Monetarists and the Politics of Monetary Policy

Abstract

Monetarist economists appear to have achieved a high level of success in having their policy ideas put into practice. The monetarists are analyzed here as a political group. They are characterized as a loosely organized group offering distinct policy prescriptions, closely aligned with neoliberal political forces. The supply of monetarists is discussed in terms of their relative numbers and shared socialization experiences. The demand for monetarist analysis stems from needs for policy prescriptions, from self-interest, and from need for ideological reassurance. This article concludes with the argument that monetarists' success depends on their ability to convince policymakers outside the Federal Reserve to adopt a monetarist line.

Get full access to this article

View all access options for this article.

References

1. William Wolman , “Hard-Nosed Monetarism Takes Over at the Fed.” Business Week, 15 June 1981, p. 32.

2. The index is the number of days per year on which one of the three monetarist (Keynesian) economists was cited in the New York Times Index divided by the number of pages of citations in the year—this last in order to control for varying completeness in indexing practices over the years. The monetarists were Milton Friedman, Karl Brunner, and Allan Meltzer. The Keynesians were Paul Samuelson, James Tobin, and Franco Modigliani. The Keynesians should do better on grounds of sheer prestige among economists; each has been president of the American Economic Association, whereas only one of the monetarists has been so honored.

3. Wall Street Journal, 9 Oct. 1979, p. 7.

4. Wall Street Journal, 12 Oct. 1979, p. 20.

5. The results are based on a rather modest 33 percent return in a stratified sample of economists. The research is reported in J. R. Kearl , Clayne L. Pope , Gordon C. Whiting , and Larry T. Wimmer , “A Confusion of Economists?” in American Economic Association Papers and Proceedings, American Economic Review, 69:28-37 (May 1979). The original sample included 100 economists in the top 7 graduate programs, 200 other academic economists, 150 economists in government positions, and 150 economists in private non-academic employment. The aggregated results—for example, in Table 1—appear not to be weighted by the relative proportions of economists in each group.

6. Counted as monetarists appearing before the HBC are Brunner, Meltzer, Christ, Dewald, Jordan, Laidler, Meigs, Meiselman, Poole, and Sprinkel, all in Table 3, and William Fellner, Darryl Francis, and John Lindauer. Counted as monetarists when appearing before the JEC are Brunner, Weintraub, Christ, Alan Greenspan and, perhaps implausibly, Herbert Stein. Also see notes to Table 4.

7. Jeffrey M. Berry , Lobbying for the People: The Political Behavior of Public Interest Groups (Princeton: Princeton University Press, 1977).

8. For further discussion of these characteristics and the overall nature of Federal Reserve relationships with external actors, see John T. Woolley, The Federal Reserve and the Political Economy of Monetary Policy (Ph.D. diss., University of Wisconsin, Madison, 1980).