The 50th Anniversary of a (Forgotten?) Classic
7 August 2006 at 10:59 am Nicolai Foss 1 comment
| Nicolai Foss |
50 years ago Don Patinkin’s Money, Interest, and Prices: An Integration of Monetary and Value Theory was published. This is one of those relatively rare books that has both been widely used as a textbook (when I began studying economics at the University of Copenhagen in 1983, it was still used as an advanced textbook in monetary theory) and as a standard reference in the relevant field (another example could be Scherer’s Industrial Market Structure and Economic Performance).
These days, the book is probably only being read by aging specialists in monetary theory, and Patinkin is not likely to be a name that is known to many modern economists (cf. Peter’s terrifying story of professional ignorance). And yet, the list of the accomplishment’s of Money, Interest, and Prices is extremely impressive (cf. this paper by Olivier Blanchard). Thus, the book clarified the meaning of Say’s law, Walras’ Law, the classical dichotomy, the value theory vs monetary theory issue, and the the loanable funds vs. liquidity preference issue in ways that have been generally accepted ever since.
A personal note: I met Patinkin in 1987 at a conference in honour of John Hicks in Aalborg. I was still a student then, and remember asking him some pretty silly questions. However, he was extremely nice and invited me to dinner the same evening in a local restaurant. When I arrived he was seated with Robert Clower and Axel Leijonhufvud! Edmund Phelps later joined. Only time I have ever been so close to so many celebrities.
Organizations and Markets 
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Peter Klein | 7 August 2006 at 11:17 am
Roger Garrison relates Patinkin to Hayek in this passage from his autobiographical sketch in The American Economist:
http://www.auburn.edu/~garriro/amerecon.htm
“For me the shining light at Virginia [where Garrison got his PhD] was Leland Yeager, whose monetary disequilibrium theory (Yeager, 1997) derives from the pre-Friedman monetarism of Clark Warburton. Yeager taught a course in monetary theory using Don Patinkin’s Money, Interest, and Prices (1965), a book well anchored in name and in deed to Knut Wicksell’s Interest and Prices (1898). It was the Wicksell-Patinkin connection that inspired my dissertation. Wicksell had called attention to the “cumulative process” that is set into motion by a bank rate of interest held below the market, or natural, rate. I could trace the Wicksellian insights in two different directions — to Patinkin and to Hayek — showing how one direction of development emphasized the sense in which money is neutral while the other emphasized the inherent non-neutrality of the process through which the economy adjusts to a monetary expansion. The key difference between the two different directions of development was capital theory — its wholesale neglect in Patinkin’s framework and its centrality in Hayek’s.”
In his book Time and Money Garrison says that “Patinkin’s account of interest-rate dynamics complements the more conventional Monetarist theory in a way that moves Monetarism in the direction of Austrianism.”