Monetary Theory and Policy from Hume and Smith to Wicksell: Money, Credit, and the Economy (Repost)

This book provides a comprehensive survey of the major developments in monetary theory and policy from David Hume and Adam Smith to Walter Bagehot and Knut Wicksell. In particular, it seeks to explain why it took so long for a theory of central banking to penetrate mainstream thought. The book investigates how major monetary theorists understood the roles of the invisible and visible hands in money, credit, and banking; what they thought about rules and discretion and the role played by commodity-money in their conceptualizations; whether or not they distinguished between the two different roles carried out via the financial system - making payments efficiently within the exchange process and facilitating intermediation in the capital market; how they perceived the influence of the monetary system on macroeconomic aggregates such as the price level, output, and accumulation of wealth; and finally, what they thought about monetary policy. The book explores the analytical dimensions in the various monetary theories while emphasizing their policy consequences. The book highlights the work of a number of pioneering theoreticians. Among these Henry Thornton stands out, primarily because of his innovative analyzis of the complicated phenomena that developed after the introduction of an inconvertible monetary system in 1797. A major question addressed by the book is why theoreticians and policymakers were so resistant to his ideas for so many years.

"This is the first history of the development of monetary ideas from Hume to Wicksell since Charles Rist's 1938 classic Histoire des doctrines relatives au credit et … la monnaie. Arie Arnon brings together a large literature and skillfully covers historical aspects of some of the main issues in monetary theory and policy that will attract the attention of historians of thought and monetary theoreticians alike." - Mauro Boianovsky, Universidade de Brasilia, Brazil

"Arie Arnon's book is a great achievement. Meticulously researched and lucid, it lays out the roots of modern monetary and banking theory in the controversies that convulsed England's rise as an industrial and trading power. Confronting financial innovation, crises, and the need for macroeconomic balance - as we do today - 'practical theorists' from Henry Thornton onwards developed the understanding of credit-based money that provides foundations for today's central banking and financial regulation. Monetary Theory and Policy from Hume and Smith to Wicksell is one of those rare books that redefines its field. It is indispensable reading for thoughtful bankers and economists alike." - Laurence Harris, University of London

"Arie Arnon's ambitious history of monetary theory and policy is History of Economic Thought at its very best. It provides an authoritative account of monetary doctrine from the eighteenth through nineteenth centuries, attending impressively to the strong interconnection between ideas and financial environment, and throughout taking under consideration a notoriously massive secondary literature. But it does more than that. The study impresses on the reader the high relevance for our own day of insights developed as much as two hundred years ago. Our policy makers, not only academic economists, would be well advised to take this book seriously." - Samuel Hollander, University of Toronto

"Arnon follows a new path through this well-traveled country, paying rather more attention than earlier guides to theoretical signposts, and a little less to policy markers. He has written a subtly original and thoroughly absorbing book." - David E. W. Laidler, University of Western Ontario

"An impressive survey of the major developments in monetary theory and associated positions on policy from the eighteenth to the nineteenth centuries. A fine, scholarly reconstruction and a very readable account of the logical structure of money and credit theories, particularly instructive and relevant in the current financial crisis." - Maria Cristina Marcuzzo, Universit… di Roma "La Sapienza," Italy

"Arie Arnon's history of monetary theory and policy from Hume to Wicksell provides an excellent roadmap to understanding the nature and evolution of the British tradition. The book is well researched and clearly written. Every chapter is good; some, such as Chapter 11 on the Currency School, are simply outstanding. This is a book that monetary historians will want to acquire." - Neil T. Skaggs, Illinois State University