Fans pick 100 books like Prices and Production

Grappling with the meaning of money and unraveling its impact on prices or on the creation of wealth is enduringly controversial.

Fascination with money - to eyes or pockets - is universal. Fisher understood this!

He defined money simply as what is acceptable in exchange for goods: bills, coins, cheques - legal tender - or other forms of debt.

Since inflation, for Fisher, is a monetary phenomenon, and as in classical physics, where one matter is equalised to another, in his economics, money-on-the-move is always balancing products-for-a-price; in the long run, too much money or too little does not affect wealth creation but only the level of price.

Fisher is a ‘must read’ because this, his ultimate conclusion, deprived of his many subtleties, is the basis of present macroeconomics.

Wicksell had social justice at heart.

His motivation to investigate money concerned the welfare impact of inflation/deflation on purchasing power.

His model has capital and resources flowing whither returns are highest and bankers chasing the highest interest rate on loans, entrepreneurs, the best profit rate on investment, and merchants, the best price for products.

As pure credit, money can unceasingly feed demand for loans, generating the cumulative process whereby loan rate increases add to costs of production and prices. Wicksell’s conclusion: if loan rates lag behind the rate of profit, prices rise.

For stability’s sake, when prices are rising/falling, there must be an increase/decrease in the interest rate.

Central banks implement this rule of thumb, but, alas, without grasping Wicksell’s doubts about whether the greedy banking system considers public interest.

Hicks envisaged an economy in which individuals choose to offer labour for income to purchase products of their effort or to spend time in uncompensated leisure.

His is a theorical economy: individuals and firms interact to determine current and future supplies and demands. It establishes the laws governing the price system regulating exchange and production.

In this world of transparent, free movement of goods and resources without government, regulations, banks, and unions, there is no room for monopolies or capital accumulation. 

Money as intermediary is simply a unit of account. Growth is the outcome of needs, efforts, and mutual cooperation.

Value and Capital, a jewel, is the core of current microeconomics, but Hicks’ economy, in which inflation and income disparities are non-issues, is not a capitalist but a market one; ironically present microeconomists conflate the two.

Most economists associate volume of money with price-level (inflation/deflation), not Keynes.

For him, a macro price-level does not reveal the unsynchronized dynamics affecting the prices of its components: commodities, labor, capital, raw materials, profits; it must be decomposed.

When FunCorp invests in a rollercoaster, its decision is based on present costs and future returns (ticket sales, performance, stock options, etc.).

Windfall profits will lead to more expansion; losses, to curtailed activity. Both expansion, contingent on easy credit, or recession, on the tightening of credit, depend on bankers’ use of individuals’ savings and their creation of more deposits.

For Keynes, an institutionalised banking system is essential for a modern economy but he advocated, in the public interest, for strict rules on bankers’ abuse of credit, to mitigate the inflation/deflation rollercoaster. 

This was an exciting reading for me. I find a great connection with Akerlof and Shiller’s book Animal Spirits.

This book admits, that people might have some cognitive limitations and use simple forecasting rules in order to make decisions with resulting implications at the aggregate level. As a result, there is great potential for the emerging, yet undiscovered discipline of behavioral macroeconomics.

Personally, for me, revolutionary element is the combination of bounded rationality and willingness to learn from past mistakes and consequent switch to better rules. This book introduces special behavioral macroeconomic model based on the dynamics of endogenous animal spirits, in which case waves of optimism and pessimism are responsible for the business cycle itself.

I find especially interesting the part devoted to the discussion of how central banks should approach inflation targeting in behavioral models with animal spirits.

I recommend this book to any reader interested in the possible cross-fertilization between diverse heterodox traditions in the study of money.

Bringing together perspectives from post-Keynesians, Circuitists, and the Firbourg-Dijon School, the book continues the tradition of Keynes’s and Kalecki’s analysis of a monetary production economy, emphasizing the similarities between the various approaches, and expanding the analytical breadth of the theory of endogenous money.

The authors aim to open new avenues of monetary research and fuel renewed interest in the nature and role of money in capitalist economies.

The book brings together a series of contributions to monetary macroeconomics as well as Bernard Schmitt’s last critique to relative price determination.

I recommend it to the reader interested in monetary theory because it gives an overview of the most challenging topics in this field, from money to financial crisis, passing through profit formation, inflation, and unemployment.

International issues are also considered, while a groundbreaking analysis of sovereign debt and interest payments is presented in what was to become Schmitt’s last contribution in English to international macroeconomics.

When I first met him at the University of Fribourg, Switzerland in 1969, I was immediately fascinated by Bernard Schmitt’s passion for scientific research and by his novel approach to monetary macroeconomics.

Three years later I started working with him as a teaching and research assistant and went on working as his closest collaborator until his death in 2014. The other two co-editors of this book also had the privilege to work closely with him.

Conceived as an homage to Schmitt’s legacy, this book is a collection of contributions explaining the historical origin, the analytical content, and the current relevance of Schmitt’s quantum macroeconomic analysis.

I recommend this book because it deals with the main problems faced by capitalist economies, inflation, and unemployment, in a new and original way, and provides the theoretical foundations for quantum macroeconomic analysis.

Orthodox economics has failed to provide a consistent insight into the pathologies blighting our economies, and both the academic and the economic worlds badly need an alternative approach to convincingly diagnose these pathologies, where they come from, and how they can eventually be disposed of.

Schmitt’s volume provides a revolutionary explanation of the cause of today’s economic disorder as well as an innovative solution enabling for the passage from disorder to order.

This is a collected volume that Kevin Hoover of Duke University put together to provide a philosophical and methodological viewpoint on the empirical and quantitative research that was emerging from the Universities of Chicago, Minnesota, Carnegie-Mellon, Rochester in the 1970s and 1980s.

My own article, “Time-to-Build and Aggregate Fluctuations: Some New Evidence”, originally published in International Economic Review in 1989, was re-printed in this volume. Why was this article re-printed in this volume? It showed that a tightly-specified representative consumer model of aggregate fluctuations, regardless of the theoretical enhancements and econometric approach, could not explain series like aggregate output, consumption and investment jointly with aggregate hours.

While Kevin Hoover continued his methodological research on causality, micro-foundations of macroeconomics and the like, this research led me to delve into micro data models of consumption and labor supply with my co-author Robert Miller from CMU to model individual choices under aggregate shocks.