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The macroeconomic situation of Laos has become significantly worse over the past two years as a result of both external and internal factors. Of the external factors, the depressed international environment in the Southeast Asian re gion, in the wake of the Asian crisis, has played a critical role. The fact that Thailand, one of the countries most hit by the Asian crisis, is the main trading partner of Laos (and also its largest foreign investor) explains the high vulner ability of Laos. This is not the whole story, however. Domestic factors in Laos have also contributed to fuelling macroeconomic fragility, as evidenced by the higher inflation and much larger exchange rate fluctuations than in neighbouring countries. Inflation reached 87 per cent in 1998 and was estimated to be more than 100 per cent in 1999. The Lao currency, the kip, depreciated by no less than 90 per cent in relation to the U.S. dollar between mid-1997 and mid-1999. Further, the kip fluctuated like a yo-yo during 1999: from some 5,000 kip per dollar in early January, it plunged to 10,000 kip per dollar in June, then appreciated to 5,800 kip in September and dropped again thereafter to 7,600 kip in December.1 Political inertia contributed greatly to the rapid deterioration of the macroeconomic stance in 1998 and 1999 by slowing down, and in some cases even blocking, the intro duction of a less accommodating macroeconomic policy and financial and banking reforms. On the other hand, economic growth has continued at a slower pace than before (4 per cent in 1998 compared with 6.6 per cent on average between 1991 and 1997) but better than in neighbouring countries, reflecting a kind of de-linkage of the real economy from the monetary economy.

The paper considers a monopolistically competitive intertemporally optimizing monetary economy featuring long-term growth. Inflation is generated through sluggish price-setting and contributes to budgetary finance through seignorage. This setup permits exploration of the interaction between inflation and growth in a tractable way. Superneutrality holds in the long but not the short run. The budget deficit fuels inflation with a hysteresis. Growth and inflation are negatively correlated in the long run, with causality running from the former to the latter, and positively correlated in the short run regardless of the origin of shocks. Price flexibility precipitates adjustment but appears also to destabilize output.

This study analyzes the change of the structure and the occurrence of the surplus labor force at the agricultural village through the break of latifundio at the cantral Andes highland region in Ecuador. The data from the field survey by the reporter at the Carbon area in Carbon-Chinipampa village in Bolivar province were used for the analysis. The final chapter of this paper indicates that the subdivision of the farmland and the penetration of the monetary economy cause the agricultural surplus labor force in this agricultural village.

Using a cash-in-advance (CIA) framework, this paper examines the shadow price of foreign exchange under three types of trade restrictions. The CIA constraint creates a consumption distortion that alters the recipient's welfare. If the effective cash requirement for a unit of the exportable becomes smaller (larger), foreign transfer improves (reduces) welfare and hence the shadow price is greater (less) than unity. Both cases of untied and tied foreign transfer are examined.

This paper provides a simple method for placing a bound on the extent of variation of endogenous business cycles in a monetary economy with additive utility. The results apply when individuals have even period lives. In general, the bound shrinks as individuals discount the future less.

This paper examines the claim that Keynesian models violate Walras' law. Walras' law is founded in the logic of exchange. Standard statements misrepresent it, as it pertains to a monetary economy. Keynesian models are consistent with Walras' law once this misrepresentation is corrected. The law holds for both notional and effective demands. It also holds in unconstrained Walrasian equilibria, constrained Walrasian equilibria, and constrained non-Walrasian equilibria. The latter corresponds to a Keynesian conception of equilibrium: markets need not clear, but agents expectations must be fulfilled.

This paper shows that in a monetary real business cycle model with limited participation, the region of indeterminacy depends crucially on (i) the coefficient of relative risk aversion, (ii) the labor supply elasticity, and (iii) the degree of increasing return-to-scale. However, the quantitative impact of the money growth rate is very small.

In The General Theory, John Maynard Keynes broke with the quantity theory of money, not just in working out a monetary theory of production but, as he says, in arguing the case for a monetary theory of value. Keynes writes (CW, 7, pp. xxii-xxiii):A monetary economy, we shall find, is essentially one in which changing views about the future are capable of influencing the quantity of employment and not merely its direction. But our method of analyzing the economic behaviour of the present under the influence of changing ideas about the future is one which depends on the interaction of supply and demand, and is in this way linked up with our fundamental theory of value. We are thus led to a more general theory, which includes the classical theory with which we are familiar, as a special case.

The main changes of new capitalism concern mainly two spheres: the new technological paradigm and valorization process and the importance of finance. The main feature of the prevailing finance-led growth regime during the first decade of new millennium is then presented. In this perspective, particular attention is given to the analysis of the evolution and the logic characterizing mergers and acquisitions and leverage buyouts. After describing the main features of the contemporary accumulation paradigm, we therefore proceed to the reformulation of the schemes of monetary circuit by taking into account the structural changes induced by contemporary capitalism.

Economists have the habit of solving the wrong problems. They speculate circumstantially about the behavior of agents and do not come to grips with the behavior of the monetary economy. This is the consequence of the methodological imperative that all explanations must run in terms of the actions and reactions of individuals. The critical point is that no way leads from the understanding of the interaction of the individuals to the understanding of the working of the economy as a whole. The solution consists in moving from subjective-behavioral axioms to objective-structural axioms, i.e. from past to future.

Although in the Schumpeterian process of entrepreneurial innovations money and financial markets are assumed to affect economic development, Schumpeter does not explicitly study financial evolution and its effects on real dynamics. In order to fill this gap, this article suggests a Minsky-inspired interpretation of Schumpeterian institutional dynamics in monetary terms. It then develops a specific Schumpeterian analysis of the evolution of financial institutions and regulatory mechanisms in the wake of the 2007–08 crisis and points to major consequences of financial innovations on economic stability. It appears that unlike the creative destruction process of entrepreneurial innovations, in a liberalised/deregulated environment financial innovations move banks from their crucial role of financing long-term economic evolution and lead to reckless finance. Thus, financial market dynamics put economies on a destructive path. Such an evolution calls for active and tight rational regulation in order to shape capitalist finance towards more stable and welfare-enhancing strategies.

The idea of finance points us to two related but distinguishable profound perspectives for understanding and interrogating finance capital and its place in any modern economy. First, the idea of finance relates to the internal split of the modern economy. It refers to the primordial crack or lack at the birth of the modern economy that both causes and traces an inherent imbalance at the core of any economy. This split is constitutive of the modern economy. There is always an internal gap within the economy, and finance capital is the form of appearance of both the economy and its inherent gap. Contrary to popular opinion, finance or finance capital has no separate existence of its own; it is part of the spatial-temporal processes of the economy. The idea of finance captures the thinking that for an economy to exist as a monetary economy it must be divided against itself. The basic insight here is that the “external” opposition between Main Street (real production) and Wall Street (mere financial activities, so-called casino capitalism) is grounded in the modern economy’s immanent self-opposition.

It is clear by now that pure exchange models are useless. For two reasons. First, because exchange is the other side of specialization in production, and, second, because a direct exchange of goods does not take place in the monetary economy. The decisive drawback of conventional exchange models, though, is that they cannot explain profit. Standard economics rests on behavioral assumptions that are expressed as axioms. The ultimate reason for the failure of conventional exchange theory is that human behavior and axiomatization are disjunct. Notable progress can be made by replacing the subjective-behavioral axioms by objective-structural axioms.

This note shows that there are monetary equilibria in the model of overlapping generations that are in the core. These equilibria have positive stocks of outside money in every generation, and they support Pareto-optimal equilibrium allocations. These equilibria are thus self-enforcing, and introducing money into an economy with infinitely many agents need not be tantamount to contriving a new social institution designed to enforce sequential contracts between generations. Journal of Economic Literature Classification Numbers: E40, E60, C71.

The aim of this article is to present a Post Keynesian model to describe growth in the Brazilian economy in the 1970s. Despite permanent inflation, the Brazilian economy grew at an accelerated rate throughout the decade, leading some to believe that inflation was not such a bad villain for the development of latecomer economies. During the 1980s, however, stagnation and triple-digit inflation dismantled this belief. This description ofthe Brazilian development process during the 1970s is oriented by the conceptual priorities set by the notion of monetary economy. Eichner's conception of a recursive model where a causal chain is built is applied to explain the dynamics of growth and inflation in the Brazilian economy in the 1970s. In this sense, this paper is in line with the developments of Eichner and Arestis in modeling short-term macroeconomic behavior according to Post Keynesian principles.' (See Eichner, 1979, 1981, 1987; and Arestis et al., 1985-86; Arestis, 1986, 1987-88,1989.)

1. Weber and Marginal Utility Theory: The Austrian Connection 2. Sociological and Economic Investigations of Economic Action: The Critique of Menger 3. Weber and the Sociology of Economic Action: The Critique of Central Planning 4. Rationality and Economic Action: A Sociological Perspective 5. Situating Rationality: Planning and Rational Choice Theory 6. The Significance of a Monetary Economy: Weber and Habermas 7. The Debate on Central Planning: Weber, Mises and After

According to prevailing methodological criteria, standard economics is definitively refuted. Joan Robinson’s wake-up call “Scrap the lot and start again” has therefore lost nothing of its original freshness and urgency. Yet, how can the restart succeed? This inquiry builds on structural axioms. First, conceptual consistency is assured and the confusion about profit and income is dissolved. The question of interest is then how a recession or depression develops as the result of the normal functioning of the monetary economy. This involves the identification of positive feedback. A very effective mechanism consists of the circular interaction of profit and distributed profit.

Reprinting the second edition (which included a new introduction explaining developments which had emerged since first publication) this book discusses explorations in the fundamental theory of a monetary economy, a theoretical critique of the ‘Phillips Curve’ approach to the theory of inflation and the theory of the term structure of interest rates in terms of the theory of forward markets pioneered by David Meiselman.

Using a stochastic cash-in-advance growth model similar to that studied by Cooley and Hansen (1989), it is demonstrated that the competitive, monetary equilibrium can be expressed as the solution to a modified social planner's problem. Hence, by employing standard dynamic optimization techniques and the second welfare theorem to the modified social planner's problem, the equilibrium of the monetary economy can be studied.

A response to the article by R. Kletter, "Iron Age Hoards of Precious Metals in Palestine – An 'Underground Economy'?" (Levant 2003), in which the author argues against our conclusions regarding a silver-based monetary economy in the 7th century BCE.

The present paper takes it as an indisputable fact that subjective-behavioral thinking leads, for deeper methodological reasons, with inner necessity to inconclusive filibustering about the agents’ economic conduct and therefore has to be replaced by something fundamentally different. The key argument runs as follows: (a) the subjective-behavioral approach can not, as a matter of principle, afford a correct profit theory, (b) without a correct profit theory it is impossible to comprehend how the monetary economy works, (c) without this knowledge economic policy proposals are unjustifiable, (d) thinking like an economist may be hazardous to the economy.

This essay examines the consequences of financial innovations for the economic stability through a monetary reappraisal of the Schumpeterian approach and states that changes occurring in financial markets may adversely affect financing conditions of firms and impede economic development. In the economic literature, it is usually asserted that liberalized financial markets lead to innovations that allow banks to provide better risk management, information acquisition, and monitoring services. Therefore financial liberalisation would support the Schumpeterian vision of creative destruction process. However, recent financial crises cast doubt on the creative nature of financial innovations on weakly regulated markets. When speculative bank behaviour gains ground, it leads to the financialisation of economies. Financial markets dominate over the productive activities and provoke disastrous consequences at the macroeconomic level. Unlike the Schumpeterian entrepreneurial innovations, the evolution of financial markets leads to reckless finance that generates destabilizing dynamics. Then the Schumpeterian creative destruction process turns out to be a destructive creation and the systemic sustainability of market economies calls for more consistent regulatory frameworks.JEL Codes: B31, E44, G01, O16, O31

The formal foundations of theoretical economics must be nonbehavioral and epitomize the interdependence of real and nominal variables that constitutes the monetary economy. This is a cogent conclusion from the persistent collapse of behavioral and real models. Conceptual rigor demands, first, to take objective-structural axioms as a formal point of departure and, secondly, to clarify the interrelations of the fundamental concepts income and profit. The present paper reconstructs the characteristic properties of a Walrasian economy in structural axiomatic terms, generalizes them and explores the consequences for our understanding of the working of the economy we happen to live in.

This paper considers a standard monetary economy with indivisible primary assets and transaction costs. When assets are indivisible, if a steady-state equilibrium with positive savings exists, there necessarily exists a very large set of equilibria. The intermediation of indivisible assets substantially reduces the set of competitive equilibria, and enhances the "flexibility" of prices. We state sufficient conditions for intermediaries to form and hold all primary assets directly. We define and analyze various measures of the consumer surplus created by intermediaries. We show that conventional measures of intermediary output bear no obvious relation to the consumer surplus created by intermediation. Journal of Economic Literature Classification Numbers: E40, G20.

It is high time we rediscovered the role of the financial cycle in macroeconomics. In the environment that has prevailed for at least three decades now, it is not possible to understand business fluctuations and the corresponding analytical and policy challenges without understanding the financial cycle. This calls for a rethink of modelling strategies and for significant adjustments to macroeconomic policies. This essay highlights the stylised empirical features of the financial cycle, conjectures as to what it may take to model it satisfactorily, and considers its policy implications. In the discussion of policy, the essay pays special attention to the bust phase, which is less well explored and raises much more controversial issues.

O artigo discute os determinantes da taxa de câmbio em uma economia monetária periférica, com base em uma perspectiva teórica centrada na economia política keynesiana. Para tal, analisam-se inicialmente as propriedades essenciais de uma economia monetária aberta e, na sequência, apresentam-se as proposições básicas da visão pós-keynesiana da determinação da taxa de câmbio, desenvolvida principalmente por John Harvey, o qual, no entanto, não discute as causas específicas do comportamento da taxa de câmbio em economias periféricas "emergentes". Por fim, após reexaminar a ideia de "condição periférica", o texto discute as peculiaridades históricas e institucionais associadas ao modo de inserção das economias periféricas no sistema monetário e financeiro internacional moderno. The purpose of this paper is to discuss, from a Keynesian analytical perspective, the determination of exchange rates in a peripheral monetary economy. Initially, the paper approaches the essential properties of an open monetary economy. Next, it presents the basic proposals of the Post Keynesian view of exchange rate determination, which was developed chiefly by John Harvey, who, nevertheless, does not discuss the specific causes of exchange rates behaviour in "emerging" peripheral economies. Finally, after re-examining the idea of "peripheral condition," the paper approaches the historical and institutional peculiarities associated with the way in which peripheral economies are integrated in the modern international monetary and financial system.

We study information acquisition in a exible framework with strategic complementarity or substitutability in actions and a rich set of externalities that are responsible for possible wedges between the equilibrium and the efficient acquisition of information. First, we relate the (in)efficiency in the acquisition of information to the (in)efficiency in the use of information and explain why efficiency in the use does not guarantee efficiency in the acquisition. Next, we show how the acquisition of private information affects the social value of public information (i.e., the comparative statics of equilibrium welfare with respect to the quality of public information). Finally, we illustrate the implications of our results in a few applications that include beauty contests, monetary economies with price-setting complementarities, and economies with negative production externalities.

Badalian and Krivorotov (2012) not only acknowledge the strong link between the crisis of 2007 and the 1990s technological paradigm, but they also accept the complementarity between overinvestment in new technologies and increasing financial liquidity that we highlighted in our article "A Financialized Monetary Economy of Production." They argue that a similar trend seems to have also characterized Great Britain between the end of the nineteenth century and the first decade of the twentieth century. Thus, in this paper, we try to deepen the comparison between the regime of accumulation led by Great Britain during the nineteenth century and the finance-led regime of accumulation led by the United States that has characterized contemporary capitalism since the 1990s. We also explain the main differences between the growth patterns during these two periods. Furthermore, we criticize the monetary theory proposed by Badalian and Krivorotov for failing to consider both the store of value function and the credit...

Anatomically, modern humans have existed at least for the last 200,000 years. For 95 per cent of the history of our species, up until about 10,000 years ago, human technology was limited to what could be made out of bone, stone, wood and other easily rendered organic matter. Then, in the period archaeologists refer to as the Bronze Age, humanity began to make tools out of metals. From then on the relationship between mining, metals and technology and the contribution to economic growth have been intimately connected. While complex, the impact of this relationship in its broadest sense is fairly clear: without mining the development of technology would have been slow to non-existent, the development of a monetary economy would probably not have happened at all and the main sources of fuel (coal and later oil) and raw materials required for industrial activity would not have been obtainable. Without mining there could not have been an industrial revolution, and from that stems, in part, the basis of all economic activity which has led to the economy of the present (Diamond, 1997; Clark, 2007). Minerals and fuels extracted by mining are an essential part of the global economy — without them there would and could be no cars, computers or consumer durables; construction techniques would have been different and in many respects more limited; and buildings themselves would have been harder to light and heat.

A comprehensive dynamic model of the monetary economy that produces the key characteristics of a debt deflation has been presented recently by Steve Keen as an alternative to conventional approaches. His model is based on a double-entry bookkeeping methodology but lacks an acceptable profit theory. In this respect it is not different from familiar approaches. Clearly, a deficient profit theory prevents a proper understanding of how the real world economy works. The present paper takes an entirely different route and places the core of Fisher’s debt deflation theory into the context of the consistent structural axiomatic approach.

The paper deals with the geographies of the European economic crisis that had its origins in the global financial crisis of 2008-09. The crisis pushed many European economies into a deep recession and caused a mass unemployment in many countries. The crisis is analysed in a monetary economy framework that builds upon the post-Keynesian economic theories such as the monetary theory of production and the chartalist theory of money. These theories focus on the operational realities of banking, credit creation and finance as well as processes of production, income creation and government spending. Hence, the theoretical framework constructed in the paper provides a comprehensive analytical tool for examining relationships between money, finance and production, the key elements of the monetary economy. It is argued in the paper that the monetary economy perspective has a lot to offer for the geographical analysis of the economic crises and the contemporary economic system in general. In other words, it is argued that economists and economic geographers need to pay more attention to the central dynamics of monetary economy. The geographical investigation of the commanding processes of monetary economy conducted in the paper brings up the essential dynamics behind the European economic crisis. The analysis will be focused on the processes that turned the financial crisis into a recession of real economy. In addition, a brief look is taken at the anatomy of the European sovereign debt crisis. The empirical analysis shows that the geographical differences in demand structures, in the liquidity preferences of different economic actors and in the basic institutional structures of monetary economy were essential elements of the crisis. The first conclusion of the paper is that the European economic crisis was a characteristic crisis of monetary economy where money and monetary conditions affect motives and decisions of the economic actors. The second conclusion is that the geographical perspective is necessary in order to expose the central dynamics of the crisis and dynamics of monetary economy in general. Therefore, the theoretical framework constructed in the paper should be utilized more widely in the geographical analysis of contemporary economic system in the future. Keywords: Financial crisis, Economic crisis, Monetary economy, Regional development JEL: G01, R00, E59

In the Sogdian letters, which have been discovered in 1932/33 by Soviet archaeologists on Mount Mug in Tajikistan, there are mentions of payments for different services, usually in drachms (δraxmē). These data are useful to reconstruct the monetary economy of Sogdiana at the dawning of the Arab invasion (beginning of the 8th Century CE). The present article focuses, in particular, on a peculiar and still puzzling linguistic compound formed by the name ʽdrachmsʼ followed by an adjective, apparently derived from the word dīnār with the suffix -ka, that is ‹δrxmyh δyn’rk’h›, δraxmē δēnārakā. The exact meaning of this unusual expression cannot be ascertained only on philological ground, but it is also necessary to take into consideration the coin circulation of Northern Tokharistan. The author analyzes the typology of the few documents that contain such a compound, “dinaric drachms”, and based on the evidence of local coin hoards, contemporary to the Sogdian letters, suggests that it actually refers to Islamic dirhams or to a standard unit of account of higher value than the Bukhar-khudat silver coins, which circulated abundantly along the Zeravšan Valley. The arrival of the Arab army in Sogdiana provoked a slow but irreversible introduction of the reformed Islamic coins into the territory; this led, for a certain period, to a double monetary circulation of silver coins with the same nominal value but with different intrinsic content.

This paper explores the implications of a search-based model of money for the linkage between steady state inventory accumulation, inflation, and welfare. Because individual traders in the search economy do not internalize the positive effects inventory accumulation and search effort have on the aggregate economy, they are too low relative to social efficiency. It is established that a tax on money balances can alleviate these externalities and improve aggregate welfare. It does so by (i) directly increasing the optimal search intensity choices of the individual trader and (ii) stimulating the accumulation of inventories through a ‘Mundeil-Tobin’ type effect. An increase in the equilibrium level of inventory accumulation also positively affects search effort. The implications for optimal monetary policy are discussed.

In this paper, recent contributions to the legal restrictions theory of money are critically examined from the perspective of received monetary economics. In particular, it is shown that, contrary to some interpretations, M. Friedman's work on the optimum quantity of money does not support the legal restrictions theory but follows a diametrically opposite approach. Furthermore, it is contended that there is a strict relationship between the theoretical foundations of money and interest rate dominance so that the latter is consistent with the essential properties of a monetary economy. Copyright 1994 by Blackwell Publishers Ltd and The Victoria University of Manchester

This paper tests Mankiw's (Journal of Monetary Economy, 1987, 20, 327–341) optimal seigniorage model. Under quadratic cost functions of taxation and inflation, the rates of inflation and taxes have unit roots and they must be cointegrated. The hypothesis of optimal policy is rejected in five countries.

Two contrasting traditions of thinking about labour are presented, the Aristotelian one which sees labour as toil and trouble and the Enlightenment one which connects labour to the possibility of social emancipation. Difficulties in determining the distinction between labour and other activities are discussed in the light of recent socio-economic changes which include the increasing reflexivity of labour. if in the modern monetary economy, as is suggested, any activity which is voluntarily paid for by others should be considered as labour, how can labour still be the main vehicle of social emancipation? An answer may be that this role of labour was always the result of false generalization: the rewards inherent in artistic and intellectual labour were mistaken for the rewards of labour as such. A more modest role for labour is suggested following Voltaire: it keeps us from doing other foolish things.

O artigo objetiva mostrar como a visão de mundo em Keynes se relaciona com suas proposições de política econômica e justifica sua atenção para a necessidade de uma ação efetiva do Estado para mitigar os problemas econômicos e sociais inerentes à dinâmica operacional de economias monetárias. Nesse sentido, após apresentar, à luz da concepção de Keynes, como os agentes econômicos se comportam e tomam decisões em economias monetárias, as atenções se voltam para a apresentação das políticas keynesianas contracíclicas, fiscal e monetária, fundamentais para assegurar o crescimento econômico em nível de pleno emprego e melhorar a distribuição da renda e da riqueza. This article aims at showing as Keynes' ideas related to the real world justifies his economic policy proposals and the necessity of State intervention to mitigate the economic and social problems that are consequence of the operational dynamic of the monetary economy. Accordingly, after presenting, in the light of Keynes' view, as economic agents behave and make their decisions in monetary economies, the article explores the Keynesian countercyclical policies, fiscal and monetary, essential to achieve full employment and to improve income and wealth distribution.

The paper provides a novel theory of income distribution and achieves an integration of monetary and value theories along Ricardian lines, extended to a monetary production economy as understood by Keynes. In a monetary economy, capital is a fund that must be maintained. This idea is captured in the circuit of capital as first defined by Marx. We introduce the circuit of fixed capital; this circuit is closed when the present value of prospective returns from employing it is equal to its supply price. In a steady-growth equilibrium with nominal wages and interest rates given, the equation that closes the circuit of fixed capital can be solved for prices, implying a definitive income distribution. Accordingly, the imputation for fixed capital costs is equivalent to that of a money contract of equal length, which is the payment per period that will repay the cost of the fixed asset, together with interest. It follows that if capital assets remain in use for a period longer than is required to amortize them, their earnings beyond that period have an element of pure rent.

The essential aim will be to reinterpret Marx’s theory of value from the standpoint of a modern monetary economy. In the tradition of the ‘Rubin’ school, it will be argued that the concept of abstract labour provides an analytical link between the two moments of the circuit of capital: between the process of the valorization of capital, on the one hand, and the realization of exchange-value, on the other. Marx’s original theory of value will be reconstructed to establish a connection between the concept of abstract labour and money.

Keynes’s theory of a monetary economy and his liquidity preference theory of investment will be examined in order to highlight the essential properties of money under the conditions of uncertainty, which inevitably prefigures the existence of involuntary unemployment and could – within a laissez faire, deregulated financial system – induce phases of endemic financial instability and crises.

Modifying a parallel dynamic programming approach to a simple deterministic economy, we consider the effect of an innovation in the means of production. The success of the innovation is assumed to depend on the availability of financing, locus of financial control, the amount of resources invested, and on a random event. The relationship between money and physical assets is critical. In this first part stress is laid on the innovation behavior of Robinson Crusoe in a premonetary economy, then on his actions in a monetary economy in partial equilibrium. Part 2 considers the closed monetary economy with several differentiated agents.