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Was the Monetarist Tradition Invented?

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  • George S. Tavlas

Abstract

In 1969, Harry Johnson charged that Milton Friedman 'invented' a Chicago oral quantity theory tradition, the idea being that in order to launch a monetarist counter-revolution, Friedman needed to establish a linkage with pre-Keynesian orthodoxy. This paper shows that there was a distinct pre-Keynesian Chicago quantity-theory tradition that advocated increased government expenditure during the Great Depression in order to put money directly into circulation. This policy stance distinguished the Chicago economists from other quantity theorists, leaving them less susceptible to the Keynesian revolution. Those who have been critical of Friedman's claim that his work derives from the earlier Chicago tradition have focused exclusively on Friedman's long-run empirical specification of money demand. Friedman's cyclical analysis is shown to be very much in the Chicago tradition. Other connections between Friedman's views and the Chicago tradition are also discussed.

Suggested Citation

  • George S. Tavlas, 1998. "Was the Monetarist Tradition Invented?," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 211-222, Fall.
    • Handle: RePEc:aea:jecper:v:12:y:1998:i:4:p:211-22
    Note: DOI: 10.1257/jep.12.4.211
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.12.4.211
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    References listed on IDEAS

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    1. Aschheim, Joseph & Tavlas, George S, 1996. "Monetary Economics in Doctrinal Perspective: Review Essay," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(3), pages 406-417, August.
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    Cited by:

    1. Julien Pinter, 2022. "Monetarist arithmetic at COVID‐19 time: A take on how not to misapply the quantity theory of money," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 51(2), July.
    2. Hugh Rockoff, 2010. "On the Origins of A Monetary History," Chapters, in: Ross B. Emmett (ed.), The Elgar Companion to the Chicago School of Economics, chapter 7, Edward Elgar Publishing.
    3. Stephen G. Hall & P. A. V. B. Swamy & George S. Tavlas, 2012. "Milton Friedman, the demand for money, and the ECB’s monetary policy strategy," Review, Federal Reserve Bank of St. Louis, vol. 94(May), pages 153-186.
    4. James R. Lothian & George S. Tavlas, 2018. "How Friedman and Schwartz Became Monetarists," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 50(4), pages 757-787, June.
    5. George S. Tavlas, 2015. "In Old Chicago: Simons, Friedman, and the Development of Monetary‐Policy Rules," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(1), pages 99-121, February.
    6. David Laidler, 2010. "Chicago Monetary Traditions," Chapters, in: Ross B. Emmett (ed.), The Elgar Companion to the Chicago School of Economics, chapter 6, Edward Elgar Publishing.
    7. Hondroyiannis, George & Swamy, P. A. V. B. & Tavlas, George S., 2001. "Modelling the long-run demand for money in the United Kingdom: a random coefficient analysis," Economic Modelling, Elsevier, vol. 18(3), pages 475-501, August.
    8. repec:ipg:wpaper:2014-530 is not listed on IDEAS
    9. George S. Tavlas, 2015. "In Old Chicago: Simons, Friedman, and the Development of Monetary‐Policy Rules," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(1), pages 99-121, February.
    10. Lothian, James R., 2009. "Milton Friedman's monetary economics and the quantity-theory tradition," Journal of International Money and Finance, Elsevier, vol. 28(7), pages 1086-1096, November.
    11. J. Bradford De Long, 2000. "The Triumph of Monetarism?," Journal of Economic Perspectives, American Economic Association, vol. 14(1), pages 83-94, Winter.
    12. Robert W. Dimand & Harald Hagemann, 2019. "Macroeconomic Dynamics at the Cowles Commission from the 1930s to the 1950s," Cowles Foundation Discussion Papers 2196, Cowles Foundation for Research in Economics, Yale University.
    13. Enrico Sergio Levrero, 2018. "An initial ‘Keynesian illness’? Friedman on taxation and the inflationary gap," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 42(5), pages 1219-1237.
    14. Elias Papaioannou & Richard Portes, 2008. "The international role of the euro: a status report," European Economy - Economic Papers 2008 - 2015 317, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    15. Kenneth N. Kuttner & Adam S. Posen, 2001. "The Great Recession: Lessons for Macroeconomic Policy from Japan," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(2), pages 93-186.

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    More about this item

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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