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ADAM SMITH’S THEORY OF MONEY AND BANKING

Published online by Cambridge University Press:  19 June 2017

Nicholas A. Curott
Nicholas A. Curott*
Affiliation:
Ball State University.
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Abstract

This paper addresses a long-running debate in the economics literature—the debate over Adam Smith’s theory of money and banking—and argues that recent reinterpretations of Smith’s monetary theory have erroneously diverted historians of monetary thought from the correct, but briefly articulated, initial interpretations of Henry Thornton (1802) and Jacob Viner (1937). Smith did not present either the real-bills theory or a price-specie-flow theory of banknote regulation, as is now generally presumed, but rather a reflux theory based upon the premise that the demand for money is fixed at a particular nominal quantity. Smith’s theory denies that an excess supply of money can ordinarily make it into the domestic nominal income stream or influence prices or employment.

Type
Articles
Information
Journal of the History of Economic Thought , Volume 39 , Issue 3 , September 2017 , pp. 323 - 347
Copyright
Copyright © The History of Economics Society 2017 

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