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The most successful economies have the best working financial markets. While causation obviously runs in both directions, current research has increasingly emphasized the role of finance in promoting growth. Here seven leading financial economists explore the links between financial development and growth. The book seeks to answer the question of the role of finance in promoting sustainable growth and in the reduction of poverty, for example via micro-financial institutions.

During the last two centuries there have been four main approaches to analysing the determination of the money supply, to wit: (1) Deposits cause Loans, (2) The Monetary Base Multiplier, (3) The Credit Counterparts Approach and (4) Loans cause Deposits. All four approaches are criticized, especially (2) which used to be the standard academic model, and (4) which is now taking over as the consensus approach. Instead, I argue that banking is a service industry, which sets the terms and conditions whereby the private sector can create additional money for itself. The problem is that such money creation tends to be highly procyclical, so the question then becomes finding the best trade‐off between official control of that process and allowing sufficient flexibility for the private sector. I conclude by reviewing how Lord King's reform proposals, in his book on The End of Alchemy, might fit into this broader analysis.

Lionel Robbins was concerned about the methodology of economic science. When he discussed the relationship between theory and 'reality', two of the examples of inappropriate relationships were taken from monetary economics. Such shortcomings continue. Among the worst are:(1) IS/LM: whereby the monetary authorities set the monetary base, and the interest rate is market determined;(2) the monetary base multiplier of bank deposits, and the role of reserve ratios;(3) the current three‐equation neoclassical consensus, assuming perfect creditworthiness, and hence no need for banks;(4) the analysis of the evolution of money.