The Ambiguity of the Notion of General Equilibrium with a Zero-Price for Money

Abstract

The first problem of monetary theory is the relationship between money and the theory of value. Until now, two approaches have been proposed to deal with this problem. The first approach characterizes the dominant orthodox theory. Its foundation is the theory of value, that is to say, a theory of an economy composed of individuals and an a priori given list of physical goods known by each individual. In this framework, the monetary question necessarily deals with the integration of money into the theory of value. After the essential contributions of Walras, Hicks and Patinkin, Hahn deals with this problem in a more rigorous way. If a few opinions which were given in a moment of enthusiasm (although ephemeral)1 are put aside, it is generally recognized that the vast research on this question has not led to satisfactory results. Within the orthodox approach there still does not exist a monetary theory which receives, by far, as much approval as that given to the theory of value developed by Arrow and Debreu.