Money, Banks and Finance in Economic Thought

Indexation proposals during the 20th century: from Marshall to Fisher and Allais

Desmedt Ludovic, Université de Bourgogne-Franche-Comte
Drabo Daouda, Université de Bourgogne-Franche-Comte

The instability of the purchasing power of money drew the attention of numerous economists since the 19th century: a declining purchasing power and its harmful effects on the economy led some theoreticians to promote indexing contracts (debts and claims) on the price level. To counteract « the evils of a fluctuating standard of value » (Marshall), most of them thought that nominal values should be adjusted. Some measures have been proposed during the 19th century by leading british writers like Lowe (1822), Poulett (1833), Jevons (1875) or Marshall (1887). In the 20th century, authors like Fisher (1913), Keynes (1927), Friedman (1974) or Shiller (2003) proposed indexation mechanisms (and tabular standards) to counteract the erosion of the purchasing power. In this line of thought, Maurice Allais laid some original conceptual bases. The indexing system is an important aspect of some works published by Allais (1947a et b, 1974, 1989, 1990). He was for several decades, a strong advocate of monetary reform in France. According to him, the indexing system could be seen as a substitute for a regime of gold convertibility (Allais, 1974). Allais’s proposal are original both theoretically and practically. His contribution sought to establish a typology of indexing mechanisms, while stressing the effects of contractualization on national saving. This article first presents an overall presentation of indexing reforms during the XXth century, and then focuses on Allais’s proposals. We will show how he established a link between indexing mechanisms and financial activities: the indexation of bank deposits should induce a rise in savings, which provides funding for investment and could increase economic activity.



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