Ȁȇȁ Partʺ: Economicsan inflationary situation which, requiring subsequent deflationary ratifi-
cationif contractual monetary obligations were to be honored, would even-
tually precipitate depression through predictable resistances to the neces-
sary price adjustments” (HuttȀȈȆȃ, p.ȀȀȇ, emphasis in original). In several
places, furthermore, Hutt appears to advocate a policy of accommodating
the quantity of money to the demand to hold it at a stable price level.
Even so, he backs away from tracing macroeconomic disorder to money.
When he comes as close as he ever does to comparing monetary distur-
bances and price rigidities as sources of disruption, he almost always puts
his emphasis on the rigidities (for example,ȀȈȆȃ, p.ȅȈ). Ļe nonmon-
etary view of depression, he says, “is truly the explanation ofalldepres-
sion. When deflation is the initiating factor (under downward cost or price
rigidity), the economy still runs through the cumulative consequences of
the withdrawal of supplies of non-money” (ȀȈȆȃ, p.ȆȂn., emphasis in
original).
[D]epression is due to the chronic, continuous boosting of costs in occu-
pations and industries where the unions tend to be strongest—because
demands for their outputs happen to be most inelastic and consumers
therefore most easily exploited. In the absence of inflation it would have
been perceived how the withdrawal of labour and output by over-pricing
in such activities reduces the source of demands for the outputs of less
easily exploitable occupations and activities. (ȀȈȆȄ, p.ȀȀȂ; footnotes omit-
ted here)But one might well expect Hutt to explain why a “chronic” and “con-
tinuous” problem manifests itself in only occasional depressions, with
healthy growth and occasional booms intervening. Later Hutt says that
inflation, if unanticipated, can improve price/cost ratios in many sectors
of the economy. But this crude remedy attracts resources into unsustain-
able kinds of production and “creates such basic distortions in the pric-
ing mechanism thatwe must often blame the attempt to spend depression
into prosperity for aggravating prospective and realised unemployment” (ȀȈȆȄ,
pp.ȀȀȂ–ȀȀȃ, emphasis in original).
Hutt touches on certain crucial questions about money without giv-
ing sufficiently explicit answers. In some passages he takes such pains to
penetrate behind the veil of money that he practically denies money’s rou-
tine but momentously important function as the medium of exchange;
he actually says that people are buying goods and services with money
only when, untypically, they are acting to reduce their cash balances (ȀȈȆȈ,