Versión de HTML Básico
prices in the same proportion and direction. As part of these dichotomy
assumptions, output would remain unaffected by exogenous changes in the
quantity of money. This exogenous effect is most of the times identified with the
central bank money supply management. Within the quantity equation conception,
its economic paradigm assumes what it attempts to prove. That is to say, once the
dichotomy is presupposed, possible vagaries in the shortage or plethora of money
cannot modify the level of output. This would imply the existence of an imaginary
economy where production and exchange takes place without money, which
becomes just a simple veil. Therefore, given this theory setting it is difficult to
understand why money is used in the real economy to conduct production
processes,
i.e.
acquiring inputs and selling them. As a consequence, the very
conception of a pure economy without money is devoid of any practical relevance,
while its theoretical underpinnings require high abstract hypothetical assumptions.
The concept of money neutrality is a basis for the quantity equation. It goes as far
back as Hume (Patinkin, 1987) early preconceptions. Hayek (2008) retakes it in the
last century, near the early thirties. The conditions to attain such neutrality,
i.e.
that
monetary disturbances cannot distort relative prices require, in turn, three premises
to take place. The first is that the money supply remains constant. The second is a
full price flexibility and third, a foreknowledge of economic agents, who can
anticipate correctly future price movements. It is only when these three conditions
take place, money neutrality could prevail. Later on, Hayek (1990) acknowledged,
that for practical purposes the concept of neutral money is untenable.