Handbook on Contemporary Austrian Economics

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122 <strong>Handbook</strong> on contemporary Austrian economics effects of non-super-neutral money has yet to occur. Given that money is non-neutral in Austrian explanations of the business cycle, it seems likely that integrating the effect of non-super-neutral money will not be difficult. It may offer new insights into how changes in the growth rate of the money supply affect the evolution of economies over decades. The improved psychological foundations of economic theory offer an opportunity to reassess Austrian monetary theory. Given the limited capabilities of economic agents to understand all the interdependencies of a modern economy and the emergence of interest in Hayek's writings on psychology, a new look at the Austrian macroeconomics may be in order. Hayek's introduction of neutral money into macroeconomic analysis greatly improved understanding of business cycles. The larger project of developing the implications of non-neutral money in the short and long run offers many avenues for further inquiry. Various schools of thought have offered explanations for the non-neutrality of money. The Austrian school will, in all likelihood, continue to make contributions to the development of empirically supported macroeconomic theory and insights into the evolution of the macroeconomy. Notes I. Thornton (2007) offers compelling evidence that Cantillon's significant essay influenced Hume. Hayek suspected this to be true. Humphrey (1984) documents a number of reasons offered by the Classical econQmists why money had non-neutral effects. 2. Tract on Monetary Reform (1923), Chapter 3. 3. Freeman and Kydland (2000) offer empirical support for the claims that changes in output lead to changes in the money supply. 4. Of course, there are exceptions. See Cochran (2001). References Cant ilion, Richard. [1755) 1931. Essai sur la Nature du Commerce en General. New York: August M. Kelley. Cochran, john. 2001. "Capital-based Macroeconomics: Recent Developments and Extensions of Austrian Business Cycle Theory," Quarterly Journal of Austrian Economics 4(3): 17- 25. Freeman, Scott and Finn Kydland. 2000. "Monetary Aggregates and Output," American Economic Review 90(5): 1125-35. Friedman, Milton. 1963. Inflation: Causes and Consequences. New York: Asia Publishing House. Friedman, Milton and Anna Schwartz. 1963. A Monetary History of the United States. 1967- 1960. Princeton: Princeton University Press. Garrison, Roger. 2000. Time and Money: The Macroeconomics of Capital Structure. New York: Routledge. Haberler, Gottfried. 1980. "Critical Notes on Rational Expectations," Journal of Money. Credit and Banking 12(Nov.): 833-6. Hayek, F.A. 1935. Prices and Production. New York: August M. Kelley. Hayek, F.A. 1952. The Sensory Order. Chicago: University of Chicago Press. Horwitz, Steven. 2000. Microfoundations and Macroeconomics: An Austrian Perspective. New York: Routledge.
Money is non-neutral 123 Hume, David. [1942] 1987. Essay: Moral, Political, and Literary. Indianapolis: Liberty Press Humphrey, Thomas. 1984. "Non-neutrality of Money in Classical Monetary Thought," Federal Reserve Bank of Richmond. Lucas, Robert E. 1996. "Nobel Lecture: Monetary Neutrality," Journal of Political Economy 104(4): 661- 82. Mayer, Thomas. 1980. "David Hume and Monetarism," Quarterly Journal of Economics 95(1): 89- 1O\. Patinkin, Don. 1965. Money, Interest, and Prices. New York: Harper & Row. Patinkin, Don. 1987. "Monetary Neutrality," in John Eatwell, Murray Milgate, Peter Newman (eds), The New Palgrave, London: Macmillan Press Ltd. Patinkin, Don and Otto Steiger. 1989. "In Search of the 'Veil of Money' and the 'Neutrality of Money': A Note on the Origin of Terms, " The Scandinavian Journal of Economics 91(1): 131-46. Romer, Christina and David Romer. 2004. "A New Measure of Monetary Shocks: Derivation and Implications," The American Economic Review 94(4): 1055-84. Thornton, Mark. 2007. "Cantillon, Hume, and the Rise of Anti-Mercantilism," History of Political Economy 39(3): 453- 80. Tobin, James. 1972. "Inflation and Unemployment," American Economic Review 62: 1- 18. Visser, Hans. 2002. "The Neutrality of Money," in Brian Snowdon and H.R. Vane (eds), An Encyclopedia of Macroeconomics, Cheltenham, UK and Northampton, MA, USA: Edward Elgar.
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