Neutral Money: Historical Fact or Analytical Artifact?

29 Pages Posted: 2 Sep 2012

See all articles by Simon Bilo

Simon Bilo

Independent

Richard E. Wagner

George Mason University - Department of Economics; George Mason University - Mercatus Center

Date Written: August 31, 2012

Abstract

Long-run neutrality of money is an artifact of a particular theoretical framework. We advance an alternative though not contradictory theoretical framework where monetary processes exert lasting real effects. Our framework holds without rejecting the classical equilibrium condition that nominal values are independent of economic realities because the two frameworks are non-commensurable. The real effects that we explore stem from the distribution of monetary injection among potential entrepreneurial experiments. The selected experiments influence the pattern of activity within society, which leads to changes in the standard given conditions of wants, knowledge, and expectations. These changes unravel into alternative paths of history.

Keywords: neutral money, Cantillon effects, business cycles, non-equilibrium modeling, kaleidics vs. equilibrium, learning by doing, money as commanding height

JEL Classification: B31, E32, E42, E52

Suggested Citation

Bilo, Simon and Wagner, Richard E., Neutral Money: Historical Fact or Analytical Artifact? (August 31, 2012). GMU Working Paper in Economics No. 12-37. Available at SSRN: https://ssrn.com/abstract=2139373 or http://dx.doi.org/10.2139/ssrn.2139373

Simon Bilo

Independent ( email )

No Address Available
United States

Richard E. Wagner (Contact Author)

George Mason University - Department of Economics ( email )

4400 University Drive
334 Enterprise Hall
Fairfax, VA 22030
United States
(703) 993-1132 (Phone)

HOME PAGE: http://mason.gmu.edu/~rwagner/

George Mason University - Mercatus Center ( email )

3434 Washington Blvd., 4th Floor
Arlington, VA 22201
United States

HOME PAGE: http://ppe.mercatus.org/scholars/richard-wagner

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