Quantity Theory of Money: True or False
- Chao Chiung Ting
Abstract
I convert F=ma into m=F÷a arithmetically as economists convert V=PY÷M into MV=PY. m=F÷a predicts absurdly that there is no mass if acceleration is zero. For example, you do not have mass when you sleep. Similarly, MV=PY predicts ridiculously that there is no aggregate income if there is no money. In fact, barter economy operates. As force is scalar in F=ma calculated as mass multiply acceleration so that force is not cause to determine mass in m=F÷a, income velocity is scalar in V=PY÷M calculated as ex-post nominal aggregate income is divided by ex-post quantity of money stock so that aggregate income does not depend on income velocity. Since the symbol V in V=PY÷M is scalar and the symbol V in MV=PY is cause so that MV=PY is not equivalent to V=PY÷M, arithmetical conversion is an invalid method to prove MV=PY. In other words, it is computation that MV=PY is equivalent to V=PY÷M as exactly as m=F÷a is equivalent to F=ma while it is thinking that MV=PY and V=PY÷M are different. Hence, quantity theory of money is false.
- Full Text: PDF
- DOI:10.5539/ijef.v9n10p46
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