The first monetary theory of the Great Depression is often credited to Milton Friedman. Advanced to counter the idea that the Great Depression resulted from inherent capitalistic instabilities, Friedman's theory attributed the Depression to policy mistakes by an inept Federal Reserve Board. More...

This chapter considers the law of reflux and its alternative interpretations: (1) as a monetary policy rule for stabilizing the price level and (2) as rule for individual banks to follow to remain liquid. The chapter argues that Adam Smith endorsed only the second interpretation, and that the...

This chapter explores the different explanations of Ricardo and Thornton for the depreciation of sterling after convertibility of sterling into gold was suspended during the Napoleonic Wars. Ricardo held that only overissue by the Bank of England could have caused depreciation of sterling while...

This chapter discusses four areas of monetary theory on which the ideas of Smith and Hume have left their imprint: (1) the overissue of bank liabilities, (2) the price-specie-flow mechanism (PSFM), (3) the need for a lender of last resort in a competitive banking system, (4) real-bills doctrine...