Money, Banking and Inflation: Essays in the History of Monetary Thought.

• Author: Carroll, Michael C.

Most contemporary monetary theory is woefully ahistoric. Today, volume after volume buries us in abstract formalistic models whose technical precision is eclipsed only by their intrinsic sterility. The rich legacy of monetary thought has been inadvertently lost or callously pushed aside. Gone are the visionary theorists - the Thorntons, Bagehots, and Penningtons - whose work defined and refined the very foundations of monetary thought. These men gave the theory life, not through reduced form equations but in open forum exchanges.

Fortunately, not all contemporary research displays this historical deficiency. The work of Thomas M. Humphrey is the conspicuous exception. Humphrey returns historical perspective by employing a methodology which he calls the "historical-doctrinal" approach. This approach allows Humphrey to "select a prominent theory or idea, examine its constituent components, identify its doctrinal origins and trace its evolution across a succession of writers, events, episodes and public policy debates" [p. xi]. Each of the thirty-eight essays in Money, Banking and Inflation: Essays in the History of Monetary Thought uses this evolutive methodology. The essays were written over a twenty-one year period at the Federal Reserve Bank of Richmond where Humphrey is a research economist who specializes in applying the history of economic thought to the analysis of policy problems. All the papers in this volume have been published previously but they have often been difficult to obtain. This collective volume eliminates this problem and adds a very convenient cumulative index which makes tracing common themes far easier.

The book is divided into nine sections which include banking theory, interest rates and inflation, the quantity theory, inflation theory, the Phillips curve, money neutrality, price-level stabilization, open economy consideration and geometrical tools. Running through all of Humphrey's essays are two defining beliefs. The first is that most of the core ideas actually date back to at least the eighteenth or nineteenth centuries and are seldom named after their original discoverer. Humphrey's second belief is that strawman interpretations of older theories are often misleading or actually wrong. When viewed from Humphrey's historical-doctrinal perspective it can be argued that, in many respects, monetary economics is only a superficially progressive science [p. x]. Humphrey believes that monetary theory has certainly...