David Hume and Monetarism

Abstract

Of the twelve characteristics of modern monetarism, five are explicit in Hume's writings: the quantity theory, the Chicago transmission process, private sector stability, the vertical Phillips curve, which Hume originated, and preference for free markets. Two others, irrelevance of allocative detail and focus on the price level as a unit, are implicit. Preference for reduced-form models fits Hume's theory of causation. Preference for stable money growth fits the whole tenor of Hume's discussion. Two propositions on targets and indicators were irrelevant in Hume's day, but Hume rejected the monetarists' strong opposition to inflation.