Sociology Index

MONETARISM

Monetarism is an economic theory that governments must use interest rates and control of the supply of money for the purpose of economic regulation. There is controversy over the role of monetarist policies in the current deficit problems of most of the worlds' economies. Monetarism is associated with neo-conservatism, a version of liberalism that stresses free markets and individualism rather than the welfare state vision that was dominant in western societies.

Monetarism is in contrast to Keynesian economics which advocates taxation and budgetary policy or fiscal policy. Monetary instruments for economic regulation is to provide a lever to influence macro-economic cycles in the economy. The Keynesian policies of post-World War Two capitalism was a retreat from confrontation with the working class. Friedman’s monetarism became popular in Thatcher’s Britain and Reagan’s U.S.A.

Monetarism is the economic doctrine of Milton Friedman, that the money supply, the total amount of money circulating in an economy is the chief controller of the level of economic activity. Monetarism has become the dominant theory in both academic economics and public policy. The idea of monetarism is that if the money supply is restricted, then prices must fall and/or the rate of circulation of money must go down.

By the end of the 1980s monetarism was abandoned. Monetarism was supplanted by a variety of policies, such as Micro-Economic Reform, which emphasized the need to tackle the resistance of the working class in hand to hand fighting with union-busting, unemployment, and divide-and-rule practices in the workplace.

The Success of the Fed and the Death of Monetarism - N. Kindan Kishor and Levis A. Kochin.
Monetarists blamed fluctuations in inflation on excessively volatile growth in monetary aggregates. The data supported this hypothesis until 1982. Since 1983 monetary aggregates have been essentially uncorrelated with subsequent inflation in the U.S.

MODIGLIANI ON MONETARISM: A RESPONSE - THOMAS MAYER, Professor, University of California Davis. 
This reply to Franco Modigliani's (1988) criticism of monetarism is not a consensual monetarist response but merely the reaction of a moderate monetarist or a monetarist fellow traveler.

MONETARISM AND THE USE OF MARKET PRICES AS MONETARY POLICY INDICATORS - ROBERT E. KELEHER.
Recently proposed strategies for employing market price indicators as guides to monetary policy embody many key propositions of monetarism. The market price approach differs from monetarism key areas: the environments in which the approach works, and the policy role of the dollar.

BEYOND KEYNESIANISM AND MONETARISM - MANCUR OLSON, University of Maryland.
Though there is consensus among economists about microeconomic theory, neither the Keynesian nor the Monetarist theory of macroeconomics has attracted a consensus.

Monetarism and the Masses 
Denmark and Economic Integration in Europe - Martin Marcussen, Mette Z°lner.
We focus on the Danish Economic Monetary Union referendum and identify rules at two different levels of analysis: causal ideas at the level of elites and deep-rooted cultural values at the level of the masses.

News-Magazine Monetarism 
EDWARD NELSON - Federal Reserve Bank of St. Louis - Research Division; Centre for Economic Policy Research. 
This Paper examines some recent monetary policy debates, in light of commentary on those issues contained in some of the work of Milton Friedman. Friedman's work considered here is the commentary on monetary policy in his Newsweek magazine columns from 1966 to 1984.

IS-LM and Monetarism 
MICHAEL D. BORDO, Harvard University; ANNA J. SCHWARTZ, National Bureau of Economic Research. 
We explore the views of two principal spokesmen for monetarism: Milton Friedman and the team of Karl Brunner and Allan Meltzer.

David Laidler on Monetarism
Michael Bordo, Anna J. Schwartz
Abstract: David Laidler has been a major player in the development of the monetarist tradition. As the monetarist approach lost influence on policy makers he kept defending the importance of many of its principles.