LETTER TO THE EDITORS: MISREPRESENTING ADAM SMITH’S MONETARY AND BANKING ANALYSES: A COMMENT ON NICHOLAS CUROTT’S INTERPRETATIONS

Abstract

Nicholas Curott attempts to correct some misrepresentations of Adam Smith’s monetary and banking analyses. However, failing to recognize Smith’s adoption of David Hume’s quantity theory of price levels and the price-specie-flow mechanism, Smith’s distinction between money and credit and their sources, and Smith’s suggestion of real, rather than “fictitious,” bills as safer for private bank lending, Curott denigrates Smith’s theory of money and banking as inferior to some modern writers’. Curott also mischaracterizes Smith’s money demand function, which is best represented as a rectangular hyperbola. I draw from the Wealth of Nations to correct Curott’s misrepresentations of Smith’s analyses.