Chapter dzDz: Hutt and Keynes ȀȇȀmoney equivalent” of nearmoneys and nonmoneys (HuttȀȈȆȃ, pp.ȀȆ–Ȁȇ;
ȀȈȆȈ, chap.ȇ).
Ļe possible frustration of transactions through failure of communi-
cations and market signals does not basically trace to the use of money.
Ļe hiatus arises from the remoteness of wage-earner and wage-earner,
of entrepreneur and entrepreneur. Ļese remotenesses are inevitable con-
sequences of the extreme division of labour that the pricing system and
money make possible. Except in this sense, the use of money has noth-
ing whatever to do with the problem. (Ļese sentences closely paraphrase
ȀȈȆȃ, pp.Ȅȇ–ȄȈ.)
Yet one would expect someone who expounds the tremendous ser-
vices of money as eloquently as Hutt does (for example,ȀȈȆȃ, p.ȅǿ) to
recognize the correspondingly great scope for damage if the real quantity
of money comes to deviate seriously from the total of real cash balances
demanded. One would expect that recognition from the author of “Ļe
Yield on Money Held” (ȀȈȄȅ), an absolutely fundamental contribution
to monetary theory. (Hutt explains the straightforward senses in which
business cash balances are productive and consumers’ cash balances afford
utility. A brilliant exposition and extension by Selgin,ȀȈȇȆ, makes further
discussion here unnecessary.)
Yet Hutt says he does not understand why the tastes, market pro-
cesses, and so forth that determine the purchasing power of the money
unit should induce “income constraints in the form of the withholding of
supplies and hence of demands, except in the sense that, in the presence
of downward cost and price rigidities, deflation will aggravate the cumula-
tive withholding process—just asunanticipatedinflation will mitigate or
reverse it” (ȀȈȆȃ, p.ȅȁ, emphasis in original). Whether Hutt realizes it or
not, the exception he makes is a mammoth one. He also appears to rec-
ognize the damage that an inappropriate quantity of money can do when
he quotes Leijonhufvud, with apparent agreement, concerning “recurrent
attacks of central bank perversity” (ȀȈȆȃ, p.ȆȂ, quoting LeijonhufvudȀȈȅȇ,
p.ȂȈȈ, where, however, Leijonhufvud capitalizes the initial letters of “Cen-
tral Bank”).
Yet Hutt shies away from recognizing the role of money in business
cycles and from appreciating the monetary-disequilibrium hypothesis of
David Hume, Clark Warburton, Milton Friedman, Karl Brunner, Allan
Meltzer, and other monetarists. In an oblique reference to the mone-
tary aspect of depression, Hutt did go so far as to say that the classical
orthodoxy of theȀȈȁǿs andȀȈȂǿs had warned against “the development of