The Neglected Contributions of R.G.Hawtrey to Macroeconomics

Hawtrey is now remembered by the majority of our profession, if not as the originator, certainly as the chief proponent of the monetary theory of the trade cycle. [...] The downswing of the cycle is also cumulative and follows the obverse route of the upswing. [...] Hawtrey and the Quantity Theory (QT) It is not an exaggeration to say that the QT constituted the focal point of much of the macroeconomic thinking prior to the collapse of the Gold Standard in 1926. [...] If we assume that the ratio of income to transactions is constant then the 𝑘 in the cash balance version is the reciprocal of v in the income version and proportional to the reciprocal of the V of the transactions approach (see Pigou (1927)). [...] The three possibilities considered were -- a fall in the money wages leading to (i) a rise in the marginal propensity to consume (ii) a fall in the long-term interest rate and (iii) a rise in the marginal efficiency of capital.