Quotation of the Day…

by Don Boudreaux on November 13, 2012

in Hayek, Monetary Policy, State of Macro

… is from pages 125-126 of Good Money Part II: The Standard, which is volume 6 in The Collected Works of F.A. Hayek; specifically, this quotation is from Hayek’s 1975 address, delivered in Lausanne, entitled “International Money” (footnote omitted):

Lord Keynes has always appeared to me a kind of new John Law.  Law, like Keynes, had been a financial genius who made some real contributions to the theory of money.  (Apart from an interesting and original discussion of the factors determining the value of money, Law gave the first satisfactory account of the cumulative growth of acceptability once a commodity was widely used as a medium of exchange.)  And, like Law, Keynes could never free himself from the false popular belief that, as Law expressed it, “as the additional money will give work to people who were idle and enabled those already working to earn more, the output will increase and industry will prosper”.

It was against the sort of view represented by Law that Richard Cantillon and David Hume began the development of modern monetary theory.

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