Terje — you really do use economic language totally differently from most economists.

Its a semantic revolution.

Seriously though I am aware of this fact. What can I do about most economists? I can’t get them to abandon a lifetime of learned outlook. I can only chip away an the margin. If you are saying that you think I am wrong then that is your opinion and I’m happy to deal with that on a point by point basis.

Monetarism challenged most of what it meant to be a Keynesian.

Yes. And now Keynesians are different. However they are still Keynesians and so was Milton essentially. It’s like saying that Abraham Lincoln challenged much of what it meant to be an American.

Even Friedman flirted with Keynesianism early in his career.

I think he was pretty much a Keynesian all of his career. He was just a different flavour of Keynesian. He still essentially bought into the view that consumers and demand are the central agents in the economic process (hence his starve the beast mentality). However Keynesianism is such a pervasive paradigm that I doubt many people can even begin to see this.

Damn straight. I so often see political debates really coming down to reason versus evolutionary instinct. It’s still a while to go before reason and civilisation is truly the modus operandi for human kind.

If everyone were born libertarian, that would be too easy!

Regarding your last sentence. Mises and many others said as much long before the monetarists came on the scene. Despite what John says the monetarists did focus on the idea that you could scientifically grow the money supply without needing to pay any regard to market feedback. Whether it is the gold price, interest rates or the CPI you need a price focus in order to track demand appropriately. You can’t just set the rudder and then ignore the landmarks. You need to constantly check your co-ordinates.

The beauty of a price target, as in the gold standard, is that short term you get stabe commodity prices (unlike today), both short and mid term you get stable consumer prices (as we do today) and long term you get the steady growth in the money supply that the monetarists championed.

I blame the Keynesians mostly for the inflationary mess of the 1970s. However the monetarists caused their share of pain.

Regards,
Terje.

p.s. by short term I mean days and weeks. By mid term I mean from months to a year or so. By long term I mean from a year or so to many years.

Terje is distracted with a rather incidental part of the early Monetarist school suggestions — that money supply be controlled through a fixed money growth rule. When it became clear that a fixed money growth rule was inadequate monetarists shifted to supporting inflation-targetting as a more effective way of achieving the same goal.

But the central elements of the Monetarist revolution hold true — that the long-run Phillips curve is vertical, inflation is a monetary phenomenon and monetary policy is more effective that fiscal policy because the latter is crowded out due to relatively elastic demand for loanable funds.