Taking Money Seriously.

• Author: Findlay, David W.

This book is a collection of articles written by David Laidler. The goal of the text, as Laidler notes in the Introduction, is to remind the readers of the importance of monetary theory and to prompt "some of them to explore further the implications of those ideas for monetary theory". The first several chapters focus on the rationale for holding money and emphasize money's role as a buffer stock. Any text with such an ambitious title must also respond to the implications of New Classical economics. Laidler also reviews the contributions of the New Classical revolution and proceeds to offer a number of criticisms of New Classical macroeconomics. A theme found throughout the text is the author's view of New Classical economics which, he argues, "despite its great theoretical clarity and rigour . . . is at best unhelpful, or at worst misleading, in empirical applications . . .". The final chapters focus on policy issues ranging from the role and implementation of monetary policy to the choice of an appropriate exchange rate regime.

The goal of chapter 1 is to explain why money should be taken seriously. The chapter begins with a brief summary of the development of monetary theory. Laidler then discusses the precautionary motive for holding money. This "overview" chapter also includes discussions about the modelling of agents' expectations and money's role as a substitute for costly information. One minor suggestion this reader had about the essay is that it would have been helpful to have included references to the work by Jo Anna Gray when discussing the effects of price level behavior on contract length and on the level of indexation.

In chapter 2, Laidler describes the notion of money as a 'buffer stock' of cash balances. This buffer stock is argued to mitigate the effects of surprises in markets and to serve as a substitute for information. To highlight the differences of the buffer stock approach, Laidler compares it to both the Keynesian and New Classical descriptions of the money market. His discussion of the disequilibrium nature of the buffer stock approach on pages 29-33 is excellent. While the majority of the chapter is devoted to the description of these competing views of the money market, the author concludes with a brief discussion of empirical characteristics of money demand.

The distinction between aggregate and individual money demand relationships presented in chapter 2 is also used in chapter 3 to discuss the costs of...