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Subject Area: Political Theory

Smith as a Monetary Economist - Leonard P. Liggio, Literature of Liberty, Autumn 1982, vol. 5, No. 3 [1982]

Edition used:

Literature of Liberty: A Review of Contemporary Liberal Thought was published first by the Cato Institute (1978-1979) and later by the Institute for Humane Studies (1980-1982) under the editorial direction of Leonard P. Liggio.

Part of: Literature of Liberty: A Review of Contemporary Liberal Thought, 20 vols. 19781-982

About Liberty Fund:

Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.


Smith as a Monetary Economist

David Laidler

  • University of Western Ontario

“Adam Smith as a Monetary Economist.” The Canadian Journal of Economics 14 (May 1981): 185–200.

Professor Laidler's main purpose is to argue that Adam Smith was a much better monetary economist than he is usually given credit for. The author argues that Smith believed the general price level to be determined by the cost of production of gold relative to that of goods, and that so long as bank money was convertible into specie, the general price level would therefore not vary. Smith's analysis of the influence of the creation of bank money on the balance of payments must be viewed against the background of this theory of the general price level, as must his adherence to the Real Bills Doctrine. Finally, Smith's analysis of the replacement of specie with paper money makes his banking theory an integral part of his theory of economic growth.