Endogenous Money and David Hume

Eastern Economic Journal, Vol. 32, No. 3, Summer 2006

Posted: 17 Dec 2008 Last revised: 18 Apr 2012

Date Written: December 15, 2008

Abstract

David Hume's monetary theory has two standard yet inconsistent readings. As a forefather of the quantity theory of money, Hume sees money as neutral. As an inflationist, Hume sees an active positive role for monetary policy. This paper reads Hume consistently instead, by showing that for Hume money is endogenous and demand driven. Hume would read the money equation as reverse causation and the co-presence of inflation and output growth as driven by demand. The 18th century knowledge of monetary theory corroborates this reading.

Keywords: David Hume, Money, Endogenous Money

JEL Classification: B12, E4

Suggested Citation

Paganelli, Maria Pia, Endogenous Money and David Hume (December 15, 2008). Eastern Economic Journal, Vol. 32, No. 3, Summer 2006, Available at SSRN: https://ssrn.com/abstract=1316581

Maria Pia Paganelli (Contact Author)

Trinity University ( email )

Dept. of Economics
One Trinity Place
San Antonio, TX 78212
United States

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