- Sep 26, 2015
- Reaction score
- The United States
- Political Leaning
Now I'm wondering if anyone on here will argue that Monetarism is a good thing..
Brad DeLong asks why monetarism — broadly defined as the view that monetary policy can and should be used to stabilize economies — has more or less disappeared from the scene, both intellectually and politically. As it happens, I wrote about essentially the same question back in 2010, inspired by the more or less hysterical pushback against quantitative easing. I thought then and think now that this was fated to happen, that Milton Friedman’s project was always doomed to failure.
Economists were urged to build everything from “micro foundations” — which was taken to mean perfect rationality and clearing markets, not realistic descriptions of individual behavior.
But to get a macro picture that looked anything like the real world, and which justified monetary activism, you needed to assume that for some reason wages and prices were slow to adjust.
Inevitably the drive for purism collided with the realistic accommodations, the ad hockery, needed to be useful; sure enough, half the macroeconomics profession basically said, “what are you going to believe, our models or your lying eyes?” and abandoned any good sense Friedman had originally brought to the subject.
Right-wingers insisted — Friedman taught them to insist — that government intervention was always bad, always made things worse.
Monetarism added the clause, “except for monetary expansion to fight recessions.” Sooner or later gold bugs and Austrians, with their pure message, were going to write that escape clause out of the acceptable doctrine. So we have the most likely non-Trump GOP nominee calling for a gold standard, and the chairman of Ways and Means demanding that the Fed abandon its concerns about unemployment and focus only on controlling the never-materializing threat of inflation.
What about the reformicons, who pushed for neo-monetarism? We can sum up their fate in two words: Marco Rubio.
The point is that the monetarist idea no longer serves any useful purpose, intellectually or politically.