Summary
This essay contains a review of the so-called Patinkin controversy which arose about the possible inconsistency of the classical dichotomy model. It can be established that this model is logically consistent and economically reasonable if and only if one is prepared to assume continually existing individual monetary equilibria. A real dichotomization of the economy into two independent sectors, which determine relative prices and the general price level, is therefore out of the question.
As opposed to Patinkin and Modigliani the same can be said for a model with no distribution effects and only inside money.
Although the real balance effect is not always operative as an adjustment mechanism, it hardly can be suspended in a static long-run model with that limited quantity of uncertainty which is needed for a minimal analysis of an economy with money as a medium of exchange.
Similar content being viewed by others
Lijst van geciteerde literatuur
A Symposium on Monetary Theory,Review o f Economic Studies XXVIII (1960), pp. 29–56.
Ackley, G.,Macroeconomic Theory, New York 1961.
Archibald, G. C. en R. G. Lipsey, Monetary and Value Theory: A Critique of Lange and Patinkin,Review of Economic Studies XXVI (1958/59), pp. 1–22.
Baumol, W. J., Stocks, Flows and Monetary Theory,Quarterly Journal of Economics LXXVI (1962), pp. 46–56.
Becker, G. S. en W. J. Baumol, The Classical Monetary Theory: The Outcome of the Discussion, in J. J. Spengler en W. R. Allen (red.)Essays in Economic Thought. Aristotle to Marshall, Chicago 1960, pp. 753–771.
Bieri, H. G., Der Streit um die ‘klassischen Dichotomie’. Ein Bericht über die Patinkin-Kontroverse,Schweizerische Zeitschrift für Volks-wirtschaft und Statistik IC (1963), pp. 172–181.
Brunner, K., Inconsistency and Indeterminacy in Classical Economics, Econometrica XIX (1951), pp. 152–173.
Bushaw, D. W. and R. W. Clower,Introduction to Mathematical Economics, Homewood 1957.
Claassen, E. M.,Monnaie, Revenu National et Prix, Parijs 1967.
Claassen, E. M., Stock-Flow Decisions and Full Equilibrium,Kyklos XXII (1969), pp. 493–505.
Clower, R. W., Classical Monetary Theory Revisited, Economica XXX (1963), pp. 165–170.
Encarnación, J., Consistency between Say's Identity and the Cambridge Equation,Economic Journal LXVIII (1958), pp. 827–830.
Fleming, M., The Timing of Payments and the Demand for Money,Economica XXXI (1964), pp. 132–157.
Frevert, P., On the Stability of Full Employment Equilibrium,Review of Economic Studies XXXVII (1970), pp. 239–252.
Gupta, S. B., The Invalidity of the' Dichotomy in the Pure InsideMoney Model,Journal of Political Economy LXXVII (1969), pp. 118–121.
Hahn, F. H., The General Equilibrium Theory of Money: A Comment,Review of Economic Studies XIX, (1951/52), pp. 179–185.
Hahn, F. H., The Rate of Interest and General Equilibrium Analysis,Economic Journal LXV (1955), pp. 52–66.
Hansen, B., A Study in the Theory of Inflation, London 1951.
Heertje, A., de+Die theoretische und empirische Bedeutung der Patinkin-. Kontroverse,Kyklos XVII (1964), pp. 31–39.
Helmstädter, E., Patinkin-Kontroverse Beitrag Nr. X,Kyklos XXII (1969), pp. 506–518.
Hickman, W. B., The Determinacy of Absolute Prices in Classical Economic Theory,Econometrica XVIII (1950), pp. 9–20.
Johnson, H. G., Monetary Theory and Policy,American Economic Review LII (1962), pp. 335–379.
Klundert, Th. van de, Enkele opmerkingen naar aanleiding van de theorie van Patinkin,De Economist CXV (1967), pp. 60–71.
Kuenne, R. E., Walras, Leontief and the Interdependence of Economic Activities,Quarterly Journal of Economics LXVIII (1954), pp. 323–354, en Reply,Quarterly Journal o f Economics LXIX (1955), pp. 631–636.
Kurimura, Y., On the Dichotomy in the Theory of Price,Metroeconomica III (1951), pp. 117–134.
Lange, O., Say's Law: A Restatement and Criticism, in O. Lange, F. McIntyre en T. O. Yntema (red.) :Mathematical Economics and Econometrics, Chicago 1942, pp. 49–68.
Lange, O:,Price Flexibility and Employment, Bloomington 1945.
Leoutief, W., The Consistency of the Classical Theory of Money and Prices,Econometrica XVIII (1950), pp. 21–24.
Lloyd, C. L., The Equivalence of the Liquidity Preference and Loanable Funds Theories and the New Stock-Flow Analysis,Review of Economic Studies XXVII (1960), pp. 206–209.
Lloyd, C. L., Classical Monetary Theory and the Velocity of Circulation,The Canadian Journal of Economics III (1970), pp. 87–94.
Lloyd, C. L., Two Classical Monetary Models, in J. N. Wolfe (red.)Value, Capital and Growth: Papers in Honour of J. R. Hicks, Edinburgh 1968, pp. 305–317.
Marschak, J., The Rationale of the Demand for Money and of Money Illusion,Metroeconomica II (1950), pp. 71–100.
Mauer, L. J., The Patinkin-Controversy-A Review,Kyklos XIX (1966), pp. 299–315.
Mishan, E. J., Say's Law and Walras' Law Once More,Quarterly Journal of Economics LXXVII (1963), pp. 617–625.
Missorten, W., De betekenis van de liquiditeitsvoorkeurtheorie en de monetaire leenfoudstheorie voor het totstandkomen van de intereststand,Maandschrift Economce XXXI (1966/67), pp. 283–291.
Modigliani, F., The Monetary Mechanism and Its Interaction with Real Phenomena,Review of Economics and Statistics XLV (1963), pp. 79–102.
Musgrave, R. A.,The Theory of Public Finance, New York 1959.
Niehaus, J., The Neoclassical Dichotomy as a Controlled Experiment,Journal of Political Economy LXXVII (1969), pp. 504–511.
Orbis Economcus, Tien jaar Don Patinkin,Money, Interest and Prices, X (1966/67), pp. 1–60.
Patinkin, D., Money,Interest and Prices, Evanston 1956 en New York 1965.
Patinkin, D., Relative Prices, Say's Law and the Demand for Money,Econometrica XVI (1948), pp. 135–154.
Patinkin, D., The Indeterminacy of Absolute Prices in Classical Economic Theory,Econometrica XVII (1949), pp. 1–27.
Patinkin, D., The Invalidity of Classical Monetary Theory,Econometrica XIX (1951), pp. 134–151.
Patinkin, D., A Reconsideration of the General Theory of Money,Review of Economic Studies XVIII (1950/51), pp. 42–61.
Patinkin, D., Further Considerations of the General Equilibrium Theory of Money,Review of Economic Studies XIX (1951/52), pp. 186–195.
Patinkin, D., Dichotomies of the Pricing Process in Economic Theory,Economica XXI (1954), pp. 113–128.
Patinkin, D., Liquidity Preference and Loanable Funds: Stock and Flow Analysis,Economica XXV (1958), pp. 300–318.
Patinkin, D., Financial Intermediaries and the Logical Structure of Monetary Theory,American Economic Review LI (1961), pp. 95–116.
Pen, J., Patinkins theorie na tien jaar,De Economist CXIV (1966), pp. 273–281.
Rosenstein-Rodan, P. N., The Coordination of the General Theories of Money and Price,Economica III (1936), pp. 257–280.
Schneider, E., Patinkin über Geld und Gtiterpreise, inFestkrift til Frederik Zeuthen, Kopenhagen 1958, pp. 315–331.
Shackle, G. L. S., Recent Theories Concerning the Role and Nature of Interest,Economic Journal LXXI (1961), pp. 209–254; herdrukt in Surveys ofEconomic Theory (deel 1), Louden, New York 1956, pp, 108–153.
Takata, Y., Critical Notes on the Theory of the Rate of Interest,Osaka Economic Papers II (1954), pp. 1–17.
Trezza, B., The Real Balance Effect and Classical Monetary Theory,Metroeconomica XX (1968), pp. 145–148.
Tsiang, S. C., Walras' Law, Say's Law and Liquidity Preference in General Equilibrium Analysis,International Economic Review VII (1966), pp. 329–346.
Valavanis, St., A Denial of Patinkin's Contradiction,Kyklos VIII (1955), pp. 351–368.
Vermaat, A. J.,De controverse tussen de ‘Loanable Funds’ theorie en de ‘Liquidity Preference’ theorie, Amsterdam 1966.
Vermaat, A. J., De wet van Walras,De Economist CXVI (1968), pp. 441–473 en 587–618.
Willms, M., Das Gleichgewichtsproblem in der klassischen und neoklassischen Geldtheorie,Jahrbuch für Sozialwissenschaft XVII (1966), pp. 168–197.
Witte., J. G., Walras' Law and the Patinkin Paradox: A Qualitative Calculus for Macroeconomics,Journal of Political Economy LXXIV (1966), pp. 72–76.
Rights and permissions
About this article
Cite this article
Vermaat, A.J. De patinkin-puzzle. De Economist 119, 43–96 (1971). https://doi.org/10.1007/BF01705894
Issue Date:
DOI: https://doi.org/10.1007/BF01705894