JW Mason in Phenomenal World:
The relationship between money world and the concrete social and material world is a long-standing, though not always explicit, question in the history of economic thought. Do the money payments and prices we see all around us have their own independent existence, distinct from the objects they are attached to? Can things that happen in money world affect the real world?
One central strand in that history is the idea that the answer to these questions is, or ought to be, negative. Money is, or ought to be, neutral—a passive record and measuring stick of real social facts that exist independently of it. The use of the word real in economics as the opposite of both nominal and monetary, as well as in its everyday ontological sense, is not just a bit of confusing terminology; it reflects a deeply-held intellectual commitment.
As early as 1752, we can find David Hume writing that:
Money is nothing but the representation of labour and commodities … Where coin is in greater plenty; as a greater quantity of it is required to represent the same quantity of goods; it can have no effect, either good or bad.
At the turn of the twenty-first century, we hear the same thing from Federal Open Market Committee member Lawrence Meyer: “Monetary policy cannot influence real variables—such as output and employment.” Money, he says, only affects “inflation in the long run. This immediately makes price stability … the direct, unequivocal, and singular long-term objective of monetary policy.”
These accounts share the perspective that money quantities and money payments are just shorthand for the characteristics and use of concrete material objects. They are neutral—mere descriptions that can’t change the underlying things. If money is neutral, changes in the supply or availability of money will only affect the price level, leaving relative prices and production unchanged.
There is, of course, also a long history of arguments on the other side—
More here.
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