This paper deals with a class of models of the demand for money that includes the Baumol-Tobin and other inventory-theoretic models as special cases. Among other things, the analysis shows that many supposedly robust comparative-statics propositions derived by earlier writers do not survive even modest generalization. More generally, the results of the paper strongly reinforce other recent research in indicating the need for a wholesale reconstruction of the microfoundations of contemporary monetary theory.

This paper deals with a class of models of the demand for money that includes the Baumol-Tobin and other inventory-theoretic models as special cases. Among other things, the analysis shows that many supposedly robust comparative-statics propositions derived by earlier writers do not survive even modest generalization. More generally, the results of the paper strongly reinforce other recent research in indicating the need for a wholesale reconstruction of the microfoundations of contemporary monetary theory.

1) That their equation (2) is logically equivalent to our (hereafter, D-K) sufficiency conditions presented in the 1974 issue of this Review. 2) That the assumption of degree zero homogeneity (in the variables m and p) of the utility function serves completely to characterize the class of illusion-free demand functions derivable from ordinal utility theory. 3) That it is possible to reinstate the usual Slutsky properties by adopting the semi-separable utility function given in their equation (4).