Monetarism and economic ideology

This paper looks at the economics of ‘monetarism’. After a discussion of the conceptualization of money and the way it functions, the mechanisms by which ‘monetarism’ analyses the relationship between the money supply and price formation are highlighted. It is argued that these are inadequate, largely because they are couched at an aggregative macro-level. A reformulation is suggested based upon the necessity to define the economic agents in the economy whose practices and processes provide the basis for the price formation and money-supply generation. The concept of a ‘money-supply’ is raised and the difficulties of defining and controlling this in a developed financial system are discussed. Finally a gesture is made towards the way in which an alternative financial mechanism might develop.