Lessons of the Monetarist Experiment

Abstract

The great revival of “monetarism” in the 1970s, culminating in the adoption of the strict prescriptions of the monetarist creed by a number of Western Governments at the turn of the decade — particularly by President Reagan’s administration in the U.S. and Mrs. Thatcher’s in Great Britain — will, I am sure, go down in history as one of the most curious episodes, comparable only to the periodic outbreaks of mass hysteria (such as the witch hunts) of the Middle Ages. Indeed I know of no other instance where an utterly false doctrine concerning the causation of economic events had such a sweeping success in a matter of a few years without any attempt to place it in the framework of accepted theory concerning the manner of operation of economic forces in a market economy.