RSSS THEME SEMINAR
Monday 30 April 2007
3.30pm-5.30pm
Ross Hohnen Room, Chancelry, ANU

The recent death of Milton Friedman provides an occasion for a retrospect on the Monetarist episode. The paper uses this occasion to analyse the episode as case study in the power of ideas in economic policy.

The paper argues that the rise of Monetarism provides a good test of the ‘power of ideas’ as its core - the Quantity Theory of Money - is located at the centre of the ‘economic way of thinking’, and was in sharp conflict with the practices that dominated anti-inflation policy in the mid-century. The paper contends that this conflict precluded any adoption of Monetarist tenets until the inflationary crisis of the mid-1970s made for the rapid and total displacement of older practices. These contentions are corroborated by the local response to Monetarism, and are underlined by Milton Friedman’s two visits to Australia. This apparent ‘triumph of ideas’ was, however, undone by the experience of the subsequent decade that revealed how fraught was the rendition Monetarist doctrine into policy. The paper records how Monetarism was soon supplanted by a (now universal) policy regime that in several of its elements - especially the desirability of Central Bank independence - was completely antithetical to Monetarism. How much this successor regime constitutes a ‘triumph of practice’ is a moot point, as its origins are indistinct and mixed; and include both theoretical developments, as well as near-accidents of personality.

Further details: Contact Andrew Leigh (Email: AndrewDOTLeighATanuDOTeduDOTau)