Download ECON 612-001 Monetary Theory

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Econ 612 - Adv. Monetary Theory
Professor Mott
Office Hours: TuTh 2:00-3:30 P.M.
Office : Econ 102
SPRING 1985
SYLLABUS
This is a course in advanced monetary theory. It is designed to serve as
part of a sequence with Econ. 611, though it can be taken independently. The
purpose of the sequence as I see it is to acquaint participants with various
issues and contributions within the domain of monetary theory, i.e., the theory
of what money has to do with an economic system. To that end I have arranged a
series of topics for this course which have been chosen with the goal of allowing us to examine the logical and historical development of certain ideas which
have come to represent the major widely-held notions of what the relation of
money to an economy is. We will not be able to cover thoroughly all the topics
which are listed on this syllabus. Thus you should take the reading list as a
list of material with which you may want to familiarize yourself at some point
in your life (like before the comprehensive exam) and as a list containing some
material with which you will want to familiarize yourself intimately during this
semester.
The assignments to be completed in order to receive a grade in the course
are three. Each counts for 1/3 of your grade. The first two assignments are two
papers on the following topics:
1)
How did neoclassical monetary theory pass through Keynes into
the "neoclassical-Keynesian synthesis"? (due two class days
after we finish Topic V.)
2)
How do the New Keynesian and "Post" Keynesian schools of thought
interpret or alter Keynes' monetary theory and how do "monetarism"
and the "new classical macroeconomics" attack Keynes and attempt to
re-establish neoclassical monetary theory? (due on the last day of
classes.)
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The papers may not be longer than 15 pages (on 8 1/2 x 11 inch paper), including footnotes. Any more than this I will throw away prior to reading the
paper. Late papers will be penalized -- 1/3 of a letter grade off for up to one
week late : 2/3 thereafter.
The third requirement is either a 10-20 page paper on a topic of your own
choosing, which , however, must be approved by me--and some of you may be quit e
surprised by what I won't approve--or a final exam. This optional paper is due
on the day for which the final exam is scheduled. The lateness penalty here is
only 1/3 of a letter at the maximum.
-2The list of topics and suggested readings for the course follows:
Four books were ordered to be available for purchase in the bookstore:
Laurence Harris, Monetary Theory
John Maynard Keynes, The General Theory of Employment, Interest and
Money ( GT)
Robert Gordon (ed.), Milton Friedman's Monetary Framework.
Robert Lucas, Studies in Business-Cycle Theory.
Copies of all the other selections will be available grouped by topic at Kinko's Copy
Center across the street.
I. The Essence and Existence of Money
Harris, Chaps. 1-2
Robert Clower (ed.), Monetary Theory: Selected Readings, Intro and Selection 3
Ross Starr, "The Structure of Exchange in Barter and Monetary Economics QJE
88 (1972)
Paul Samuelson, "An Exact Consumption-Loan Model of Interest with or without
the Social Contrivance of Money," JPE 66 (1958)
Hyman Minsky, "Frank Hahn's Money andfnflation: A Review Article," JPKE 6 {1984)
II. Neoclassical Monetary Theory
Harris, Chaps. 3-6
Clower (ed.), Selections 9-12
Clower, "What Traditional Monetary Theory Really Wasn't," Can. JE (1969 )
Samuelson, 11 Nonoptimality of Money Holding under Laissez Faire," Can. JE (1969)
Harry G. Johnson, Further Essays in Monetary Economics, Chaps 4, 5
Irving Fisher, The Purchasing Power of Money, Chaps. 2, 4, 5, 8,
Knut Wicksell, Lectures on Political Economy, Vol. II, pp. 141-208
Friedrich Lutz, "On Neutral Money," ,n Str1essler (ed.), Roads to Freedom
Eugene Fama, 11 Banking in the Theory of Finance," JME 6 (1980).
Robert Greenfield and Leland Yeager, "A Laissez-Faire Approach to Monetary
Stability," JMCB 15 (1983).
Lawrence White~ompetitive Payments Systems and the Unit of Account," AER 74
(1984).
III. Keynes
Keynes, A Tract on Monetary Reform, pp.61-70
, A Treatise on Money, Vol. I, Book III
==:==--___==, GT, Preface, Chaps. 1-2, 13-22
IV. Neoclassical Keynesianism
Harris, Chaps. 9-12, 15-17
John Hicks, "Mr . Keynes and the 'Classics': A Suggested Interpretation,"
Econometrica 5 (1937)
James Tobin, "A General Equilibrium Approach to Monetary Theory," JMCB 1 (1969)
, "Commercial Banks as Creators of 'Money• , in Essays in - -Economics (and elsewhere)
John Gurley and Edward Shaw, "Financial Intermediaries and the SavingInvestment Process, J. of Finance 11 (1956)
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V. Monetarism
Harris, Chap . 7
Gordon, (ed.) , pp. 1-62, 77-89, 111-172.
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VI.
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New 11 Keynesianism
Harris, Chaps. 13. 14
Don Patinkin, Money, Interest, and Prices, Chap. 13
Clower (ed.), Selections 14, 19
Axel Leijonhufvud, Information and Coordination , Selections 1, 6, 7
Robert Barro and Herschel Grossman. "A Gener"arDi sequi l i bri um Model of
Income and Employment," AER 61 (1971)
Kenneth Arrow, "Toward a Theory of Price Adjustment" in Moses Abramovitz
et al., The Allocation of Economic Resources
TracyMott-:--"Mr. Keynes and the Neoclassics, 11 Social Concept 1 (1984)
VII . "Post" Keynesianism
Keynes, GT, Chap. 12
Robinson-,-Economic Heresies, Chaps. 5, 6
• "The Rate of Interest," in The Rate of Interest and Other Essays
=N~ic~h-o""""l_a_s Kaldor, "Speculation and Economic Stability," RES 7 (1939) _____
Michal Kalecki, "The Principle of Increasing Risk.'' Economica 4 (1937) •
Aspects of Full Employment," in Selected Essays on the
-- -• "Political
Dynamics
of the Capitalist Economy
Mott, 11 Kalecki 's Principle of Increasing Risk and the Relation Between
Mark-up Pricing, Investment Fluctuations, and Liquidity Preference"
• "Liquidity Preference vs. Loanable Funds Once More. 11
Tobin, "Real Balance Effects Reconsidered," in Asset Accumulation and
Economic Activity. Clower (ed.), Selection 13. Gordon (ed.) pp. 90-110.
PauToavidson, "Money and the Real World, 11 EJ (1972)
Minsky, "Financial Innovations and Financia-1 Instability · Observations and
Theory"
Basil Moore, "Monetary Factors," in Alfred Eichner (ed.
Guide to
Post-Keynesian Economics
Nai -Pew Ong, "The Log
-~a rx I s Theory of
Money," Soc. Concept 1 ( 1983)
VIII. The "New Classical Macroeconomics"
Harris, Chap. 21
Friedman. "The Role of Monetary Policy," in The Optimum Quantity of Money.
Edmund Phelps, "Money Wage Dynamics and Labor Market Equil i hri uin, 11
JPE 76 (1968)
Lucas, pp. 66-89, 179-296.
Thomas Sargent and Neil Wallace, "Rational Expectations and the Theory of
Economic Policy," JME 2 (1976)
Rodney Maddock and Michael Carter, "A Child's Guide to Rational Expectations," JEL 20 (1982)
Stanley Fiscner, "Long-Term Contracts, Rational Expectations, and the
Optimal Money Supply Rule," JPE 85 (1977)
Randall Bausor, "The Rational-Expectations Hypothesis and the Epistemics
of Time," Cam. JE 7 (1983)
IX. Money and Economic Deve l opment
Ronald McKinnon, Money and Capital in Economic Development, Chps. 5, 6, 7.
Kalecki, Essays on Developing Economies, Chp. 5.