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Cambridge Journal of Economics Advance Access originally published online on March 27, 2006
Cambridge Journal of Economics 2007 31(1):101-122; doi:10.1093/cje/bel002
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Right arrow B25 - Historical; Institutional; Evolutionary; Austrian
Right arrow E12 - Keynes; Keynesian; Post-Keynesian
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© The Author 2006. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.

The characteristics of a monetary economy: a Keynes–Schumpeter approach

Giancarlo Bertocco*

* Università degli Studi dell'Insubria, Italy

Address for correspondence: Dipartimento di Economia, Facoltà di Economia, Università degli Studi dell'Insubria, via Monte Generoso, 71, 21100Varese, Italy; email: gbertocco{at}eco.uninsubria.it

Mainstream monetary theory considers money only as an instrument meant to facilitate trading without having any effect on income or on the evolution of the economic system. The aim of this paper is to elaborate a monetary theory capable of supporting the thesis of money non-neutrality based on the arguments developed by Keynes and Schumpeter. The synthesis of the theories of these two great economists will be formulated starting from the two points which are common in the views of Keynes and Schumpeter. First, in contrast with mainstream theory, Keynes and Schumpeter state that the diffusion of a fiat money induces a radical modification into the way in which the economic system works. Second, when Keynes and Schumpeter describe the reasons why money and financial aggregates are not neutral, they highlight the fundamental role of the credit market and of banks; in contrast with the mainstream theory, they do not consider the credit market as the mirror image of the goods market.

Key Words: Money non-neutrality • Bank money • Credit

JEL classifications: E12, E40, E44, G21

Manuscript received September 27, 2004; final version received September 26, 2005.


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