ABSTRACT
Monetarism is a child of the Counter-Reformation. Its theological basis is Patinkin’s argument that Keynes is guilty of having overlooked the “real-balance effect” and that the very notion of an equilibrium rate of unemployment is a contradiction in terms. Wrapped in the mantle, which once graced the shoulders of John Stuart Mill, as Defender of the Faith, Milton Friedman is the symbol of a belief in classical theology that is uncompromising. His attitude to economic policy derives from a strict fundamentalist interpretation of the neoclassical counter-reformation. Even if the government has learned its lesson and does not initiate further rounds of monetary expansion, it may find that its hand is forced. Monetary expansion to finance a rise in real wages earned as the reward for an increase in productivity is therefore to be welcomed. An improvement in living standards of this type is a characteristic feature of the economic progress which impressed Adam Smith.
