Abstract
1. In earlier publications,3 I have tried to show how the quantity theory of money can be formulated operationally by considering two new concepts, the rate of forgetfulness and psychological time. The rate of forgetfulness bears the same relation to the past as the rate of interest does to the future. Psychological time defolnes a transformation of the time reference scale such that the rate of forgetfulness per unit of time is constant. For fifteen different cases studied, confrontation of this theory with available data on the money supply and global expenditure shows that the results are what one would expect if the theory were correct.3 4 The purpose of this study is to show that it is possible to derive the new formulation from simpler and more attractive postulates than those used earlier, following systematic application of the fundamental analogy between interest and forgetfulness,5 6 and that it results from the confrontation of the new theory, in its new
Published Version
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