Involves

Word

Cantillon effect

kan-TIL-un ih-FEKT · noun

The Cantillon effect is the uneven impact of new money. It enters through particular banks, markets, or programs, changing some prices and incomes before others.

Examples

  • Quantitative easing has a Cantillon effect when financial markets reprice before paychecks change.

  • Rate cuts can create a Cantillon effect because homeowners who refinance and investors who own stocks may benefit sooner than renters with no portfolio.

Origin

Named for Richard Cantillon, an Irish-born banker and economist in Paris. In an essay written around 1730, he explained that new money changes prices in the order it is spent. Economists later gave his name to the mechanism.

How it connects

The name for the uneven path of new money, and for the banker who traced it.

This word appeared in Whoever is closest to the money supply benefits most, the Involves connection for August 1, 2026, which asked: Why do not all boats rise with the tide when you print money?

Check yourself

What does the Cantillon effect describe?

New money enters through particular channels and changes some prices and incomes before others.. Right. The path matters: new money enters somewhere specific, and some prices move before others.

What the sources establish

  • Richard Cantillon's essay, written around 1730, analyzed how increases in money change prices in the order the money is spent.

Sources