Of money

David Hume anticipated modern monetarism. First, Hume contributed to the quantity theory and interest rate theory. Hume has been credited with being the first to prove that, on an abstract level, there is no quantifiable amount of nominal money a country needs to thrive. He understood that there was a difference between nominal money and real money. Second, Hume has a theory of causation which fits in with the Chicago school “black box” approach. According to Hume, cause and effect are related only through correlation. Hume shared the belief with modern monetarists that changes in the money supply can affect consumption and investments. Lastly, Hume was a vocal advocate of the stability of the private sector. However, Hume also had some non-monetarist aspects to his economic philosophy. For example, he had a stated preference for rising prices and thought of government debt as a sort of substitute for actual money. He called government debt “a kind of paper credit.” He also believed in heavy taxation because he thought it increases effort. As can be seen, Hume’s economic approach resembles his other philosophies in that he does not choose one side indefinitely, but sees gray in the situation.

David Hume (1711 – 1776) was a Scottish Enlightenment philosopher, historian, economist, and essayist, who is best known today for his highly influential system of philosophical empiricism, scepticism, and naturalism. Hume’s empiricist approach to philosophy places him with John Locke, George Berkeley, Francis Bacon and Thomas Hobbes as a British Empiricist. Beginning with his A Treatise of Human Nature (1739–40), Hume strove to create a total naturalistic science of man that examined the psychological basis of human nature. Against philosophical rationalists, Hume held that passion rather than reason governs human behaviour. Hume argued against the existence of innate ideas, positing that all human knowledge is founded solely in experience.

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