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Chicago, Harvard, and the Doctrinal Foundations of Monetary Economics

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  • Tavlas, George S

Abstract

The relationship between Milton Friedman's monetary economics and the views espoused by Chicago and non-Chicago quantity theorists in 1930-36 is examined. Contrary to recent interpretations, Chicago economists advanced the efficacy of monetary policy as the means of escaping from the Great Depression if such a policy was implemented with budget deficits to generate monetary expansion. The use of the quantity theory of money to provide a theoretical rationale for budget deficits distinguished the Chicago economists from other quantity theorists and left them less susceptible to the Keynesian revolution. The claim that Harvard was an important center for monetary research in the early 1930s is refuted. Copyright 1997 by the University of Chicago.

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  • Tavlas, George S, 1997. "Chicago, Harvard, and the Doctrinal Foundations of Monetary Economics," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 153-177, February.
    • Handle: RePEc:ucp:jpolec:v:105:y:1997:i:1:p:153-77
    DOI: 10.1086/262069
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    1. Henry C. Simons, 1934. "Economic Reconstruction: The Columbia Report," Journal of Political Economy, University of Chicago Press, vol. 42, pages 795-795.
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    6. Laidler, David, 1993. "Hawtrey, Harvard, and the Origins of the Chicago Tradition," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 1068-1103, December.
    7. Lee, Joong-Koon & Wellington, Donald C, 1984. "Angell and the Stable Money Rule," Journal of Political Economy, University of Chicago Press, vol. 92(5), pages 972-978, October.
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    Cited by:

    1. Loef, Hans E. & Monissen, Hans G., 1999. "Monetary policy and monetary reform: Irving Fisher's contributions to monetary macroeconomics," W.E.P. - Würzburg Economic Papers 11, University of Würzburg, Department of Economics.
    2. 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.
    3. Tavlas, George S., 2021. "A Reconsideration Of The Doctrinal Foundations Of Monetary Policy Rules: Fisher Versus Chicago," Journal of the History of Economic Thought, Cambridge University Press, vol. 43(1), pages 55-82, March.
    4. T. Gerasimos S. & V. Erotokritos & Т. Герасимос С. & В. Эротокритос, 2017. "Предварительный поведенческий подход в таргетированию реальных доходов // A Tentative Behavioral Approach to Real Income Targeting," Review of Business and Economics Studies // Review of Business and Economics Studies, Финансовый Университет // Financial University, vol. 5(1), pages 17-31.
    5. Sebastian Edwards, 2015. "Academics as Economic Advisers: Gold, the ‘Brains Trust,’ and FDR," NBER Working Papers 21380, National Bureau of Economic Research, Inc.
    6. Edwards, Sebastian, 2020. "Change of monetary regime, contracts, and prices: Lessons from the great depression, 1932–1935," Journal of International Money and Finance, Elsevier, vol. 108(C).
    7. Peter J. Boettke & Alexander W. Salter & Daniel J. Smith, 2018. "Money as meta-rule: Buchanan’s constitutional economics as a foundation for monetary stability," Public Choice, Springer, vol. 176(3), pages 529-555, September.
    8. Sebastian Edwards, 2017. "The London Monetary and Economic Conference of 1933 and the End of the Great Depression," Open Economies Review, Springer, vol. 28(3), pages 431-459, July.
    9. 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.
    10. Frederick Guy & Neil Perry & Andrei Shleifer & Andrew Metrick & Martin L. Weitzman & Barbara R. Bergmann & David Laidler & George S. Tavlas, 1999. "Correspondence," Journal of Economic Perspectives, American Economic Association, vol. 13(3), pages 235-242, Summer.
    11. George S. Tavlas, 2003. "The Economics of Exchange‐Rate Regimes: A Review Essay," The World Economy, Wiley Blackwell, vol. 26(8), pages 1215-1246, August.
    12. Soldatos, Gerasimos T. & Varelas, Erotokritos, 2017. "Firms’ rational expectations, workers’ psychology, and monetary policy in a behavioral real business cycle model," Economic Analysis and Policy, Elsevier, vol. 53(C), pages 129-139.
    13. Steindl, Frank G., 1998. "The Decline of a Paradigm: The Quantity Theory and Recovery in the 1930s," Journal of Macroeconomics, Elsevier, vol. 20(4), pages 821-841, October.
    14. Brett Fiebiger & Marc Lavoie, 2020. "Helicopter Ben, Monetarism, The New Keynesian Credit View and Loanable Funds," Journal of Economic Issues, Taylor & Francis Journals, vol. 54(1), pages 77-96, January.
    15. Soldatos, Gerasimos T. & Varelas, Erotokritos, 2014. "The Chicago Tradition and Commercial Bank Seigniorage," MPRA Paper 57721, University Library of Munich, Germany.
    16. Hugh Rockoff, 2000. "Henry Calvert Simons and the Quantity Theory of Money," Departmental Working Papers 200003, Rutgers University, Department of Economics.
    17. David Laidler & Roger Sandilands, 2010. "Harvard, the Chicago Tradition, and the Quantity Theory: A Reply to James Ahiakpor," History of Political Economy, Duke University Press, vol. 42(3), pages 573-592, Fall.
    18. Moe Thorvald Grung, 2013. "Control of Finance as a Prerequisite for Successful Monetary Policy: A Reinterpretation of Henry Simons’ “Rules versus Authorities in Monetary Policy”," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 3(3), pages 1-18, April.
    19. Aschheim, Joseph & Tavlas, George S., 2004. "Academic exclusion: the case of Alexander Del Mar," European Journal of Political Economy, Elsevier, vol. 20(1), pages 31-60, March.

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