I. Introduction, 157. — II. Expected profits and the generalized mean, 159. — III. A comment on Siegel's analysis, 165. — IV. Expected value analysis in other areas of economics, 168.

I. Solution of the model and the impact of monetary policy, 121.—II. Burden of adjustment and the foreign trade multiplier, 129.—III. Policy coordination, capital mobility, and sterilization, 133.

In this paper the issues raised in the turn-of-the-century American debate over the quantity theory of money are examined. J. Laurence Laughlin of Chicago,the leading antiquantity theorist, provoked the controversy with theoretical and empirical criticisms of the quantity theory, while Irving Fisher emerged as the chief defender of the monetary orthodoxy. Laughlin argued that issues of convertible paper money would not raise prices or the money supply but would instead lead to losses of monetary gold. His position was regarded as incompatible with the classical neutrality-of-money theorem. To identify the fundamental sources of disagreement between Laughlin and the quantity theorists, the neutrality-of-money proposition is decomposed into two components the neutrality proposition per se and the assumed causal role of money.

In this paper the issues raised in the turn-of-the-century American debate over the quantity theory of money are examined. J. Laurence Laughlin of Chicago,the leading antiquantity theorist, provoked the controversy with theoretical and empirical criticisms of the quantity theory, while Irving Fisher emerged as the chief defender of the monetary orthodoxy. Laughlin argued that issues of convertible paper money would not raise prices or the money supply but would instead lead to losses of monetary gold. His position was regarded as incompatible with the classical neutrality-of-money theorem. To identify the fundamental sources of disagreement between Laughlin and the quantity theorists, the neutrality-of-money proposition is decomposed into two components the neutrality proposition per se and the assumed causal role of money.

This paper presents a procedure for determining the optimal monetary aggregate for stabilization policy. To illustrate the procedure, a simple stochastic IS-LM model is used, and how, in general, stabilizing an aggregate consisting of both money and interest bearing government debt will provide superior stabilization for output is shown. The relative weight given to the two components in the aggregate may vary widely, depending upon the source of random disturbances in the economy. Also, for a specific weight, stabilizing the aggregate is equivalent to stabilizing the interest rate. Finally, we show how stabilizing the aggregate is equivalent to other forms of optimal monetary policy proposed by Poole, and Kareken, Muench, and Wallace.