From Walras’s Numéraire to the Quantity Theory of Money

The neoclassical theory can be conceived of as the antithesis of the classical theory. Production loses its central role in the creation of value, which allegedly arises within relative exchange. It is through exchange, indeed, that price determination is thought to take place. Yet, this chapter suggests a logical proof that the general equilibrium system originally proposed by Walras is undetermined. This should incite economists to reconsider the role of exchange as the source of economic value. The chapter thus deals with the neoclassical understanding of money inserted in general equilibrium analysis. Despite the general belief that money is nothing but an object of payment, it is argued that Walras’s concept of numéraire as general equivalent acquires its full significance when it is identified with nominal money.