Hostname: page-component-586b7cd67f-g8jcs Total loading time: 0 Render date: 2024-11-25T01:31:51.909Z Has data issue: false hasContentIssue false
  • English
  • Français

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.
Get access Rights & Permissions [Opens in a new window]

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 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Arnon, Arie. 2011. Monetary Theory and Policy from Hume and Smith to Wicksell: Money Credit and the Economy. Cambridge: Cambridge University Press.Google Scholar
Bailey, Samuel. 1825. A Critical Dissertation on the Nature, Measures, and Causes of Value; Chiefly in Reference to the Writings of Mr. Ricardo and His Followers. London: R. Huner.Google Scholar
Blaug, Mark. 1968. Economic Theory in Retrospect. Cambridge: Cambridge University Press.Google Scholar
Bloomfield, Arthur I. 1975. “Adam Smith and the Theory of International Trade.” In Skinner, A. S. and Wilson, T., eds., Essays on Adam Smith. Oxford: The Clarendon Press, pp. 455–481.Google Scholar
Cantillon, Richard. [1730] 1959. Essai sur la Nature du Commerce in Général. London: Frank Cass and Co., Ltd.Google Scholar
Cesarano, Filippo. 1998. “Hume’s Specie-flow Mechanism and Classical Monetary Theory: An Alternative Interpretation.” Journal of International Economics 45: 173–186.Google Scholar
de Boyer des Roches, Jerome. 1998. “Endogenous Money and Shareholders’ Funds in the Classical Theory of Banking.” The European Journal of the History of Economic Thought 5 (1): 60–84.Google Scholar
de Boyer des Roches, Jerome. 2013. “Bank Liquidity Risk from John Law (1705) to Walter Bagehot (1873).” The European Journal of the History of Economic Thought 20 (4): 547–557.Google Scholar
Eagly, Robert V. 1970. “Adam Smith and the Specie-flow Doctrine.” Scottish Journal of Political Economy 17: 61–68.Google Scholar
Girton, Lance, and Roper, Don. 1978. “J. Laurence Laughlin and the Quantity Theory of Money.” Journal of Political Economy 86 (4): 599–625.Google Scholar
Glasner, David. 1985. “A Reinterpretation of Classical Monetary Theory.” Southern Economic Journal 52 (1): 46–67.Google Scholar
Glasner, David. 1989a. Free Banking and Monetary Reform. Cambridge: Cambridge University Press.Google Scholar
Glasner, David. 1989b. “On Some Classical Monetary Controversies.” History of Political Economy 21 (2): 201–229.Google Scholar
Glasner, David. 1992. “The Real-Bills Doctrine in the Light of the Law of Reflux.” History of Political Economy 24 (4): 867–894.Google Scholar
Glasner, David. 2000. “Classical Monetary Theory and the Quantity Theory.” History of Political Economy 32 (1): 39–59.Google Scholar
Hayek, Friedrich von. 1973. Law, Legislation, and Liberty. Volume I. Chicago: University of Chicago Press.Google Scholar
Hayek, Friedrich von. 1976. Denationalization of Money: An Analysis of the Theory and Practice of Concurrent Currencies. London: Institute of Economic Affairs.Google Scholar
Hollander, Jacob H. 1911. “The Development of the Theory of Money from Adam Smith to David Ricardo.” Quarterly Journal of Economics 25: 429–470.Google Scholar
Hollander, Samuel. 1973. The Economics of Adam Smith. Toronto: University of Toronto Press.Google Scholar
Hume, David. [1752] 1985. “Of the Balance of Trade.” In Miller, Eugene F., ed., Essays: Moral, Political, and Literary. Indianapolis: Liberty Fund, pp. 308–326.Google Scholar
Humphrey, Thomas M. 1981. “Adam Smith and the Monetary Approach to the Balance of Payments.” Federal Reserve Bank of Richmond Economic Review 67 (6): 3–10.Google Scholar
Humphrey, Thomas M. 1982. “The Real Bills Doctrine.” Federal Reserve Bank of Richmond Economic Review 68 (September–October): 3–13.Google Scholar
King, Lord Peter. [1804] 1884. “Thoughts on the Restriction of Payments in Specie.” In A Selection from the Speeches and Writings of the Late Lord King. London: Longmans, pp. 47–161.Google Scholar
Klein, Benjamin. 1974. “The Competitive Supply of Money.” Journal of Money, Credit, and Banking 6 (4): 423–453.Google Scholar
Laidler, David. 1981. “Adam Smith as a Monetary Economist.” The Canadian Journal of Economics 14 (2): 185–200.Google Scholar
Mints, Lloyd. 1945. A History of Banking Theory in Great Britain and the United States. Chicago: University of Chicago Press.Google Scholar
McCloskey, Donald N., and Richard Zecher, J.. 1985. “How the Gold Standard Worked, 1880–1913.” In Eichengreen, Barry and Flandreau, Marc, eds., The Gold Standard in Theory and History. New York: Routledge, pp. 57–75.Google Scholar
Murphy, Antoin. 2010. The Genesis of Macroeconomics: New Ideas from Sir William Petty to Henry Thornton. Oxford: Oxford University Press.Google Scholar
Niehans, Jurg. 1990. A History of Economic Theory: Classic Contributions, 1720–1980. Baltimore: The Johns Hopkins University Press.Google Scholar
Perlman, Morris. 1989. “Adam Smith and the Paternity of the Real Bills Doctrine.” History of Political Economy 21 (1): 77–90.Google Scholar
Rothbard, Murray N. 1995. An Austrian Perspective on the History of Economic Thought. Volume I. Cheltenham: Edward Elgar.Google Scholar
Samuelson, Paul A. 1980. “A Corrected Version of Hume’s Equilibrating Mechanism for International Trade.” In Chipman, J. S. and Kindleberger, C. F., eds., Flexible Exchange Rates and the Balance of Payments. Amsterdam: North Holland, pp. 141–157.Google Scholar
Santiago-Valiente, Wilfredo. 1988. “Historical Background of the Classical Monetary Theory and the ‘Real-Bills’ Banking Tradition.” History of Political Economy 20 (1): 43–63.Google Scholar
Scrope, G. Poulett. 1830. The Currency Question Freed from Mystery. London: James Ridgway.Google Scholar
Selgin, George A. 1989. “The Analytical Framework of the Real Bills Doctrine.” Journal of Institutional and Theoretical Economics 145 (3): 489–507.Google Scholar
Selgin, George A., and White, Lawrence H.. 1985. “The Evolution of a Free Banking System.” Economic Inquiry 25 (3): 439–457.Google Scholar
Selgin, George A., and White, Lawrence H.. 1994. “How Would the Invisible Hand Handle Money?” Journal of Economic Literature 32 (December): 1718–1749.Google Scholar
Skaggs, Neil T. 1991. “John Fullarton’s Law of Reflux and Central Bank Policy.” History of Political Economy 23 (3): 457–480.Google Scholar
Smith, Adam. [1776] 1981. An Inquiry into the Nature and Causes of the Wealth of Nations. Two volumes. Indianapolis: Liberty Fund.Google Scholar
Smith, Adam. 1978. Lectures on Jurisprudence. Edited by Meek, R. L., Raphael, D. D., and Stein, P. G.. Oxford: Oxford University Press.Google Scholar
Thompson, Earl A. 1974. “The Theory of Money and Income Consistent with Orthodox Value Theory.” In Horwich, G. and Samuelson, P. A., eds., Trade, Stability, and Macroeconomics. New York: Academic Press, pp. 427–453.CrossRefGoogle Scholar
Thornton, Henry. [1802] 1939. An Enquiry into the Nature and Effects of the Paper Credit of Great Britain. London: George Allen and Unwin.Google Scholar
Viner, Jacob. 1937. Studies in the Theory of International Trade. New York: Harper and Brothers.Google Scholar
West, Edwin G. 1997. “Adam Smith’s Support for Money and Banking Regulation: A Case of Inconsistency.” Journal of Money, Credit, and Banking 29 (1): 127–134.Google Scholar
White, Lawrence H. 1984. Free Banking in Britain: Theory, Experience, and Debate, 1800–1845. Cambridge: Cambridge University Press.Google Scholar