by Amonn
[Title Page and Publication Information]: Title page and publication details for Alfred Amonn's 1953 article on the quantity theory of money, published in the Swiss Journal of Economics and Statistics. [Section I: Critique of Modern Simplifications of the Quantity Theory]: Amonn critiques contemporary economists like Alvin Hansen and Erich Schneider for presenting a 'primitive' and 'mechanistic' version of the quantity theory (P = f(M)). He argues that even the earliest theorists, such as Jean Bodin, understood that the price level is a function of both money supply and the volume of goods (P = f(M, T)). Amonn defends the theory against charges of ignoring human disposition, asserting that all quantity theorists implicitly recognize that price changes result from the choices of economic subjects regarding demand and supply. [Section II: Historical Development and the Equation of Exchange]: This section traces the evolution of the quantity theory from Bodin and Locke through Hume and Mill to Irving Fisher. Amonn highlights the gradual inclusion of variables like the velocity of circulation and credit volume. He defends Fisher's equation of exchange (MV + M'V' = PT) against the common criticism that it is a mere identity or tautology, clarifying the distinction between mathematical equality and logical identity. He argues that while the equation does not describe causality directly, it provides the necessary functional framework for empirical causal analysis. [Section III: Functional Relationships and Variables in the Equation]: Amonn examines what the equation of exchange reveals about the functional relationship between money, velocity, prices, and transactions. He explains that while the equation allows any variable to be mathematically isolated, researchers must look to empirical reality to determine which variables act as independent or dependent causes. He notes that the variability of these factors depends on economic conditions, such as full employment versus underemployment, and critiques older theorists for assuming a long-term undisturbed state. [Section IV: Determinants of Purchasing Power and the Role of Credit]: Amonn focuses on the causal determination of the value of money. He argues that the money supply (M) is often an independent variable determined by policy or credit creation, whereas the price level (P) is typically a dependent variable. He addresses potential exceptions where price increases might seem to drive money supply, concluding that such cases usually involve the mobilization of existing cash or credit. He cites J.S. Mill to emphasize that only money actually offered on the market affects prices. [Section V: The Theory as an Application of Supply and Demand]: Amonn argues that the refined quantity theory is simply the application of the general principle of supply and demand to money. He references Mill and F.A. Walker to support this view. He also critiques Hugo Hegeland's interpretation, which suggests the theory's primary purpose was to show that the quantity of money is irrelevant to total wealth. Amonn maintains that the central goal has always been explaining the determination and changes of the value of money. [Section VI: Defining Monetary Supply and Demand]: Amonn defines 'supply of money' as the readiness to exchange money for goods and 'demand for money' as the readiness to exchange goods for money. He notes a unique characteristic: unlike goods, the demand for money is theoretically unlimited because money does not satisfy needs directly and is not subject to the law of diminishing utility in the same way. This unique quantitative relationship justifies the name 'Quantity Theory.' He also critiques the confusing modern use of 'demand for money' to refer to interest rates or cash holdings. [Section VII: Conclusion and the Scientific Value of the Theory]: In the concluding section, Amonn argues that modern criticisms of the quantity theory often attack an obsolete version rather than its sophisticated modern form. He defends the theory's scientific value, comparing it to the law of free fall in physics: even if its conditions are never perfectly met in reality, it provides a necessary theoretical framework for understanding how changes in money supply influence the price level, provided other factors are accounted for.
Title page and publication details for Alfred Amonn's 1953 article on the quantity theory of money, published in the Swiss Journal of Economics and Statistics.
Read full textAmonn critiques contemporary economists like Alvin Hansen and Erich Schneider for presenting a 'primitive' and 'mechanistic' version of the quantity theory (P = f(M)). He argues that even the earliest theorists, such as Jean Bodin, understood that the price level is a function of both money supply and the volume of goods (P = f(M, T)). Amonn defends the theory against charges of ignoring human disposition, asserting that all quantity theorists implicitly recognize that price changes result from the choices of economic subjects regarding demand and supply.
Read full textThis section traces the evolution of the quantity theory from Bodin and Locke through Hume and Mill to Irving Fisher. Amonn highlights the gradual inclusion of variables like the velocity of circulation and credit volume. He defends Fisher's equation of exchange (MV + M'V' = PT) against the common criticism that it is a mere identity or tautology, clarifying the distinction between mathematical equality and logical identity. He argues that while the equation does not describe causality directly, it provides the necessary functional framework for empirical causal analysis.
Read full textAmonn examines what the equation of exchange reveals about the functional relationship between money, velocity, prices, and transactions. He explains that while the equation allows any variable to be mathematically isolated, researchers must look to empirical reality to determine which variables act as independent or dependent causes. He notes that the variability of these factors depends on economic conditions, such as full employment versus underemployment, and critiques older theorists for assuming a long-term undisturbed state.
Read full textAmonn focuses on the causal determination of the value of money. He argues that the money supply (M) is often an independent variable determined by policy or credit creation, whereas the price level (P) is typically a dependent variable. He addresses potential exceptions where price increases might seem to drive money supply, concluding that such cases usually involve the mobilization of existing cash or credit. He cites J.S. Mill to emphasize that only money actually offered on the market affects prices.
Read full textAmonn argues that the refined quantity theory is simply the application of the general principle of supply and demand to money. He references Mill and F.A. Walker to support this view. He also critiques Hugo Hegeland's interpretation, which suggests the theory's primary purpose was to show that the quantity of money is irrelevant to total wealth. Amonn maintains that the central goal has always been explaining the determination and changes of the value of money.
Read full textAmonn defines 'supply of money' as the readiness to exchange money for goods and 'demand for money' as the readiness to exchange goods for money. He notes a unique characteristic: unlike goods, the demand for money is theoretically unlimited because money does not satisfy needs directly and is not subject to the law of diminishing utility in the same way. This unique quantitative relationship justifies the name 'Quantity Theory.' He also critiques the confusing modern use of 'demand for money' to refer to interest rates or cash holdings.
Read full textIn the concluding section, Amonn argues that modern criticisms of the quantity theory often attack an obsolete version rather than its sophisticated modern form. He defends the theory's scientific value, comparing it to the law of free fall in physics: even if its conditions are never perfectly met in reality, it provides a necessary theoretical framework for understanding how changes in money supply influence the price level, provided other factors are accounted for.
Read full text