tailieunhanh - History of Economic Analysis part 111

History of Economic Analysis part 111. At the time of his death in 1950, Joseph Schumpeter-one of the major figures in economics during the first half of the 20th century-was working on his monumental History of Economic Analysis. A complete history of humankind's theoretical efforts to understand economic phenomena from ancient Greece to the present, this book is an important contribution to the history of ideas as well as to economics. | History of economic analysis 1062 into a few big aggregates and to consider these as the causes that determine the one to be explained. The so-called Equation of Exchange is certainly the simplest possible system of such aggregates that contain the value of money or the price level at all. And if the latter be the thing to be explained the others drop naturally though illogically into the role of its causes and the Equation of Exchange in itself nothing but the statement of a formal relation without any causal connotation then turns or may turn into the Quantity Theory. This is why during that period both the equation of exchange and the quantity theory enjoyed another lease on life and why so much of the discussion on the theory of money took the form of arguments for and against the quantity theory. We must therefore try to find out what the quantity theory of these writers really amounted to. To accomplish this in the way most useful to the reader we shall concentrate on the outstanding achievement in this line Professor Fisher s theory of the purchasing power of In itself there is nothing new about what has come to be called the Fisher or Newcomb-Fisher equation. It simply links the price level P with 1 the quantity of money in circulation M 2 its efficiency or velocity V and 3 the physical volume of trade T . Let us express this by writing P M E To this functional MV P V T relation the Fisher equation imparts the particular form t or MV PT. Again this equation is not an identity but an equilibrium condition. For Fisher did not say that MV is the same thing as PT or that MV is equal to PT by definition given values of M V T tend to bring about a determined value of P but they do not simply spell a certain P. But the really interesting monetary analysis begins behind the façade of the equation. Two sets of questions arise. a The Definition of the Concepts. First what are the precise meanings of P M V T Whatever may be urged against the quantity theory .