bu a y g ea ly o e he cou se o a
decade, while he ins i u ional ac o s which lead o measu emen e o
in iden i ying any speci ic obse able agg ega e as " he money s ock"
a y g ea ly om qua e o qua e in ways which la gely wash ou
12 The Ando-Shell appendix o Ando and Modigliani [2] is somewha ex-
cep ional in his ega d, since i a emp s o demons a e heo e ically he
independence o money demand om a weal h a iable ( a he han a guing,
as did Gold eld [25], ha a weal h dependence is easonable a p io i bu is
empi ically insigni ican ). This posi ion is Keynesian in a e ing he "c owding
ou " p oblem bu an i-Keynesian in p ecluding a liquidi y ap. (Bo h o hese
p oposi ions equi e ede ini ion in a money-sho s-longs wo ld ins ead o a
money-bonds wo ld, howe e .)
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The Theo e ical Nondeba e abou Mone a ism 361
public's demand o go e nmen secu i ies as a ac ion o eal weal h,
sy and (VII) a de ini ion o s:
(V) sW =
(VI) is = a ( K, s, M, , > 0 > ^,
(VII) s = is-i
whe e is is he nominal yield on go e nmen secu i ies and n is he
expec ed a e o p ice in la ion.
The money ma ke equa ions analogously ep esen (VIII) a ma ke -
clea ing equilib ium condi ion in eal e ms, (IX) he public's demand
o money as a ac ion o eal weal h, /a , and (X) a de ini ion o YM:
(VIII) iW^
(IX) M = M s, M , Mj M^>0> M^ m2
(X) M = iM - n
whe e iu is he ( ypically ze o) nominal yield on money.
Since he adding-up cons ain s implied by he weal h de ini ion (IV)
cons ain he de i a i es o asse demand unc ions (II), (VI) and (IX),
one o hese ou ela ionships is edundan . Hence Tobin's model in
his o m is a sys em o nine independen equa ions in he nine a iables
(FX, K>
q>
Wy Sy s, IS,
IM>
M).24c This sys em oo is capable o gene a ing
esponses o mone a y policy, and Tobin has also analyzed ca e ully
he esul ing " ansmission mechanism". In con as o he implica ion
o Maye 's pape , howe e , he key aspec o his mechanism is once
again i s dependence on ela i e p ice (yield) e ec s and s ock e ec s.
Mone a y policy in he o m dM = — dS ^ 0 dis u bs he asse ma ke
equilib ium, he eby causing po olio adjus men s which change YK, q,
YS, is, YM and W. The "mechanism" is hus essen ially iden ical o ha
employed by BYunneY and Mel zeY.
24 Tobin explici ly no ed ha di e en in e p e a ions o he model a e
possible, depending upon he pa icula se o nine a iables assumed o be
endogenous.
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362 Benjamin M. F iedman
While Tobin's model is explici ly mo e de ailed han he B unne -
Mel ze model in i s ea men o he asse ma ke s, i is less explici
in inco po a ing he goods ma ke . Ne e heless, Tobin explained clea -
ly ha he p i a e-demand- o -goods equa ion which he g aphed as
a o m o IS cu e in (Ry Y) space depends posi i ely on q,25 Jus as
in he B unne -Mel ze model, he e o e, he asse ma ke adjus men s
due o mone a y policy lead in u n o u he adjus men s in he
goods ma ke .
Fu he mo e, bo h he Tobin model and he B unne -Mel ze model
adop he same disagg ega ion me hodology o sides ep comple ely he
"asse agg ega ion" ques ion which domina ed much o he mone a is
deba e a decade ago. In pa icula , he issue which a ac ed so much
a en ion a ha ime conce ned he asse subs i u ion implica ions o
mo ing om he Keynesian-Hicksian-Me zle ian wo ld, in which he
only wo asse s we e money and capi al, o a h ee-asse wo ld in-
cluding money and capi al and secu i ies.26 We e secu i ies o be ea ed
as (app oxima ely) pe ec subs i u es o capi al, lea ing he only (o
p incipal) di iding line ha be ween money and all non-money asse s,
o we e secu i ies (app oxima ely) pe ec subs i u es o money, lea ing
he only (o p incipal) di iding line ha be ween capi al and all inan-
cial asse s?27 Bo h Tobin and B unne and Mel ze ha e disposed o
his ques ion by simply p ese ing he ull h ee-way asse disagg ega-
ion and acknowledging ha , in p inciple, he demand o e e y asse
depends upon (among o he hings) he yield on all o he asse s. Rela i e
subs i u abili ies a e he e o e an empi ical ma e o elas ici ies o unc-
ions explici ly included in he model wi h espec o a gumen s explici ly
included in hose unc ions, a he han a heo e ical ma e o com-
pe ing pa adigms.
Wha is one o make o all his? Pe haps B unne and Mel ze a e
no mone a is s. O pe haps Tobin is no a Keynesian. Pe haps. A mo e
likely conclusion, howe e , is ha , once mone a is s and Keynesians
25 F om (III), any a ia ion in equi es an in e se a ia ion in q o
ixed R; see oo no e 22. Tobin did no indica e he na u e o he supply-o -
goods equa ion which would accompany his model; in he B unne -Mel ze
model he p ice-se ing equa ion (3) desc ibes he beha io o supplie s.
26 See, o example, he discussion in Tobin [41]. The discussion usually
assumed ha he secu i ies in ques ion we e nominally denomina ed and non-
indexed.
27 See Leijonhu ud [27] o an a gumen which esol es his ques ion ac-
co ding o whe he he secu i ies a e o sho o long ma u i y.
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The Theo e ical Nondeba e abou Mone a ism 363
speci y clea ly he " ansmission mechanism" by which mone a y policy
has i s e ec in hei espec i e heo e ical models, hese al e na i e
mechanisms a e by and la ge iden ical. On his key issue, which is he
essence o he heo e ical dimension o he mone a is deba e, i is ha d
o ind signi ican disag eemen .
IV. Conclusion
F om a heo e ical s andpoin , he "mone a is " label oday is an
old school ie. Like o he such emblems o associa ion, i may con ey
in o ma ion abou he bea e 's ins i u ional a ilia ions, o abou his
mode o exp essing himsel , o abou his as es and p e e ences, o e en
abou who his iends a e. I does no bea in o ma ion abou he bea -
e 's heo e ical concep ion o money and i s ole in he mac oeconomic
sys em. Theo e ical ques ions he e a e plen y, bu hese a e no bound
up in he mone a is deba e. Ins ead, in pa as a esul o wo decades
o discussion, he ocus o he mone a is deba e oday lies wi h em-
pi ical issues.
V. Re e ences
1. Andoy Albe , and Modigliani, F anco: "The Li e Cycle Hypo hesis o
Sa ing: Agg ega e Implica ions and Tes s." Ame ican Economic Re iew, LI 11
(May, 1963), 55 - 84. — 2. Ando, Albe , and Modigliani, F anco: "Some
Re lec ions on Desc ibing S uc u es o Financial Sec o s.,, F omm and Klein
(eds.), The B ookings Model: Pe spec i e and Recen De elopmen s. Ams e -
dam: No h-Holland Publishing Company, 1975. — 3. And ews, P. W. S.:
"A Fu he Inqui y in o he E ec s o Ra es o In e es ." Ox o d Economic
Pape s III (Feb ua y, 1940), 32 - 73. — 4. Baumol, William J.: "The T ansac-
ions Demand o Cash: An In en o y Theo e ic App oach." Qua e ly
Jou nal o Economics, LXVI (No embe , 1952), 545 - 556. — 5. Blinde ,
Alan S., and Solow, Robe M.: "Does Fiscal Policy Ma e ?" Jou nal o
Public Economics, II (No embe , 1973), 318 - 337. — 6. Blinde , Alan S., and
Solow, Robe M.: "Analy ical Founda ions o Fiscal Policy." Blinde e al.,
The Economics o Public Finance. Washing on: The B ookings Ins i u ion,
1974. — 7. Boswo h, Ba y: "The S ock Ma ke and he Economy."
B ookings Pape s on Economic Ac i i y (No. 2, 1975), 257 - 290. — 8. B ai-
na dy William C.: "Unce ain y and he E ec i eness o Policy." Ame ican
Economic Re iew, LVII (May, 1967), 411 -425. — 9. B unne , Ka l, and
Mel ze , Allan H.: "Money, Deb , and Economic Ac i i y." Jou nal o
Poli ical Economy, LXXX (Sep embe /Oc obe , 1972), 951 - 977. — 10. B un-
ne , Ka l, and Mel ze , Allan H.: "An Agg ega e Theo y o a Closed
Economy." S ein (ed.), A Con e ence on Mone a ism. Ams e dam: No h-
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DOI h ps://doi.o g/10.3790/ccm.9.3.347 | Gene a ed on 2023-01-16 13:33:35
364 Benjamin M. F iedman
Holland Publishing Company, o hcoming. — 11. B unne , Ka l, and Mei ze ,
Allan H.: "Mone a ism: The P incipal Issues, A eas o Ag eemen and he
Wo k Remaining." Mimeo, 1975. — 12. Cagan, Phillip: "The Mone a y
Dynamics o Hype in la ion." Ch. 2 in [20]. — 13. Clowe , Robe W.: "The
Keynesian Coun e -Re olu ion: A Theo e ical App aisal." Hahn and B ech-
ling (eds.), The Theo y o In e es Ra es. London: Macmillan, 1965. — 14.
De Leeuw, F ank, and G ämlich, Edwa d: "The Channels o Mone a y Policy."
Fede al Rese e Bulle in, LV (June, 1969), 472 -491. — 15. Ebe sole, John:
"The In luence o In e es Ra es upon En ep eneu ial Decisions in Business:
A Case S udy." Ha a d Business Re iew, XVII (1938), 35 - 39. — 16.
F iedman, Benjamin M.: "Ta ge s, Ins umen s, and Indica o s o Mone a y
Policy." Jou nal o Mone a y Economics, I (Oc obe , 1975), 443 - 473. —
17. F iedman, Benjamin M.: "S abili y and Ra ionali y in Models o Hype -
in la ion." Mimeo, 1975. — 18. F iedman, Benjamin M., and F oewiss, Kenne h
C.: "Bank Beha io in he B unne -Mel ze Model." Jou nal o Mone a y
Economics, o hcoming. — 19. F iedman, Mil on: "The E ec s o a Full-
Employmen Policy on Economic S abili y." F iedman, Essays in Posi i e
Economics. Chicago: Uni e si y o Chicago P ess, 1953. — 20. F iedman,
Mil on (ed.): S udies in he Quan i y Theo y o Money. Chicago: Uni e si y
o Chicago P ess, 1956. — 21. F iedman, Mil on: "The Quan i y Theo y o
Money — A Res a emen ." Ch. 1 in [20]. — 22. F iedman, Mil on: "The
Demand o Money: Some Theo e ical and Empi ical Resul s." Jou nal o
Poli ical Economy, LXVII (Augus , 1959), 327 - 351. — 23. F iedman, Mil on:
"The Role o Mone a y Policy." Ame ican Economic Re iew, LVIII (Ma ch,
1968), 1 - 17. — 24. F iend, I win, and Liebe man, Cha les: "Sho -Run Asse
E ec s on Household Sa ing and Consump ion: The C oss-sec ion E idence."
Ame ican Economic Re iew, LXV (Sep embe , 1975), 624 - 633. — 25. Gold-
eld, S ephen M.: "The Demand o Money Re isi ed." B ookings Pape s on
Economic Ac i i y (No. 3, 1973), 577 - 638. — 26. Keynes, JohnMayna d: The
Gene al Theo y o Employmen In e es and Money. New Yo k: Ha cou ,
B ace & Wo ld, Inc., 1936. — 27. Leijonhu ud, Axel: On Keynesian Eco-
nomics and he Economics o Keynes. London: Ox o d Uni e si y P ess, 1968.
— 28. Maye , Thomas: "The S uc u e o Mone a ism." K edi und Kapi al,
VIII (Nos. 2 and 3, 1975), 190 - 218, 293 - 316. — 29. Meade, James E., and
And ews, P. W. S.: "Summa y o Replies o Ques ions on E ec s o In e es
Ra es." Ox o d Economic Pape s, I (Oc obe , 1938), 14- 31. —30. Mei ze ,
Allan H.: "The Demand o Money: The E idence om he Time Se ies."
Jou nal o Poli ical Economy, LXXI (June, 1963), 219 - 246. —31. Me on,
Robe C.: "Li e ime Po olio Selec ion Unde Unce ain y: The Con inuous-
ime Case." Re iew o Economics and S a is ics, LI (Augus , 1969), 247 - 257.
— 32. Modigliani, F anco: "Mone a y Policy and Consump ion." Consume
Spending and Mone a y Policy: The Linkages. Bos on: Fede al Rese e Bank
o Bos on, 1971. — 33. Modigliani, F anco, and Bmmbe g, R.: "U ili y Ana-
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The Theo e ical Nondeba e abou Mone a ism 365
lysis and he Consump ion Func ion: An In e p e a ion o C oss Sec ion
Da a." Ku iha a (ed.), Pos -Keynesian Economics. New B unswick: Ru ge s
Uni e si y P ess, 1954. — 34. Pa inkin, Don: Money, In e es and P ices. 2nd
ed. New Yo k: Ha pe & Row, 1965. — 35. Phelps, Edmund S.: "Phillips
Cu es, Expec a ions o In la ion, and Op imal Unemploymen O e Time."
Economica, XXXIV (Augus , 1967), 254 - 281. — 36. Phelps, Edmund S.:
In la ion Policy and Unemploymen Theo y. New Yo k: W. W. No on &
Company, Inc., 1972. — 37. Pie ce y James L., and Thomson, Thomas D.:
"Some Issues in Con olling he Money S ock." Con olling Mone a y Ag-
g ega es II: The Implemen a ion. Bos on: Fede al Rese e Bank o Bos on,
1972. — 38. Poole, William: "Op imal Choice o Mone a y Policy Ins u-
men s in a Simple S ochas ic Mac o Model." Qua e ly Jou nal o Economics,
LXXXIV (May, 1970), 197 - 216. — 39. Samuelson, Paul A.: "Li e ime Po -
olio Selec ion by Dynamic S ochas ic P og amming." Re iew o Economics
and S a is ics LI (Augus , 1969), 239 - 246. — 40. Tobin, James. "The In e es
Elas ici y o T ansac ions Demand o Cash." Re iew o Economics and
S a is ics, XXXVIII (Augus , 1956), 241 -247. — 41. Tobin, James:
"Money, Capi al, and O he S o es o Value." Ame ican Economic Re iew,
LI (May, 1961), 26 - 37. — 42. Tobin, James: "An Essay on he P inciples o
Deb Managemen ." Commission on Money and C edi , Fiscal and Deb
Managemen Policies. Englewood Cli s: P en ice-Hall, 1963. — 43. Tobin,
James: "A Gene al Equilib ium App oach o Mone a y Theo y." Jou nal o
Money, C edi and Banking, I (Feb ua y, 1969), 15 -29. — 44. Tobin, James:
"In la ion and Unemploymen ." Ame ican Economic Re iew, LXII (Ma ch,
1972), 1 - 18. — 45. Tobin, James: "Keynesian Models o Recession and De-
p ession." Ame ican Economic Re iew, LXV (May, 1975) 195 - 202. — 46.
Tobiny James: "Long Run E ec s o Fiscal and Mone a y Ac ions on Agg ega e
Demand." S ein (ed.), A Con e ence on Mone a ism. Ams e dam: No h-
Holland Publishing Company, o hcoming. — 47. Tobin, James, and Dolde,
Wal e J.: "Weal h, Liquidi y and Consump ion." Consume Spending and
Mone a y Policy: The Linkages. Bos on: Fede al Rese e Bank o Bos on, 1971.
Zusammen assung
Die heo e ische „Nich -Auseinande se zung" übe den Mone a ismus
Bei eine Beu eilung de mone a is ischen Diskussion is es besonde s wich-
ig, zwischen empi ischen und heo e ischen Thesen zu un e scheiden. Als Schlüs-
sel hie zu haben die Diskussions eilnehme imme deu liche ih e Au assung zu
einzelnen F agen he ausgea bei e ; es is zunehmend kla gewo den, daß de
cha ak e is ische Inhal des Mone a ismus eine Reihe on empi ischen Behaup-
ungen is . Alle Lek ionen übe Mone a ismus, die die Volkswi e insowei e -
hal en und angenommen haben, abe auch jene F agen, die noch ums i en
sind, be e en in e s e Linie empi isdie Punk e.
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366 Benjamin
M.
F iedman
Von den zwöl dia ak e is ischen mone a is ischen Thesen, die Thomas
Maye au zähl "", haben el als ypischen Inhal en wede empi ische ode o -
zugsweise empi ische Gegens ände. Die zwöl e „Das mone a is ische Modell
des T ansmissionsp ozesses" e binde im wesen lichen, ums i ene empi ische
Aussagen (die S abili ä des Ve häl nisses de Geldnach age und die ela i en
Schwie igkei en, die mi de Messung on Ve ände ungs a en on Geld olu-
men e sus Zinsni eau e bunden sind) sowie heo e ische Punk e, die bei nä-
he e Be ach ung unums i en sind (die Rangskala on Anlagen, bei denen
übe schüssige Ne o-Nach age den Ände ungen de Geldanlagegewohnhei en
des Publikums en sp ich , und das Ve auen au E ek e beim Ve mögensbe-
s and und bei den ela i en P eisen). In de Ta is de T ansmissionsmedia-
nismus ode das S uk u modell wie es in B unne 's und Mei ze 's „mone a i-
s ischem Modell" um issen wi d, im wesen lichen nich on jedem Modell zu
un e scheiden, das on Tobin „keynesianisches Modell" genann wi d.
Das schließliche E gebnis eine jah elangen heo e ischen Deba e au beiden
Sei en des mone a is ischen Fo ums is da in zu sehen, daß die Thesen hin ei-
chend geklä wu den, um zu zeigen, daß gegenwä ig nu noch ein ge inge
Wide sp uch bes eh . De Inhal de Auseinande se zung is s e s empi isch ge-
wesen und bleib empi isch.
* 8. Jg. (1975) S. 191 . und 293 .
Summa y
The Theo e ical Nondeba e abou Mone a ism
The dis inc ion be ween empi ical p oposi ions and heo e ical ones is essen-
ially impo an in making an assessmen o he mone a is deba e. As key pa -
icipan s in he deba e ha e p og essi ely elabo a ed exac ly wha hey hink
on pa icula ques ions, i has become inc easingly clea ha he dis inguishing
con en o mone a ism is a se o empi ical p oposi ions. Those lessons which
economis s ha e hus a lea ned and accep ed om mone a ism, as well as
hose ques ions which emain in dispu e, all conce n p ima ily empi ical issues.
O Thomas Maye 's wel e cha ac e is ically mone a is p oposi ions"*, ele en
a e clea ly ei he empi ical o p e e en ial in hei dis inguishing con en . The
wel h, " he mone a is model o he ansmission p ocess," combines essen-
ially empi ical issues which a e in dispu e ( he s abili y o he demand- o -
money ela ionship, and he ela i e deg ee o measu emen di icul y asso-
cia ed wi h money e sus in e es a es) and heo e ical issues which, on close
inspec ion, a e no in dispu e ( he ange o asse s o which he ne excess
demand esponds o changes in he public's holdings o money balances, and
* Vol. 8 pp. 191 and pp. 293.
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The Theo e ical Nondeba e abou Mone a ism 367
eliance on asse s ock e ec s and ela i e p ice e ec s). Indeed, he ansmis-
sion mechanism, o s uc u al model, speci ied in B unne 's and Mel ze 's
"mone a is model" is essen ially indis inguishable om ha speci ied in
Tobin's "Keynesian" model.
The ne impac o many yea s o heo e ical con ibu ions on bo h sides o
he mone a is deba e has been o cla i y he issues su icien ly o demons a e
ha he e is ac ually bu li le heo e ical disag eemen . The con en o he
deba e has been empi ical all along and emains empi ical.
Résumé
La « non-que elle » heo é ique su le moné a isme
Pou juge la que elle moné a is e, il es pa iculiè emen impo an de dis-
s ingue les hèses empi iques des hèses héo iques. Dans ce e op ique, les
pa icipan s à la que elle on oujou s plus clai emen dé eloppé leu s idées su
des ques ions isolées; il es de enu de plus en plus é iden que le con enu ca-
ac é is ique du moné a isme cons i ue une sé ie d'a i ma ions empi iques. Tous
les cou s su le moné a isme donnés e accep és jusqu'à p ésen pa les écono-
mis es, mais aussi ou e les ques ions qui demeu en con o e sées, conce nen
en p emiè e ins ance des poin s empi iques.
Des douze hèses ypiquemen moné a is es que dénomb e Thomas Maye *,
onze o en comme con enu dis inc i des suje s empi iques ou de p é é ence
empi iques. La douzième, «le modèle moné a is e du p ocessus de ansmis-
sion », lie pou l'essen iel des a i ma ions empi iques con o e sées (la s abili é
de la ela ion de la demande moné ai e e les di icul és ela i es liées à la me-
su e des aux de changemen du olume moné ai e pa appo au ni eau des
aux d'in é ê ) à des élémen s héo iques (les échelles de classemen des place-
men s, qui pe me en de cons a e qu'une demande ne e excessi e co espond
à des modi ica ions des habi udes d'in es issemen du public e la con iance
dans les e e s su le pa imoine exis an e su les p ix ela i s). En éali é le
mécanisme de ansmission ou le modèle s uc u el el qu'il a é é ce né dans le
«
modèle moné a is e
»
de B unne e de Mel ze , ne se dis ingue pa ien d'es-
sen iel du modèle appelé «keynesien» pa Tobin.
Le ésul a inal de la longue que elle héo ique opposan les deux ailes du
o um moné a is e consis e à cons a e que les hèses son su isammen déb ous-
saillées pou démon e que les con adic ions son aujou d'hui de enues mi-
neu es. Le con enu de la que elle a oujou s é é
I
empi ique e con inue à le de-
meu e .
* Voi Année 1975, pages 191 e s es e 293 e s es.
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