Central Banking Journal Vol 18 No 2 November 2007, 1st November 2007

A review of Keynes, Keynesians and Monetarism, by Tim Cogdon (Edward Elgar, 360 pages).

The post-war disputes over economic theory and policy were ferocious, even by the standards of academia. As Tim Congdon was a leading exponent of the monetarist side, his views on the history and resolution of the battles are of great interest and provide a common theme to this collection of clear and persuasive essays. The author divides the postwar era into three periods. The first, which he calls “Stop/Go” lasted from 1945 to the second quarter of 1971; the second (“Boom and Bust”) from the third quarter of 1971 to the third quarter of 1992; and the third (“Stability”) from the last quarter of 1992 onwards.

In the first period the dominant view among British economists was Keynesian. The objective was to avoid high unemployment, and it was held that this could only be achieved through fiscal policy. The main constraint was the fixed exchange rate. In practice, this meant periodic and politically damaging devaluations, which were only accepted under the stress of apparent necessity. As increases in interest rates allowed such necessities to be postponed, monetary policy came in by the back door, but was otherwise considered to be unimportant. “By the late 1960s hardly any British economist thought that interest rates could or should be varied to influence domestic economic variables,” Congdon notes.

Full article: Keynes, Keynesians and Monetarism – ARWS Central Banking Nov 2007