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Podcast 12 Emiritus Professor David Laidler University of Western Ontario at Canada
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Professor David Laidler, firstly, talks about, growing up in Newcastle upon Tyne, England and his experience at LSE pursuing under graduation. • Wikipedia • https://en.wikipedia.org/wiki/David_L... • Paper's Title: Macro’s Missing Link The Unbridged Gap between Monetarism and the Wicksell Connection • https://ir.lib.uwo.ca/cgi/viewcontent... • • David Laidler's Books • https://www.amazon.in/stores/David-E.... • Following this, Professor Laidler draws on his paper. Only some of the evidence in the paper is anecdotal evidence, the majority is textual and historical. Professor Laidler makes the case that Monetarism and Wicksell tradition are closely tied to each other Wicksell's analysis centred on how the rate of interest’s success or failure in co-ordinating saving and investment might influence both the price level and real output. Wicksell’s cumulative process model of price inflation was built upon a set of 3 premises and he brought interest rates right at the center of macroeconomics. Subsequently, Irving Fisher’s in his pursuit of analysis of 19th century history identified the effects of fluctuations in gold production on the quantity of money as the principal source of secular price level variations in gold standard countries. Fisher explained the positive correlation between the level of prices and that of nominal interest rates in terms of the influence of previously rising (or falling) prices on inflation expectations. When Wicksell revisited this topic in the third edition of his Lectures, he was much less insistent on the key role of non-monetary shocks. Later, Gustav Cassel (1928) would eventually develop a model in which the principal channel through which any discrepancy between the Wicksellian natural and market rates of interest affects prices is through money supply changes created by the movements in bank lending that such deviations induce. However, this paper was not given the attention it should have deserved, and it was later discovered by Humphrey. • • Around this time John Keynes wrote A Treatise on Money (1930) where the economic fluctuations formally explained in the Treatise turned out to be in prices alone, and not, as its author intended, in output and employment as well. Although Keynes carried over his theory of the demand for money from the A Treatise on Money into the heart of the General Theory with only cosmetic changes, he dealt with the supply of money very differently in the two books. Money also played an important role in Keynes’s General Theory, but, in the aftermath, the so-called Keynesian Revolution largely downplayed the role of money in macroeconomic analysis. Professor Laidler, then draws attention, to the role of economists, at UCLA, played in the contribution to problem of information and coordination; for instance, Karl Brunner, Alan Meltzer, Armen Alchian, Axel Leijonhufvud and Robert Clower. • • Drawing on his experience, working as a Research Assistant for Professor Anna Schwartz for The Monetary History of the United States, 1867–1960 (1963), Professor highlights the learning he derived on the importance of data, in particular, the construction of data, in macroeconomics research. • Professor Laidler talks about the criticism the QTM has received. Firstly, the criticism due to “real bill doctrine” is discussed. Secondly, the instability of the income velocity (V) of money in the QTM would be would by, as per the Keynesians, influenced factors other than the change in money. Thirdly, the QTM’s central assumption of full employment is discussed. • • The liquidity trap, a Keynesian concept, has a substitute in monetary economics literature, namely, as being a case of credit deadlock. The contribution of Ralph Hawtrey to the theory of credit deadlock is discussed. • Following this, the discussion comes back to Friedman and Schwartz (1970) where they recognized that, when they said “money”, they were referring to a multitude of assets. Each type of money should not simply be given equal weights, but rather each asset should be weighted by its degree of “moneyness.” Here, the contribution of Professor Barnett, in construction of Divisia Monetary aggregates is brought to the picture and that the case for Central Banks to use this aggregate is intensifying in the face of increasingly evolving complexity of asset substitution and financial innovation with time. • Lastly, Professor Laidler argues that central banks, both in AEs and EMEs, are better off with targeting inflation. • • 📌 Connect with Me: • ---------------------------------------- • LinkedIn: / manhar-singh • Dialogue With Manhar: / dialogue-with-manhar • Twitter: https://x.com/Singh_Manhar1 • #BusinessCycles #MonetaryAggregates #Money #DivisiaMonetaryAggregates #DavidLaidler
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