The Structure of Monetarism (II)

Maye , Thomas A icle The S uc u e o Mone a ism (II) K edi und Kapi al P o ided in Coope a ion wi h: Duncke & Humblo , Be lin Sugges ed Ci a ion: Maye , Thomas (1975) : The S uc u e o Mone a ism (II), K edi und Kapi al, ISSN 0023-4591, Duncke & Humblo , Be lin, Vol. 8, Iss. 3, pp. 293-316, h ps://doi.o g/10.3790/ccm.8.3.293 This Ve sion is a ailable a : h ps://hdl.handle.ne /10419/292742 S anda d-Nu zungsbedingungen: Die Dokumen e au EconS o dü en zu eigenen wissenscha lichen Zwecken und zum P i a geb auch gespeiche und kopie we den. Sie dü en die Dokumen e nich ü ö en liche ode komme zielle Zwecke e iel äl igen, ö en lich auss ellen, ö en lich zugänglich machen, e eiben ode ande wei ig nu zen. So e n die Ve asse die Dokumen e un e Open-Con en -Lizenzen (insbesonde e CC-Lizenzen) zu Ve ügung ges ell haben soll en, gel en abweichend on diesen Nu zungsbedingungen die in de do genann en Lizenz gewäh en Nu zungs ech e. Te ms o use: Documen s in EconS o may be sa ed and copied o you pe sonal and schola ly pu poses. You a e no o copy documen s o public o comme cial pu poses, o exhibi he documen s publicly, o make hem publicly a ailable on he in e ne , o o dis ibu e o o he wise use he documen s in public. I he documen s ha e been made a ailable unde an Open Con en Licence (especially C ea i e Commons Licences), you may exe cise u he usage igh s as speci ied in he indica ed licence. h ps://c ea i ecommons.o g/licenses/by/4.0/ The S uc u e o Mone a ism (II) By Thomas Maye , Da is/Cal. In Pa I o his pape which appea ed in he p e ious issue o his jou nal* I selec ed wel e p oposi ions cha ac e izing he mone a is ou - look, and discussed six o hem. I will now disouss he emainde , and hen summa ize bo h pa s o his pape . Th ee o hese p oposi ions ela e o mone a y policy. They a e he choice o an indica o , he choice o a a ge , and he use o a mone a y g ow h ule58. VII. Mone a y Indica o s A mone a y policy indica o is a a iable ha measu es he h us , ha is he di ec ion and .magni ude, o mone a y policy. I «should he e- o e be a a iaible which is closely con olled by he cen al 'bank a he han being endogenous o he economy. Accu a e da a on i should be a ailable wi hou delay, and i should ha e a e y high co ela ion wi h he a ge , o goal, a iables. These equi emen s ule ou bo h he money s ock and he long e m in e es a e as mone a y indica o s. To be 'Su e, o a mone a is he s ock o money is he ul ima e indica o o mone a y policy in a di e en sense, becaiuse changes in he money s ock o e ell changes in income. Ru , a leas in he Uni ed S a es, acou a e da a on he money s ock a e no a ailable quickly, and besides, he money s ock is pa ly endogenous, being some dis ance emo ed om cen al bank ac ions. Hence, i canno be used as an indica o as he e m is de ined in his con ex . Simila ly, o he Keynesian he long e m in e es a e is no an adequa e indica o because i is no unde he close con ol o he cen al bank. Thus, nei he mone a is s no Keynes- ians can use as hei indica o s hose a iables which would i bes in o * pp. 190. 58 The indica o s- a ge s dicho omy has ecen ly been challenged by Ben- jamin F iedman ("Ta ge s, Ins umen s and Indica o s o Mone a y Policy", Jou nal o Mone a y Economics, o hcoming). Howe e , since I am dealing he e wi h he dispu e be ween mone a is s and Keynesians bo h o whom gene ally use his dicho omy, I am accep ing i wi hou ques ioning i s alidi y. :o K edi und Kapi al 3/1975 OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.8.3.293 | Gene a ed on 2023-01-16 13:32:12 294 Thomas Maye hei models. Bo h o hem ha e o selec o he indica o s which a e close o he ools used by he cen al bank. Mone a is s a o some measu e o o al ese es such as he ese e base adjus ed o changes in ese e equi emen s o else unbo owed ese es. These a e clea ely unde he con ol o he cen al bank, hey a e measu ed accu a ely wi hou delay, and hey ha e a powe ul e ec on he money s ock, he ¡mone a is s' a ge a iable. Keynesians, on he o he hand, p obably use he sho e m in e es a e as hei a o ed indica o 59. The sho e m a e can hen be ela ed o one o hei a ge a iables, he long e m in e es a e, ia e m s uc u e heo y. And in addi ion, he sho - e m a e is a a ge in i s own igh o Keynesians since i a ec s lows in o deposi o y ins i u ions, and hence esiden ial cons uc ion. Bu his does no make i an indica o . Bu i is impo an o no e ha he choice o a mone a y policy in- dica o is o a conside able ex en isola ed om he es o he Keynes- ian-mone a is dispu e. The mone a is chooses a mone a y ¡base measu e o wo easons. One is ha his analysis o he money supply p ocess ells him ha his is he a iable which bes e lec s mone a y policy ac ions. The second is ha he belie es he mone a y base (adjus ed o ese e equi emen changes) o be he bes indica o o u u e changes in he money s ock. As a as he i s o hese easons is conce ned his in ol es li le dispu e wi h Keynesians i only because ew Keynesians ha e bo he ed o o mula e a money supply hypo hesis. Tu ning o he second eason, he p edic i e powe o a base measu e, i is ce ainly ue ha one can p edic he money 's ock ai ly well in his way. Bu suppose ha i we e shown ha changes in he sho e m in e es a e a e an e en 'be e indica o o changes in he money s ock. In his case, he mone a is 'should use he sho - e m in e es a e as his indica o o p edic he money s ock. And he possibili y ha he sho e m in e es a e is a be e p edic o o he money s ock han a e a ious ese e measu es is by no means a e ched60. Fu he mo e, i i 59 I ha e ph ased his s a emen in such a en a i e way because I am a om ce ain ha mos Keynesians eally p e e he sho e m a e as hei indica o . Unlike he mone a is s, Keynesians ha e no w i en much on his opic. 60 See Richa d Da is and F ede ick Schad ack, "Fo ecas ing he Mone a y Agg ega es wi h Reduced Fo m Equa ions", in Fede al Rese e Bank o New Yo k, Mone a y Agg ega es and Mone a y Policy (New Yo k, 1974), pp. 60-71. See also F ed J. Le ine, "Examina ion o he Money-S ock Con ol OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.8.3.293 | Gene a ed on 2023-01-16 13:32:12 The S uc u e o Mone a ism (II) 295 we e somehow shown ha mone a y policy changes a e e lec ed be e by he Fede al Funds a e han by a ese e base measu e, he mone a - is could abandon his money supply hypo hesis wi hou he eby weaken- ing his belie in any o he o he mone a is p oposi ions. Con e sely, a Keynesian could selec o al ese es as his policy in- dica o , and use his a iable, a he han he sho e m a e, o p edic long e m in e es a es. The unse led s a e o e m s uc u e heo y ha dly p o ides IUS wi h imuch con idence in ying o p edic he long a e on he basis o he sho e m a e. Empi ically, Da id Fand has shown ha while he e is a ai ly high co ela ion be ween long e m and sho e m a es, "in a cyclical con ex , he long a e is ela i ely in- dependen o he sho - un mo emen s in he 'sho a es"61. In addi ion o i s use in gauging policy, a mone a y indica o can also be used1 o measu e he h us o he mone a y impulse ega dless o whe he his a ises in he p i a e o public sec o . Fo his a mone a is may wan o use he money s ock, while a Keynesian may wan o use a sho e m in e es a e. Thus, i he money s ock is g owing a , say, a 10 pe cen a e, while he Fede al Funds a e is 12 pe cen , a mon- e a is would call his a si ua ion o mone a y ease, while a Keynesian would call i igh money. This dis inc ion has some supe icial ela ion o he dispu e abou he ansmission mechanism ibeca use he Keynesian is looking a an in e es a e while he mone a is is using he money s ock. Bu , as discussed abo e, his dispu e is, in pa , a ma e o e minology a he han a genuine dispu e. (And, as will be shown below, in pa i is he esul o many Keynesians no being ai h ul o hei Wicksellian adi ion.) Ano he connec ion is ha o he Keynesian he sho e m in e es a e is a alid pa ial indica o because i a ec s he low o unds in o inancial in e media ies, and hence esiden ial mo gage lending and cons uc ion. (This is a channel s essed s ongly in he FMP-model.) App oach o Bu ge , Kalish, and Babb", Jou nal o Money, C edi and Bank- ing, ol. V, No embe 1973, pp. 924-938; and James Pie ce, and Thomas Thomson, "Some Issues in Con olling he S ock o Money", in Fede al P ese e Bank o Bos on, Con olling Mone a y Agg ega es II: The Implemen- a ion (Bos on n. d.), pp. 115-136. 61 Da id Fand, "A Time Se ies Analysis o he 'Bills-Only' Theo y o In e es Ra es", Re iew o Economics and S a is ics, ol. XLVIII, No embe 1966, p. 369. 20* OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.8.3.293 | Gene a ed on 2023-01-16 13:32:12 296 Thomas Maye Thus, he e we ha e a componen o mone a ism which has only a limi ed ela ionship o he o he componen s. The 'dispu e abou he p ope indica o :is o a conside able ex en an isola ed echnical issue. I s in usion in o he mone a is -Keynesian (deba e can pe haps be ex- plained as an his o ical -acciden . In he pas he Fede al Rese e has used sho e m in e es a es and money ma ke condi ions as i s in- dica o in a di e en sense om he way he indica o concep is de- ined he e. Ins ead o ea ing sho e m a es and money ma ke con- di ions as an in e media e s ep on he way o long- e m in e es a es o o he money s ock, i looked a sho e m a es and money ma ke con- di ions as an immedia e guide o how i s policy is a ec ing income. In his way — which does no allow he money s ock o be a ecognized pa o he p ocess — he use o sho e m a es and money ma ke condi ions is, o cou se, con a y o mone a ism. Bu as a esul o he insigh s which mone a is s ha e b ough o his deba e indica o s a e no longe hough o in his way. VIII. Mone a y Policy Ta ge s Ob iously mone a is s wan o iuse he money s ock as he a ge o mone a y policy. Keynesians, on he o he hand, p e e o iuse long e m in e es a es o , in some cases, bank c edi o o al c edi . The ex en o which each o hese a ge s i s in o he unde lying heo ies o bo h schools can be seen bes by conside ing he a gumen s o each o hese a ge s. To s a wi h a compa ison o he in e es a e a ge and he money s ock a ge he e is again he measu emen p oblem p e iously discussed in connec ion wi h he ansmission p ocess. Bu wi h espec o he p oblem o chosing a a ge , he Keynesian is less wo ied abou he di icul ies o measu ing he in e es a e. This is so because one impo an Keynesian channel o he impac o mone a y policy ope a es h ough he lows o unds in o deposi o y ins i u ions. And since such lows depend upon a compa ison o in e es a es o de- posi o y ins i u ions wi h open ma ke a es, he p oblem o in e ing he expec ed eal a e om he -nominal in e es a e does no a ise. (And he p oblem o combining a ious obse ed and impu ed a es in o " he in e es a e" is also less se ious.) Fu he mo e, ano he chan- nel is he e ec o in e es a es on he ma ke alue o he households' s ock o secu i ies, and hence on consump ion. He e oo, he p oblem o OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.8.3.293 | Gene a ed on 2023-01-16 13:32:12 The S uc u e o Mone a ism (II) 297 measu ing he in e es a e is no 'se ious. Howe e , o he adi ional "cos o capi al" e ec o in e es a es on in es men , he measu emen p oblem s ill exis s. Apa om he measu emen p oblem he choice o a a ge in ol es ano he issue which a ises om ou inabili y o p edic p ecisely changes in he liquidi y p e e ence schedule and in expendi u e incen i es62. I we would 'know e y accu a ely he -liquidi y p e e ence cu e as well as expendi u e incen i es, hen he cen al bank could easily selec he in e es a e which would op imize i s objec i es. Since wi h a known liquidi y p e e ence cu e we can in e a pa icula quan i y o money o each a e o in e es and ice e sa, lea ing aside he abo e discussed measu emen p oblem, i would be a ma e o comple e indi e ence whe he he cen al bank picks a pa icula in e es a e a ge o a money s ock a ge . Bu in ac uali y he cen al bank does no know he liquidi y p e- e ence schedule and he s eng h o he expendi u e incen i es accu- a ely. Suppose ha he liquidi y p e e ence cu e 'shi s ou wa d un- expec edly. All he cen al bank obse es is a ise in he in e es a e. I i uses an in e es a e a ge i esponds o his ise in he in e es a e by inc easing he quan i y o money su icien ly o lowe i back o i s p e ious le el63. Wha i does is o sa is y he inc eased demand o money, o in e ms o he cash balance equa ion, i o se s he ise in he Camb idge "k" by aising "M", hus keeping "PT" cons an . I i had used a money s ock a ge ins ead o i s in e es a e a ge , i would ha e kep he money s ock cons an and allowed he in e es a e o ise. This inc ease in he in e es a e would hen ha e educed income below i s p e ious (p esumably op imal) le el. On he o he hand, suppose ha he liquidi y p e e ence cu e is p edic able, bu ha expendi u e incen i es inc ease unexpec edly64. 62 Fo a de ailed exposi ion o his a gumen see William Poole, "Op imal Choice o Mone a y Policy Ins umen s in a Simple S ochas ic Mac o Model", Qua e ly Jou nal o Economics, ol. 84, May 1970, pp. 197-216; and "Rules o Thumb o Guiding Mone a y Policy" in Boa d o Go e no s, Fede al Re- se e Sys em, Open Ma ke Policies and Ope a ing P ocedu es, S a S udies, Washing on, D. C., pp. 135 - 189. 63 The assump ion ha he money g ow h a e and he in e es a e a e nega i ely co ela ed is jus i ied by he analysis being only e y sho un. 64 I is wo h no ing ha wha is ele an is no he s abili y o ei he he IS o LM cu e, bu i s p edic abili y since he cen al bank can eadily o se p edic able luc ua ions. OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.8.3.293 | Gene a ed on 2023-01-16 13:32:12 298 Thomas Maye This oo aises he a e o in e es . I he cen al ibank has an in e es a e a ge and coun e ac s his ise in he in e es a e i allows income o ise in an unin ended way. In o he wo ds, i expendi u e incen i es inc ease he in e es a e should also inc ease, hus ac ing as an au o- ma ic s abilize . Hence, i i is expendi u e mo i es a he han he li- quidi y p e e ence unc ion which changes in an lunp edic ed way, hen an in e es a e a ge does ha m, anid a money s ock a ge is p e e able. Bu i i is he liquidi y p e e ence unc ion which is he [unp edic able one, hen an in e es a e a ge is supe io 65. On bo h o hese issues a mone a is p e e s a money s ock a ge . Re- ga ding he measu emen p oblem, someone who accep s he .mone a is ansmission p ocess belie es ha he money s ock can be measu ed mo e accu a ely han can he in e es a e. On he ela i e p edic abili y o he liquidi y p e e ence unc ion and he expendi u e unc ions a quan- i y heo is conside s he liquidi y p e e ence unc ion (i. e. he demand o money) o be he s able o he wo66. Hence, he mone a is 's p e- e ence o a money s ock a ge o e an in e es a e a ge can be seen as an implica ion o he quan i y heo y and i s ansmission mechanism. Apa om he money s ock and he long e m in e es a e he e is a hi d majo po en ial a ge o mone a y policy. This is a c edi measu e, 'such as bank c edi o o al c edi . He e oo, he quan i y heo y and he mone a is 's e sion o he ansmission p ocess decide he issue o he mone a is . As a quan i y heo is he belie es ha he e ec o changes in he money s ock on income is mo e impo an han he e ec o changes in bank c edi , o o he wise he would hold a quan i y heo y o bank c edi a he han a quan i y heo y o money. 65 A hi d aspec o he choice be ween a money s ock a ge and an in e es a e a ge ela es o he p oblem o lags in he e ec s o mone a y policy. Since many ypes o expendi u es espond only slowly o a change in he in e es a e he e ec s o mone a y policy end o be delayed. Bu his delay can be o se i in e es a es ini ially o e shoo hei new le el. (See Donald Tucke y "Dynamic Income Adjus men s o Money Supply Changes", Ame ican Economic Re iew, ol. LVI, June 1966, pp. 433 - 449.) Inso a as he cen al bank ollows a money s ock a ge such an o e shoo occu s au oma ically. Bu wi h an in e es a e a ge , he cen al bank may ail o allow o he equi ed o e shoo . And e en i i aims o an o e shoo , i does no know how la ge i should be. 66 The mone a is looks upon expendi u e mo i es as s able oo, unless dis- u bed by a ia ions in he money g ow h a e, since he ea s he p i a e sec o as s able, bu e en so, he akes he demand o money as he s able one. OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.8.3.293 | Gene a ed on 2023-01-16 13:32:12 The S uc u e o Mone a ism (II) 299 Mo eo e , in his analysis o he ansmission p ocess he mone a is e- jec s a c edi and bo owing cos in e p e a ion67. The ma e is mo e complex o a Keynesian. As indica ed abo e, he p oblem o measu ing he in e es a e is o se ious conce n o him only wi h espec o he cos o capi al channel. Since di e en Keynesians a ach di e en weigh s o his channel, i is ha d o say how signi ican he measu emen p oblem is o he Keynesian s choice o a a ge . Fu he mo e, a Keynesian may — o may no — be conce ned abou he di icul ies o measu ing he money s ock. Wi h ega d o he second issue, he ela i e p edic abili y o he liquidi y p e e ence and expendi u e unc ions, Keynes o iginally con- side ed bo h he liquidi y p e e ence unc ion and he in es men unc- ion o be e a ic wi hou indica ing which was he «mo e 'uns able. Mode n Keynesians, on he o ihe hand, ha e deemphasizeid he spe- cula i e mo i e o liquidi y p e e ence which o Keynes was he sou ce o i s ins abili y, and appea o belie e ha he liquidi y p e e ence unc ion is ai ly s able and p edic able. On he o he hand, Keynesians also belie e ha in es men and consump ion, while uns able, a e p e- dic able. I is he e o e no eally clea wihe he Keynesians ypically conside he liquidi y p e e ence unc ion o he expendi u e unc ions o be he mo e p edic able. Pe haps he e is a p esump ion ha , on he whole, hey conside he demand o money o 'be he mo e p edic able a iable which should make hem p e e a money s ock a ge . Mo eo e , inso a as hey a e he in ellec ual hei s o he Wicksellian adi ion, Keynesians should p e e a money s ock a ge o an in e es a e a ge . I was Wicksell who augh us he dange s o keeping he money a e o in e es ixed (as happens wi h an in e es a e a ge ) when he na u al a e o in e es changes. All in all, Keynesian heo y is mo e o less neu al on he issue o he money s ock e sus he in e - es a e as he a ge . The hi d po en ial a ge is he olume o bank c edi , o o al c edi . Some Keynesians ha e accep ed such a ge s and hey, o cou se, di e sha ply om he mone a is s. Bu one can be a good Keynesian while ejec ing he easoning o he Radcli e Repo . 67 A ou h po en ial a ge , and money ma ke condi ions, is ha dly aken se iously anymo e, a leas in he Uni ed S a es. OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.8.3.293 | Gene a ed on 2023-01-16 13:32:12 300 Thomas Maye IX. The Mone a y G ow h Rule The nex componen o mone a ism is he cons an money g ow h ule. Such a ule i s well in o he mone a is amewo k on se e al coun s. Fi s , i is closely ela ed o he quan i y heo y. I he demand o «money is indeed cons an when adjus ed o end, hen a cons an g ow h a e o he supply o money would esul in income oo g ow- ing a a cons an a e68. Hence, someone who accep s die quan i y heo y o money is much mo e likely o a o cons an money g ow h hen is someone who belie es ei he ha he demand o money is un- s able, o ha luc ua ions in income a e la gely due o nonmone a y ac o s, ac o s which he cen al ¡bank can o se 69. Second, a belie in cons an money g ow h also i s in wi h he mone a is 's belie ha he p i a e sek o is inhe en ly s able. I his is he case he e is a bes a limi ed amoun o good ha could 'be accomplished by a ia ions in he money g ow h a e. Thi d, belie in a cons an money g ow h a e e- qui es accep ance o a money s ock a ge , o he mone a y g ow h ule is eally only a special e sion o he ¡use o a mone a y a ge ; i me ely se s a speci ic, un a ying a ge . In addi ion, he cons an money g ow h ule also has some connec- ion, albei a loose connec ion, wi h wo o he componen s o mone- a ism, he disin e es in alloca i e 'de ail, and he mone a is iew o he p ice le el. Someone who is in e es ed in alloca i e de ail is likely o be conce ned, om ime o ime, wi h he impac o inancial 's in- gency on a pa icula sec o , such as esiden ial cons uc ion. He is he e o e likely o eel, a leas occasionally, ha he mone a y g ow h 68 A mone a y g ow h ule is supposed o p o ide a g ow h a e o money income which is s able, hough his may be a s able a e o in la ion o de la ion. 69 This conclusion is subjec o he ca ea ha in hei o mal heo y mone- a is s conside he demand o money o be s able only in a unc ional sense. Hence, i many o he a iables in he money demand unc ions luc ua e, he demand o money, and he e o e income, would also luc ua e unde a cons an money supply ule. Bu acco ding o F iedman, and pe haps o mos mone- a is s, his dis inc ion be ween he unc ional s abili y and he cons ancy o he demand o money does no c ea e a se ious p oblem. Inso a as he demand o money is a unc ion o pe manen income o weal h i is likely o g ow a a s eady a e. To be su e, i is also a unc ion o he nominal a e o in e es . Bu luc ua ions in he nominal in e es a e a e la gely he esul o p e ious luc ua ions in he money g ow h a e and p ices. Hence, gi en a cons an money g ow h ule, eloci y would end o be ai ly s able in a nume ical, as well as a unc ional, sense. OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.8.3.293 | Gene a ed on 2023-01-16 13:32:12 The S uc u e o Mone a ism (II) 307 de e mina ion o in e es a es and bank c edi o ee ma ke , and can con ine i s a en ion o he s ock o money, some hing jus abou always conside ed ou side he domain o he p i a e ma ke . A mone a y g ow h ule, ob iously educes he need o disc e iona y policy. And i he Phillips-cu e is such ha one canno success ully ade o un- employmen and in la ion hen he e is ano he ask he go e nmen should no a emp . Finally, he e a e se e al links be ween a conce n abou in la ion and conce n abou he g ow h o go e nmen . One is ha in la ion can easily lead o poli ical p essu es o he imposi ion o wage and p ice con ols. A second is ha , gi en a p og essi e ax sys em, in la ion aises he sha e o he go e nmen 'sec o wi h he esul ing emp a ion o inc ease go e nmen expendi u es. A hi d link is ha since one way go e nmen expendi u es ha e isen is h ough in la iona y inance, p e en ion o in la ion may indi ec ly limi go e nmen expendi u es. Fou h, de ici expendi u es w hen inanced by newly c ea ed money, as is so o en he case, end o be in la iona y. A c i ic o mone a ism migh he e o e be emp ed o claim ha mone a ism is basically an "ideological" doc ine; ha i consis s o inding seemingly echnical easons o hide a basic commi men in a o o un e e ed capi alism. Bu his emp a ion o play ama eu psycho- analys should be i mly esis ed. A mone a is can eply o i e y easily by e e sing he a gumen , and claiming ha he ideological elemen in he déba e es s wi h he Keynesians; ha i is hei ideological commi men o go e nmen egula ions and he g ow h o bu eauc acy ha makes hem ejec he mone a is 's sound a gumen s on a ious echnical issues o mone a y economics. On a mo e wo hwhile le el han such name-calling i should be no ed ha while opposi ion o go e nmen egula ions i s in well wi h mone a ism, i is s ill a e y loose connec ion in one impo an sense82. One can be a adical and ye accep all he o he mone a is p oposi- ions discussed abo e. Thus, a adical migh e en accep he cons an mone a y g ow h ule on he basis ha his is he bes one can do unde capi alism83. In ac , a planne in an almos o ally con olled economy, 82 See ibid., p. 63. 83 A adical, unless he is Ma xis , need no ejec he mone a is 's belie in he inhe en s abili y o he p i a e sec o since his objec ion o capi alism could be ounded on g ounds o he han ins abili y. OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.8.3.293 | Gene a ed on 2023-01-16 13:32:12 308 Thomas Maye such as China, should ind he quan i y heo y mo e use ul han he Keynesian heo y84. Con e sely, one can be a igh -wing ex emis wi hou being a mone a is . XIII. Some O he Di e ences I one wan s o look o a common h ead connec ing a ious mone a is p oposi ions one need no con ine onesel o an ideological conside a ion since he e is a me hodological elemen a ailable. We li e in a wo ld oo complex o ou in ellec ual appa a us. We mus he e o e do ei he o wo hings. One is o ake accoun o a g ea many ac o s a he cos o being able o see hei in e ela ions only in a ague, clouded way. The o he is o simpli y d as ically, and o look a only a ' ew ac o s. Along hese lines one can classi y economis s in o "cloud make s" and in o "o e simpli' ie s", o use wo de oga o y e ms. Using his dicho omy he Keynesian is a cloud make while he mone a is is an o e simpli e 85. Thus he quan i y heo y is simple han he Keynesian heo y in he sense o aking accoun o ewe a iables86. The pic u e is less ob ious as a as he mone a is ansmission p ocess is conce ned. The mone a is iew o his p ocess is ce ainly mo e cloudy and less clea han he Keynesian one, since he mone a is (belie es ha i wo ks h ough a la ge wumlbe o channels, some o which he canno speci y. Howe e , a ague ansmission 84 The Keynesian's ma ginal e iciency o in es men and he mul iplie play li le, o no, ole in de e mining income in a con olled economy. On he o he hand, since he public has eedom o adjus i s money holdings he quan i y heo y is ele an . 85 This does no imply ha he quan i y heo is hinks we li e in a simple wo ld. One may wan o use simple models p ecisely because he wo ld is so complex ha no complex, bu s ill manageable, model can do i jus ice. This can be seen eadily on an empi ical le el. I we y o o ecas a a iable which has de e minan s o only mode a e complexi y we end o use a s anda d "explana o y" eg ession. Bu i we y o o ecas a a iable wi h ex emely complex de e minan s we e a e mo e likely o use a nai e model o some o he au o eg essi e scheme. 86 The B unne -Mel ze e sion o he quan i y heo y gi es he imp ession o being mo e complex han he Keynesian heo y since i c i icizes Keynesian heo y o igno ing some impo an e ec s. Bu his appea ance is due, in pa , o he ac ha when B unne and Mel ze c i icize he Keynesian model hey ocus on he g ea ly o e simpli ied IS, LM diag am which does no gi e he ull Keynesian s o y. Al hough hey in oduce some addi ional a iables, hey omi some o he Keynesian a iables. OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.8.3.293 | Gene a ed on 2023-01-16 13:32:12 The S uc u e o Mone a ism (II) 309 p ocess, when combined wi h F iedman's me hodological iews esul s in a simple, a he han a complex, iaw o he wo ld. F iedman inds a close ela ionship ibe ween changes in money and in nominal income, and p esumably does no eel g ea ly wo ied by he ac ha i is di - icul o speci y he ansmission p ocess87. He s esses p edic i e powe a he han desc ip i e ealism88. The mone a is 's 'hypo hesis ha he p i a e sec o is inhe en ly s able also helps o simpli y he analysis, since, i ue, his means ha we do no ha e o conce n ou sel es in mac oeconomics wi h luc ua- ions in expendi u e mo i es. Hence, one can dispense wi h he de ailed Keynesian analyses o consump ion and in es men , as well a>s many complex business cycle heo ies. The mone a is 's disin e es in alloca i e de ail ob iously also simpli ies mac oeconomics. The same i>s ue o his use o small, a he han la ge, econome ic models, and o his oous on he o e all p ice le el a he han on he p ices cha ged in indi idual indus ies. Using o al ese es a he han a combina ion o sho e m in e es a es and money ma ke condi ions as an indica o o mone a y policy helps o simpli y he analysis o mone a y policy. Indeed, mone a is s ha e c i icized he use o money ma ke condi ions because o he complexi y and agueness i in oduces89. The use o a s able money g ow h a e also ob iously simpli ies he conduc o mone a y policy. Indeed, one o he leading mone a is a gumen s o i is ha we do no ha e he equi ed in o ma ion, such as knowledge o lags, o do be e wi h disc e iona y policy han a simple g ow h a e ule does. And a Phillips-cu e ha does no allow o any unemploymen -in la ion ade-o simpli ies mac oeconomics by emo ing one e y di icul 87 To be su e, F iedman belie es ha he me e co ela ion o money and in- come is no enough o es ablish he quan i y heo y, ha a plausible ansmis- sion p ocess is needed. (See Mil on F iedman and Anna Schwa z, "Money and Business Cycles", Re iew o Economics and S a is ics, Vol. XLV, Feb ua y 1963, Supplemen , p. 59.) Howe e , a ague, gene alized ske ch o he ans- mission p ocess may su ice o his. 88 Ka l B unne oo, has ejec ed he ype o desc ip i e ealism ha es s heo ies by e alua ing he alidi y o hei assump ions. (See his "Assump ions' and he Cogni i e Quali y o Theo ies", Syn hese, Vol. 20, 1969, pp. 501 - 525. 89 See Ka l B unne and Allan Mel ze , Some Gene al Fea u es o he Fede al Rese e's App oach o Policy, U.S. Cong ess, House, Commi ee on Banking and Cu ency, Subcommi ee on Domes ic Finance, 88 h Cong ess, 2nd Session (Washing on, D.C. 1964). 21 K edi und Kapi al 3/1975 OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.8.3.293 | Gene a ed on 2023-01-16 13:32:12 310 Thomas Maye OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.8.3.293 | Gene a ed on 2023-01-16 13:32:12 The S uc u e o Mone a ism (II) 311 M-i ljz: 0 ^ 1 V * "2 § a o a a o cJ .S3 a OJ VJ O g s •S s Js a Uh C/Î C a) i « e « a a o e o, g x § w a « 4-> CS CL -SI? ^ £ ns ? S i o J^ a> h <u • g _1 a> a> nJ js w ^ 3 Jh W O a, -a >N w :3 « ~o £ * g C o £ S ? s o a > T3 S Oh X T3 a o u 'g <U G 4-» a> G -O O O, * o S " ° à G .2 i -C i M G g G ^ ^ ~ Ûi - X ni O O ^ w> S I ^ g Vh <u î O .S G S O 2 »- £ u <U xD u, C3 » J g JS .S G a> 0 £ O £ i i o ^ ô .2 4-> ÇJ * g s S G § « S ^ <L> . 5 S a .2 x "S o ^ § O H J -M G C 3 JD^J Xi O) 3 ï; c oa.2 «-M "O 4-» X ?S N ^ CQ O QkJPH +3 O 'o g J g 3 a I a * a 3 § >• 3 5 <U U H 21* OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.8.3.293 | Gene a ed on 2023-01-16 13:32:12 312 Thomas Maye ques ion, selec ion o he op imal ade-o . Only wo componen s o mone a ism, he use o a 'money s ock a ge , and he conce n abou in la ion do no i he pic u e o mone a ism as simpli ica ion. The e exis s also ano he elemen ha links six mone a is p oposi- ions. This is he mone a is 's skep icism abou how muich we eally know abou he sho un wo kings o he economy. Mone a is s gene ally seem o be less op imis ic abou his han a e Keynesians. I we eally do know li le abou he sho - un 'beha io o he economy, hen he mone a is ansmission p ocess is less subjec o he c i icism ha i -does no y o spell ou he channels o mone a y in luence in any de ail. Any a emp o do his could hen be conside ed p esump- uous. Second, i ou knowledge o sho - un economic beha io is limi ed, hen we may no ha e an adequa e amewo k o (using in- o ma ion abou alloca i e de ail. Thi d, we hen do no know enough o ibuild use ul la ge 'scale econome ic models. Fou h, he less ou knowledge, he weake is he case o " ine uning", and he s onge is he case o a mone a y ule90, and hence he use o a money s ock a ge . Finally, he less we know abou he economy he less likely a e go e nmen egula ions o imp o e i . XIV, Conclusion This pape has deal wi ih a ious p oposi ions ha make up mone- a ism, b oadly -de ined, and showed ha hey o m a cohe en whole. Wi h one excep ion ( he use o a o al ese e measu e as he indica o o mone a y policy) hey i oge he in he sense ha de ini i e p oo o he alidi y o one o he mo e basic p oposi ions would inc ease he plausibili y o some o he o he p oposi ions. Figu e 1 shows ela ions which ha e been aced he e be ween he a ious p oposi ions. Bu his does no mean ha mone a ism is a pa adigm which mus be accep ed o ejec ed as a whole. As poin ed ou abo e, wi h he ex- cep ion o he quan i y heo y i sel , and pe haps i s ansmission p ocess, e e y single p oposi ion o mone a ism is one which a Keynes- ian could accep while ejec ing o he s, and s ill main ain his adhe ence o basic Keynesian heo y. In pa icula , he policy p oposi ions a e 90 This s a emen is subjec o he objec ion ha a g ea deal o knowledge is equi ed o decide on he co ec long un g ow h a e ule. Bu mone a is s belie e ha he economy can adap i sel o any mone a y g ow h a e as long as his a e is s able. OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.8.3.293 | Gene a ed on 2023-01-16 13:32:12 The S uc u e o Mone a ism (II) 313 eadily de achable om he heo e ical p oposi ions o mone a ism, and can «be accep ed wi hou qualms by a Keynesian. Con e sely, someone who accep s some o he mone a is p oposi ions, including he wo mos basic ones ( he quan i y heo y an>d he mone a is e sion o he ansmission p ocess) need no he e o e accep all he o he s. Hence, a good case can 'be made o abolishing he e m "mone a ism" al oge he , and o ea ing each p oposi ion independen ly. This would educe he (un o una e pola iza ion o economis s in o mone a is s and an i-mone a is s, wi h he accompanying endency o accep o ejec a ious p oposi ions on a basis o he han he empi ical e idence bea ing on hem91. Admi edly, his may well be he counsel o pe ec- ion since he e m "mone a ism" is now so well es ablished and con enien . Bu eclec icism is ully jus i ied92. Zusammen assung Die S uk u des Mone a ismus (II) In dem Au sa z wi d die E ö e ung des Mone a ismus o gese z *, in dem sechs Regeln ü eine mone a is ische Poli ik au geg i en we den: (1) De Geb auch de Mindes ese en als ein Indika o ü die Geldpoli ik. (2) Die Aus ich ung de Geldpoli ik au das Geld olumen als die geeigne e Ziel a i- able. (3) De Glaube an die Regel om s abilen Wachs um de Geldmenge. (4) Ablehnung eine Al e na i e zwischen In la ion und A bei slosigkei . (5) G oße Beso gnis übe In la ion, und (6) Abneigung gegenübe s aa lichen Ein- g i en. Es we den die Wechselbeziehungen diese Punk e und ih e Beziehung zu den im e s en Teil des Au sa zes behandel en sechs Thesen e ö e . Ob- wohl zumindes ün on ihnen eindeu ig mi ande en mone a is ischen Fo - de ungen e bunden sind, kann man dennoch einige ane kennen und ande e ablehnen. * Siehe S. 190 . 01 As Cy us Go don (Riddles in His o y, New Yo k, 1974, p. 156) has pu i , "all schools o hough a e in eali y 'schools o un- hough ' o he ex en ha hey p e en us om going o whe e he ac s should lead us". 92 Thus Ka l B unne has a gued ha : "... he ou majo issues [in he mone a is deba e] allow a a ie y o combina ions. ... The e olu ion o such a spec um wi h a 'middle g ound' should en ich ou u u e esea ch ac i i ies. Such ac i i ies should yield subs an i e esul s o e he yea s o he ex en ha economis s success ully a oid he 'media p opensi y' o equa ing all issues wi h ideological posi ions." "Commen a y on 'The S a e o he Mone a is Deba e' ", Fede al Rese e Bank o S . Louis, Re iew, Vol. 55, Sep embe 1973, p. 14. OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.8.3.293 | Gene a ed on 2023-01-16 13:32:12 314 Thomas Maye Es wi d da geleg , daß die Wahl de Mindes ese en als Indika o ü die Geldpoli ik nu eine nebensächliche Ve bindung mi allen ande en mone a is i- schen Thesen ha . Alle dings sind ü ande e Punk e die gegensei igen Ve - knüp ungen iel enge . So s eh beispielsweise die Benu zung de Geldmenge als Ziel a iable de Geldpoli ik mi de Quan i ä s heo ie deswegen in enge Ve bindung, weil die Quali ä s heo ie eben au die Geldmenge abziel und da- on ausgeh , daß das Geld olumen genau gemessen we den kann — was unbeding de Fall sein muß, wenn es als Ziel a iable benu z we den soll. Ähnlich bes eh eine enge Ve bindung zwischen dem Leh sa z on de s abi- len Wachs ums a e de Geldmenge und de Quan i ä s heo ie au g und de Annahme, daß die Geldnach age s abil sei. Und dies wiede um is eine genau- e e Umsch eibung de Geldmenge als Ziel a iable. Die Ablehnung de Al e - na i e zwischen In la ion und A bei slosigkei paß gu zu Quan i ä s heo ie, weil sich P eise und Geldmenge p opo ional en wickeln, wenn man die Phil- /¿ps-Ku e in ealen G ößen ausd ück . Noch zahl eichen ande en Ve knüp- ungen zwischen diesen Thesen wi d nachgegangen. De Wide s and de Mone a is en gegen S aa seing i e en sp ich den mei- s en ande en mone a is ischen Fo de ungen. Abe es wä e ein I um anzu- nehmen, daß dies die G undlage des Mone a ismus wä e. Vielmeh dü en eine Neigung zu Unkomplizie hei und Skepsis gegenübe unse e Kenn nis de Zusammenhänge undamen ale sein. Summa y The S uc u e o Mone a ism (II) This pape con inues he discussion"* o mone a ism by aking up six mone- a is policy p oposi ions. They a e: (1) he use o a ese e measu e as an indica o o mone a y policy, (2) he use o he money s ock as he p ope a ge o mone a y policy, (3) belie in a s able money g ow h a e ule, (4) ejec ion o an in la ion-unemploymen ade-o , (5) g ea conce n abou in- la ion, and (6) dislike o go e nmen in e en ion. The in e ela ions o hese p oposi ions and hei ela ions o he six p oposi ions aken up in Pa I o his pape a e discussed. Al hough a leas i e o hem a e clea ly connec ed wi h o he mone a is p oposi ions, he connec ion is again sudi ha one can accep some, wi hou accep ing he o he s. I is a gued ha use o a ese e measu e as an indica o o mone a y policy has only a weak connec ion wi h all he o he mone a is p oposi ions. Howe e , o he o he p oposi ions he in e connec ions a e much close . To gi e some examples, he use o he money s ock as a a ge o mone a y policy is connec ed o he quan i y heo y, since he quan i y heo y cen e s on he * pp. 190. OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.8.3.293 | Gene a ed on 2023-01-16 13:32:12 The S uc u e o Mone a ism (II) 315 money s ock, and also implies ha he money s ock can be measu ed p ope ly, some hing ha is needed i i is o be used as a a ge . Simila ly, he s able money g ow h a e is connec ed o he quan i y heo y by he belie ha he demand o money is s able, and i is connec ed o he money s ock a ge since i is a speci ica ion o ha a ge . The ejec ion o he in la ion-unemploymen ade-o i s well wi h he quan i y heo y because, i he Phillips-cu e is in eal e ms, p ices and he s ock o money mo e p opo iona ely. Nume ous o he connec ions be ween hese p oposi ions a e aced. The mone a is 's opposi ion o go e nmen in e e ence i s well wi h mos o he mone a is p oposi ions. Bu i would be misleading o conside his o be he basis o mone a ism. Ins ead, a p e e ence o simplici y, and skep icism abou ou knowledge seem mo e basic. Résumé La s uc u e du moné a isme (II) L'é ude du moné a isme se pou soui (I)* pa ce e Sec ion II, dans laquelle in e iennen six ègles de poli ique moné a is e: (1) L'u ilisa ion des ése es minimales comme indica eu de la poli ique moné ai e. (2) L'alignemen de la poli ique moné ai e su le olume moné ai e considé é comme la a iable inalisée app op iée. (3) La c oyance à la ègle de l'expansion s able du olume moné ai e. (4) Reje de l'al e na i e en e l'in la ion e le chômage. (5) Vi es inquié udes au suje de l'in la ion, e (6) an ipa hie à l'éga d des in e en ions é a iques. L'on examine les appo s d'échange en e ces di e s poin s e leu ela ion a ec les six hèses aisan l'obje de la Sec ion I de l'é ude. E bien que cinq au moins de ces six hèses son clai emen liées à d'au es exigences moné a is es, l'on peu cependan en accep e ce aines pou en epousse d'au es. L'au eu explique que le choix des ése es minimales comme indica eu de la poli ique moné ai e n'a qu'une liaison secondai e a ec ou es les au es hèses moné a is es. Mais pou d'au es poin s, les jonc ions son ne emen plus é oi es. C'es ainsi pa exemple que l'emploi du olume moné ai e comme a iable inalisée de la poli ique moné ai e se ou e en é oi e ela ion a ec la héo ie quan ia i e du ai p écisémen que la héo ie quali a i e s'o ien e su le olume moné ai e e qu'elle pos ule que ce olume peu ê e mesu é ès exac emen — ce qui doi ce ainemen ê e le cas lo sque le olume moné ai e se de a iable inalisée. Pa eillemen , il exis e une é oi e ela ion en e la hèse du aux s able d'expansion du olume moné ai e e la héo ie quan i a i e pou au an que la demande moné ai e demeu e s able. E ceci cons i ue in e sémen une desc ip ion plus p écise du olume moné ai e p. 190. OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.8.3.293 | Gene a ed on 2023-01-16 13:32:12 316 Thomas Maye comme a iable inalisée. Le eje de l'al e na i e en e l'in la ion e le chômage s'adap e pa ai emen à la héo ie quan i a i e en aison du dé elop- pemen p opo ionnel des p ix e du olume moné ai e lo squ'on exp ime la cou be de Phillips en g andeu s éelles. De nomb eux au es liens en e ces hèses son égalemen analysés. L'opposi ion des moné a is es aux in e en ions é a iques co espond à la plupa des au es exigences moné a is es. Mais ce se ai une e eu de c oi e que c'es là le ondemen du moné a isme. Une endance à la simplici é e au scep icisme à l'éga d de no e connaissance des in e connexions de ai au con ai e ê e ondamen ale. OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.8.3.293 | Gene a ed on 2023-01-16 13:32:12