The Continuing Muddles of Monetary Theory: A Steadfast Refusal to Face Facts

Abstract

There has been a remarkable gulf between mainstream monetary theory and reality in recent decades. Amongst the worst examples are:(1) IS/LM: the monetary authorities set the monetary base, and the interest rate is determined in the market; (2) The monetary base multiplier of bank deposits, and the role of reserve ratios; (3) The current three equation neo-classical consensus, which not only assumes perfect creditworthiness for all agents, but also an essentially non-monetary system, e.g. no need for banks; (4) The standard theory of the evolution of money. Monetary economics can only get better, but it has a long way yet to go.

Cite this paper

@inproceedings{Robbins2008TheCM, title={The Continuing Muddles of Monetary Theory: A Steadfast Refusal to Face Facts}, author={Lionel Robbins and John Taylor}, year={2008} }