Journal of Economic Perspectives: Vol. 12 No. 4 (Fall 1998)


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Was the Monetarist Tradition Invented?

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Tavlas, George S. 1998. "Was the Monetarist Tradition Invented?" Journal of Economic Perspectives, 12(4): 211-222.

DOI: 10.1257/jep.12.4.211


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.

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Tavlas, George S. (Bank of Greece and Monetary Committee of the European Union)

JEL Classifications

B22: History of Thought: Macroeconomics
E50: Monetary Policy, Central Banking, and the Supply of Money and Credit: General


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