Monday, July 8, 2013

What makes a monetarist?

It might be that you think monetary instability (however defined - of course the fashion now is stable NGDP but at another time it was stable prices) is an important cause of real instability. Another definition is that you think given monetary stability there will be a guarantee of real stability.

The former is a version of monetarism that is much more broadly held than the latter. I'd have to pull the Tract out again, but the early Keynes certainly fits the first definition and I'm willing to trust people that he fits the second definition too. By 1936 he obviously doesn't fit the second definition but does still fit the first. This is the sense in which anyone that calls themselves a Keynesian today is also a monetarist. This is why you see Keynesians mostly supporting NGDP targeting or some other flavor of monetary expansion. This is also why I've never seen a particularly stark transition in Keynes from the twenties into the thirties and forties. He picks up more sophisticated elements to his thinking but you see the main points very far back, including in the Tract. I'm not alone in thinking there is real continuity - it is not universally agreed that he made any kind of big transition. He rediscovered Malthus and got more explicit on those themes, and he picked up the multiplier. So newer styles and themes surfaced over time. But I for one don't see a sea-change (which is not to say I don't acknowledge changes).


  1. What if there's a huge supply side shock? That will cause real instability.

  2. In a certain sense, virtually everybody is a Monetarist because the Quantity Theory of Money has been ingrained into standard economics for a good few decades.


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