Lilia Costabile refers to Von Mises' view that new money is injected =
into the economy at particular points. It is, thus, not neutral in the =
sense that all price ratios between goods remain constant. New money is =
not distributed from Milton Friedman's helicopter. This is not an =
Austrian invention. The idea of neutrality can be found in Hume, the =
idea that new money is injected at particular points dates from the same =
period: Cantillon gave a detailed exposition of the process, explaining =
how it would influence interest rates (Cantillon 1964 pp. 212-23).
The idea may date from the 18th century, the term 'neutral money' seems =
to have been coined only in 1919, by the German economist L. von =
Bortkiewicz (Koopmans 1933 p. 228, nt. 1). Wicksell used the term ' =
neutral rate of interest', not yet 'neutral money'.
It may be noted that even if money is neutral (in a comparative-statics =
analysis, or in a proximate way), it need not be super-neutral. =
Super-neutrality means that changes in the rate of money growth, and =
thus changes in the rate of inflation, have no real effects. This is =
hardly possible if inflation has an impact on the composition of =
economic agents' portfolios.
Hans Visser
Cantillon, R. (1964), Essai sur la Nature du Commerce en G=E9n=E9ral, =
ed. by H. Higgs, with an English translation, Kelley, New York 1964. =
First published in 1755.
Koopmans, J.G. (1933), 'Zum Problem des "Neutralen" Geldes', in F.A. =
Hayek (ed.), Beitr=E4ge zur Geldtheorie, Vienna: Julius Springer.
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