Hutts Views on Money - ZAeconomist.pdfVIP

MANAGERIAL AND DECISION ECONOMICS, SPECIAL ISSUE, 7 9 - 8 3 (1988 ) Hutts Views on Money BRIAN KANTOR Department of Economics, University of Cape Town, South Africa W. H. Hutt did not accept Keynesian assumptions of rigid prices. Nor did he concur that the level of demand for money and credit could impact on the role of prices as a co-ordinating mechanism. He did, however, distinguish between real money and money units (nominal money) and what he called moneyed demand, the rate of expenditure of money units similar to Keyness effective demand. Banks were dealers in money who could dilute or condense it, thus impacting on the general price level. Banks sacrifice yield if they are not fully loaned-up, but this does not imply that fractional reserve hanking leads to inflation. Absent convertability into a commodity standard, however, that is given government suspension of convertability inflation is then inevitable unless a strict policy of money neutrality is followed by the authorities. The implementation of such a rule is difficult, and while price flexibility would have accomplished the necessary adjustments, Hutt had not progressed towards todays theories of expectations, which might have made his views more tenable at the time of writing. examination for the Preliminary Course in 1960 re- A PERSONAL INTRODUCTION quired students to fill in a map of Africa with the latest names of the newly independent countries . I regretted not being able to reply with confidence, because if I It was my o