The financial crash of 2008 showed the fragility of the financial system. A key question which surfaced in the aftermath of the global crisis was why economists were unable to predict this crash. This new volume argues that this failure can be attributed, at least in part, to the poor and inconsistent treatment of money and monetary matters in economic theory. The book takes this problem as its starting point, and from there aims to develop a more consistent treatment of the topic.
Here, Hasse Ekstedt affirms that the treatment of money in economic theory has been inconsistent and that the topic of money can in fact be seen as anomalous. He argues that this anomaly depends on deficiencies in the economic theory, which through an equilibrium approach mainly perceives money as an index of measurement.
In contrast, this volume puts forward the case for money as a non-equilibrium concept, and that the stability of money and financial markets are to be sought in social and institutional structures. In particular, the volume discusses the relationship between the market and public bodies, as well as addressing economic and financial stability in general and in relation to the globalized economy, particularly focussing on the problem of structural stability. In doing so, the book offers a new approach both to money and to its role in economic theory.
Author(s): Hasse Ekstedt
Series: Routledge International Studies in Money and Banking (75)
Publisher: Routledge
Year: 2015
Cover
Title
Copyright Page
Contents
List of figures
List of tables
Preface
Acknowledgements
1 Introduction, scopes and methods
Scopes of the book
Methodological matters
The structure of the book
2 The understanding of money: a retrospective glance
Introduction
Aristotle
The Salamanca School
David Hume 1711–1776
Adam Smith 1723–1790
The bullionist debate and real bills
David Ricardo 1772–1823
Henry Thornton 1760–1815
The aftermath of the bullionist debate and the currency debate
Jean Baptiste Say 1767–1832
Knut Wicksell and the two paths of thinking
Metallism and chartalism
3 Money, value and prices in neoclassical economic theory
Introduction
The structure of the neoclassical theory
Arrow's paradox
Money and cash balances
How can we avoid theoretical chaos?
The dimensionality problem and economic behaviour
Developments of the neoclassical theory
Summing up the neoclassical theory and its modifications
4 Money, value and prices in the Keynesian and monetarist theories
From the microscopic level to the macroscopic level
The complexity of the macroscopic structure
Keynes and Keynesian macroeconomics
Cash balances, inflation and uncertainty
The IS-LM model as a policy tool and its alleged death
Supply side economics
Complementarities in production and labour hoarding
The monetarist challenge
5 Concluding comments on the nature of money in economic theory
Some lessons from history
Some important features of liquidity
Measuring inflation
The fundamental intrinsic feature of money
State and inflation
A mathematical view of measures in non-equilibrium
Some further comments on equilibrium
Dynamics and irreversibility
6 Uncertainty, money and liquidity
Risk and uncertainty
A first look at uncertainty
Expected utility and the state space
The complex state space – the copula
Uncertainty of the agents' actions
Three levels of uncertainty in decision making
7 Inter-temporal valuation, expectations and stability
Introduction
Valuation and expectation linked to the real economy
Real performance and the financial sector
Expectations
Uncertainty and money contract
Some comments on the globalized economy
8 Money and stability
The dimensions of the concept of money
The intrinsic logical meaning of money
Diffusion of money and equilibrium
The modelling problem
Production and its conditions
Notes
Bibliography
Index
