Some Aspects of Monetarism Circa 1970

Abstract

Viewed from 1994, the monetarism of 1970 was not nearly as homogenous a body of doctrine as it seemed at the time. Three areas of difference between the doctrine’s leading proponents, Milton Friedman on the one hand and Karl Brunner and Allan Meltzer on the other, are now apparent. First: Brunner and Meltzer paid more attention to the role of credit markets than did Friedman; second: Friedman’s empiricism made him relatively uninterested in discussing issues raised by money’s status as a social institution, a matter that Brunner and Meltzer frequently discussed; third: this second characteristic of Friedman’s work led him to discuss the interaction of inflation and unemployment in terms that clearly prefigure the New-classical analysis of Robert E. Lucas, et al., while Brunner and Meltzer’s emphasis on the role of money as a means of coping with information and co-ordination problems led them to anticipate many of the insights of what is now called “New Keynesian” economics. Thus the monetarist literature of 25 years ago sheds important light upon modern debates.