Monetarism
- Prologue - |
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"[Recessions] are essentially a result of a supply of money that is
too small, and to that extent are monetary phenomena...Complaints about excessive habits
of saving are in such circumstances calculated to confuse the mind of the public and to
distract attention from the shortcomings of monetary policy."
(Gustav Cassel, Theory of
Social Economy, 1918: p.445).
"The present writer is in agreement with the conclusion that the
cause of the Great Depression must be sought elsewhere than in savings-investment
relationships...[T]he emphasis of contemporary economists on these relationships has been
misplaced, because a far more potent factor of economic instability in recent years,
namely, erratic variation in the quantity of money, has been ignored."
(Clark Warburton, "The
Misplaced Emphasis", Journal of Business, 1946: p.284)
"At last, I have discovered the cause of Christmas!"
(attributed to Nicholas Kaldor,
after noting that the money supply surges in December and declines in January)
"Another difference between Milton and myself is that everything
reminds Milton of the money supply. Well, everything reminds me of sex, but I keep it out
of the paper."
(attributed to Robert M. Solow)
"[Monetarism] has benefited much from Keynes' work...If Keynes were
alive today, he would no doubt be at the forefront of the counter-revolution. You must
never judge a master by his disciples."
(Milton Friedman, Counter-Revolution
in Monetary Theory, 1970: p.8)
"I have never found the familiar statement that inflation is
everywhere and at all times a monetary phenomenon to be a very edifying one: for the price
level is the inverse of the purchasing power of money, so that by the same token one can
say that the price of potatoes is a potato phenomenon."
(Don Patinkin, "Some
Observations on the Inflationary Process", in Flanders and Razin, editors, Developments
in an Inflationary World, 1981: p.31)
"The first and most important lesson that history teaches about what
monetary policy can do -- and it is a lesson of the most profound importance -- is that
monetary policy can prevent money itself from being a major source of economic
disturbance."
(Milton Friedman, "The Role
of Monetary Policy", American Economic Review, 1968: p.12)
"I think I had best begin by making my own position clear - I regard
"monetarism" as a terrible curse, a visitation of evil spirits, with particular
unfortunate, one could almost say devastating consequences on our own country,
Britain."
(Nicholas Kaldor, Origins of
the New Monetarism, 1981: p.1)
"[Milton Friedman] is quite talented at outraging his intellectual
opponents, who have accordingly devoted much energy and knowledge to advertising his work.
His only flaw as a debater, in my opinion, is that often his victories are temporary; the
defeated adversary will slink off muttering "I'll think of a reply to his argument in
a few days.""
(George J. Stigler, Memoirs of
Unregulated Economist, 1988: p.154)
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