Re: DEfinition of money.

[Paul Davidson <pdavidson@xxxxxxx>]

At 09:54 PM 8/16/98 -0400, you wrote:
>hi paul,
>
>i think i follow this definition except for the last sentence. what does
>elasticity of production/ substitution mean?
>



The elasticity of production equals  zero -- means money does NOT grow on
trees and therefore cannot be harvested by the use of hired labor.  In
other words, as my book POST KEYNESIAN MACROECONOMIC THEORY  explains in
great length and some technical detail, an increase in the demand for money
does not induce private sector entrepreneurs to increase their hiring of
workers to produce more of the money commodity. (Actually all that is
required is that the elasticity of production approximates zero).

The elasticity of substitution approximating zero means that when the
relative price of money rises (relative to the price of producibles), the
producibles can not be a substitute for the money .\\

Again see my PKMT chapters 6 and 7 to get the complete discussion .

Paul
Paul Davidson
Holly Chair of Excellence in Political Economy
Economics Department -- 523 SMC
University of Tennessee
Knoxville, Tennesseee 37996-0550
email: Pdavidson@xxxxxxx;   phone: (423)974-4221;    fax: (423) 974-1686