Analyzing the World’s Money

Abstract

In a lucid, highly readable style, Professor Paul Davidson takes us one step beyond Money and the Real World in his book International Money and the Real World. In Money and the Real World, Davidson attempted to provide an analysis of real world money conditions. Employing a realistic monetary model, he described the operation of a closed entrepreneurial economy that employed time-oriented money contracts to organize production and exchange activities. In the volume at hand, he analyzes the more complicated international world open economies may exist and different monetary units may be employed in specifying contractual obligations. The key to his analysis is the bifurcation of economies into Unionized Monetary Systems (UMS) and Non Unionized Monetary Systems (NUMS) where the latter use different monetary units (in the absence of the institution of fixed exchange rates) in specifying contractual obligations among trading partners at home and abroad (p. x). In a world of UMS, the simple closed model of Keynes's general theory (as further developed by post Keynesians such as Professor Davidson) is satisfactory. In the international real world NUMS may exist, however, economic growth and purchasing power stickiness over time may be even more difficult to achieve and a more comprehensive model is required. Davidson begins his book by reviewing many of the concepts that were applicable for a closed monetary system. Chapter 1 reiterates the issues involved in solving the crisis in economic theory