Arnold Kling

The Source of my Anti-Monetarism

Philosophy and Rational Irrati... Distilling Famous Thinkers...

Alex Tabarrok forwards Paul Krugman's citations of the late Paul Samuelson on the ineffectiveness of monetary policy, due to high substitutability between Federal reserve liabilities and other assets. Alex says that Samuelson sounds like me.

Clearly, the causality runs from Samuelson writing in 1948 to me writing 60 years later, not the other way around. Krugman and I both breathed the MIT air, and while it was not Samuelson himself who conveyed the anti-monetarist view, Franco Modigliani was a worthy expositor.

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E. Barandiaran writes:

The ineffectiveness of monetary policy is due to the high variabillity of the not-so-high degree of substitutability of liabilities issued by a central bank (currency), banks (different types of deposits) and other financial intermediaries. In other words, it's ineffective because the definition of money as an aggregate of some of those liabilities is meaningless.

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