ABSTRACT
This chapter examines the investigation into monetary policy by the Treasury and Civil Service Committee in the early 1980s. It explains the disagreements which arose between the monetarists during the 1980s. The chapter describes the development as the ‘adaptive expectations’ Phillips curve, to distinguish it from the ‘new classical’ school modifications. The adaptive expectations theory is in marked contrast to the rational expectations theory, formed from the ‘new classical’ school. While the arguments from the monetarists and the ‘new classical’ school were formed out of academic rigour and were a product of the American universities, the supply-siders originated from a different stable and pursued their objectives with different means. The problem for both the American monetarists and the supply-siders was that their two experiments unravelled quite rapidly in the early 1980s. The chapter outlines the economic instruments the Thatcher administration intended to use. It explores some of the developments which arose from the challenges to Keynesianism.
