Monetarism

-- Bradford DeLong (delong@econ.berkeley.edu), May 04, 2000

Answers

About ten years ago, as a very dogmatic student, I argued with my Professor of Economics because I thought Dornbusch and Fischer's Macroeconomics was a "monetarist" textbook while he thought they were fundamentally keynesians. Thank you for having shed some lights on the reasons of our discussion.

Contributed by Vincenzo Scoppa (V.SCOPPA@UNICAL.IT) on September 8, 1999.

-- Vincenzo Scoppa (V.SCOPPA@UNICAL.IT), May 04, 2000.

The second plank........ "Under normal circumstances, monetary policy is a more potent and useful tool for stabilization than is fiscal policy."

In this times and moments, and having the Ecuador experience, very fresh. Us inhabitants, of what we call the thirld world, and after a profound dominance, within our very questioned authorities and policy makers (they are always some big shots relative), of what is called keynesianism, this is: the state is god. Believe, more and more, that the heart of the dilemna is within the second plank. Because down here, it is religion. We are irrational, and contrary to what Professor Lucas discovered, we (our authorities) still believe that printing money, and financing the ink, through more and more taxes (government spending), will lead to prosperity. Here is a hypothesis, that would appreciate your comments: "dolarize", minimize the risk of burecratic creativity, and tax consumption, as opposed to wealth (remember Hobbes ?). Because we suppose that the wealthy, do create employment, which down here, is much needed, when you consider unemployment rates, of an average of 18%. Contributed by Juan M. Carrasquilla (janmacar@hotmail.com) on January 25, 2000.

-- Juan M. Carrasquilla (janmacar@hotmail.com), May 04, 2000.

You and I had articles appear in a recent volume of Critical Review, so I was naturally drawn to your piece in JEP on "The Triumph of Monetarism." My paper in CR was entitled, "An Ultra-Keynesian Strikes Back," so you'll not be surprised if I chide you for being much too kind to the monetarists. Here are my reasons in brief:

1) Monetarism without stable velocity is a very pale version of the original doctrine, and your figure 1 is much more damaging to the creed than you allow; and

2) The natural rate hypothesis is badly out of wack with both the recent experience of the U.S. and Europe, where prices should have fallen throughout much of the 1980's and 1990's. Of course, one can say the curve has shifted, but, by now, this strategy seems rather desperate.

Have you read Nicholas Kaldor's ill-tempered little book, "The Scourge of Monetarism"? I realize the hyperbole may be annoying, but his critique of Friedman and his account of an endogenous money supply have, so far as I'm aware, never been addressed by the monetarists. When you say that Classic Monetarism has achieved an "intellectual hegemony," you are talking about a small empire, one that does not even span the other articles in the very same volume of JEP in which your article appears. If Solow is outside the fold, then one can imagine a great many more, especially outside the U.S.

Well, thanks for listening.

Greg Contributed by Greg Hill (Greg.Hill@ci.seattle.wa.us) on April 7, 2000.

-- Greg Hill (Greg.Hill@ci.seattle.wa.us), May 04, 2000.