Banking between the Invisible and Visible Hands: A Reinterpretation of Ricardo's Place within the Classical School.

This paper reexamines the Classical School's attitude to central banking. A novel framework relates views on central banking to positi ons on the application of free trade-specifically the Real Bills Doct rine-in determining the quantities of money and credit. This framewor k clarifies the Classical School's reservations about central banking and reveals a common error in interpreting Ricardo's position. The a uthor shows that Ricardo, in contrast to the Currency School, changed from being basically a Smithian to raising the possibility of contro lling the quantity of money: thus, in fact, paving the way to central banking. Copyright 1987 by Royal Economic Society.