Abstract
‘Neutrality of money’ is a shorthand expression for the basic quantity-theory proposition that it is only the level of prices in an economy, and not the level of its real outputs, that is affected by the quantity of money which circulates in it. Thus the notion – though not the term – goes back to early statements of the quantity theory, such as the classic one by David Hume in his 1752 essays ‘Of Money’, ‘Of Interest’ and ‘Of the Balance of Trade’. At that time the notion also served as one of the arguments against the mercantilist doctrine that the wealth of a nation was to be measured by the quantity of gold (which in 18th-century England constituted a – if not the – major form of metallic money: Feaveryear 1963, p. 158) that it possessed. The term itself is much more recent. Though attributed by Hayek (1935, pp. 129–31) to Wicksell, it is actually due to continental economists in the late 1920s and early 1930s to whom Hayek also refers (see 1935, pp. 129–31; see also Patinkin and Steiger 1988).
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Patinkin, D. (2018). Neutrality of Money. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_957
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DOI: https://doi.org/10.1057/978-1-349-95189-5_957
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