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- Title
Monetarism and Economic Theory.
- Authors
Hahn, F. H.
- Abstract
In this paper I want to examine the theoretical foundations of "monetarism". <BR> At the outset there is a difficulty. Professor Stein writes: "Monetarists are policy oriented. Their major propositions are a series of empirical observations... rather than a theory in direct opposition to neo-Keynesian analysis" (Stein, 1976). And Professor Friedman writes, "I continue to believe that the fundamental differences between us are empirical not theoretical" (Friedman, 1976). Professor Friedman also urges us to paint with a broad Marshallian brush and not to worry too much about the fine detail. All this suggests the claim that there is an accepted theory of the economy and that this theory is capable of yielding both monetarist and other conclusions. For instance, in the IS-LM context the LM curve may be vertical and/or the IS curve could be flat, in which case Monetarists' propositions hold. But the shapes of these curves are contingent on time and place, and Monetarists do not claim that logically the curves could not have less extreme shapes. Yet it will readily be agreed that this classification of cases by the shapes of the two curves does not exhaust the propositions of either Monetarists or non-Monetarists. For instance, the former will want to argue that in normal times the intersection of the two curves is at a level of income producible by the economy with a natural rate of unemployment. Moreover, it is by no means the case that we are agreed that the IS-LM cross is a generally accepted theory of the economy. So for the moment at least let us suspend judgment on this matter.
- Subjects
ECONOMICS; ECONOMIC equilibrium; INSTITUTIONAL economics; KEYNESIAN economics; MARKET equilibrium
- Publication
Economica, 1980, Vol 47, Issue 185, p1
- ISSN
0013-0427
- Publication type
Article
- DOI
10.2307/2553164