David Hume on Monetary Policy: A Retrospective Approach

Abstract

Monetary policy is a modern idea of which David Hume is generally considered a precursor. Moreover, thanks to Milton Friedman and Robert Lucas, he is often presented as one of the first and most illustrious endorser of monetarism. This paper argues against this view, and in agreement with Joseph Schumpeter, that Hume's contribution to economics, while not insignificant, cannot claim any real novelties. It offers an interpretation of Hume as a descendant of a pre-modern understanding of money rather than a forerunner of modern monetary ideas, and as a scholar exposing common ideas of his time rather than a prophet of economic theories developed centuries later, and argues that there is little in Hume that resembles today's monetary policy prescriptions.

David Hume on Banking and Hoarding

“…And an increase in paper money, generally through easy credit, was commonly believed by some of his contemporaries, such as Sir Robert Walpole (see also, e.g., Dutot [1738Dutot [ ] 1974Wallace [1758Wallace [ ] 1969de Pinto [1774de Pinto [ ] 1969, to be a possible way to achieve this. Hume, on the other hand, does not believe one can stimulate the economy with an increase in paper money (Paganelli 2009).…”

How Cantillon and Hume Propose the Same Theory of First-Round Effects

“…Bordo (1983) gives an overview of Cantillon's monetary economics. Henderson (2010), McGee (1989), and Schabas and Wennerlind (2011) give general overviews of Hume's economics; Duke (1979) and Paganelli (2006;2009), e.g., discuss his monetary economics.…”

Cantillon and Hume on Money and Banking: The Foundations of Two Theoretical Traditions

“…On Cantillon and the Essai sur la Nature du Commerce en Général (written around 1730 and first published in 1755, Higgs’ edition in 1931 (Cantillon, [1931]), hereafter Essai ), see Jevons (), Higgs (, ), Hayek (, ), Rist (), Salleron (), Sauvy (), Spengler (), Bordo (), Murphy (), Brewer (, ), Thornton (, ), Gillard (), Van der Berg (). On David Hume as a monetary economist and the Political Discourses (first edition in 1752, Miller's edition in 1985 (Hume, [1985]), hereafter Discourses ), see Rotwein (), Duke (), Fausten (), Mayer (), Samuelson (), Rashid (), Perlman (), McGee (), Berdell (), Gatch (), Cesarano (), Schabas (, ), Wennerlind (, , ), Caffentzis (, ), Dimand (), Paganelli (, , ), Desmedt (), Schabas and Wennerlind ().…”