ABSTRACT
Under the lead of Friedman and Johnson, monetary analysis in the past two decades has been largely transformed. The previous institutional approach has been replaced by the application of microeconomic analysis; banking has been treated as an industry in which the size and pattern of output, and the remuneration of factor inputs, are determined by the standard market influences. Normatively, particular characteristics of banking have been recognised as justifying some minimum of official regulation. But such regulation is itself to be exercised with the minimum administrative discretion and the minimum social control. Thus the major normative implication of the analysis is that competition in banking is to be maximised, and administrative intervention minimised, subject only to the constraints stomming from the technical monopoly characteristics embodied in banking.1
