ABSTRACT
As in Hicks’s other major works of the 1930s, in ‘A Suggestion for Simplifying the Theory of Money’ (1935, hereinafter ‘Suggestion’), he aims to show that Keynes’s analysis amounts to a special case of Classical theory. He does so by seeking to introduce money in general equilibrium theory on the grounds of the constructive method which also underlies Value and Capital. As might be expected, money is not a primary feature of the general equilibrium model. It might possibly be fitted into the model only as an exercise in ‘generalization’, similar to the extension of the mechanistic principles to non-mechanical phenomena (like heat and light) in nineteenth-century physics. In this chapter, I argue that Hicks’s ‘Suggestion’ can be criticized from both a Classical and a Keynesian standpoint. On the one hand, his application of the constructive method to money does not work. On the other, his approach is incompatible with Keynes’s monetary theory because it neglects the fact that the latter is a ‘theory of principle’.
