Economic Quarterly

2004

 

Winter 2004

Classical Deflation Theory

Thomas M. Humphrey

Classical economists David Hume, Pehr Niclas Christiernin, Henry Thornton, David Ricardo, Thomas Attwood, and Robert Torrens looked beyond the redistributive (creditor-debtor) effects of deflationary monetary contraction to its adverse effects on output and employment. They attributed these effects to price-wage stickiness; to rises in real debt, tax, and cost burdens; to cash hoarding in anticipation of future price falls; and to other determinants. Addressing deflation associated with post-war resumption of gold convertibility at the old mint par, they advocated policies ranging from gradualism to devaluation and even to outright abandonment of the gold standard in order to avoid or mitigate deflation's harm.



Topics: Deflation
Contact Us

Richmond

Amanda L. Kramer
(804) 697-8606

Publications image
Get Our Free Publications

To receive a notification by email when Economic Quarterly is posted online or to order single copies of past issues, click on the links below (published online only since 2012).