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A Pure Theory of Money

Published online by Cambridge University Press:  07 November 2014

H. G. Littler
H. G. Littler*
Affiliation:
Montreal
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Extract

In this paper an attempt is made to work out mathematically a pure theory of money. The method employed is to consider only those operations which are fundamental to all monetary economies. These fundamental operations are spending, saving, and investing and any relationships which can be shown to exist between them must, therefore, be valid for all economic systems employing money.

The quantities dealt with in this analysis are purely monetary ones: no considerations of value arise. The resulting equations, therefore, express relationships between different quantities of money or between different money flows.

We shall first investigate the operations of spending and investing and then consider the operation of saving.

In order to simplify the problem, we shall consider first an economic system of a restricted type and then later remove the restrictions in order to achieve generality. We postulate that this simplified system operates under the following two restrictions: (a) no investment is made except by an industrial unit; (b) there is no taxation.

Type
Articles
Information
Canadian Journal of Economics and Political Science/Revue canadienne de economiques et science politique , Volume 10 , Issue 4 , November 1944 , pp. 422 - 447
Copyright
Copyright © Canadian Political Science Association 1944

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References

1 It will be clear that the author owes a very great debt to recent economic literature and above all, to Keynes's, Lord The General Theory of Employment, Interest and Money (London 1936).Google Scholar The author would like to record his gratitude to Professors Keirstead, Higgins, and Beach for the help they have given him in the writing of this paper and the invaluable suggestions they have made regarding its form and the arrangement of the mathematical proofs.

2 The method used in this section is based on that given by Lord Keynes in chapter VI of the General Theory of Employment, Interest and Money. It has, however, been modified very considerably to make it serviceable for this investigation.

3 Ibid., pp. 63 and 74.

4 Ibid., p. 114.

5 Economic Journal, June, 1931.

6 General Theory, p. 97.