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The Quantity Theory of Money

More recently the quantity theory of money has been associated with
the development of monetarism and the work of Milton Friedman, perhaps
the most influential economist in the past quarter-century. Although the term
‘monetarism’ did not emerge until 1968 (see Brunner, 1968), its main core
proposition, the quantity theory of money, was well established in classical
macroeconomics following the publication of David Hume’s influential essay,
Of Money, in 1752. Indeed, Mayer (1980) has argued that the salient date
for the birth of monetarist ideas was 1752, since most of the fundamental
propositions which characterize monetarism date back to Hume’s essay. Here
we will present only a short exposition of the quantity theory in order to
complete the classical scheme. For a more detailed discussion, see Laidler
(1991).