ABSTRACT
In recent years the term ‘monetarism’ has come into vogue.1 Defined in a very narrow sense it is the view that changes in the money stock are the predominate factor explaining changes in money income, and hence is merely a new term for ‘quantity theory’. But used in a broader sense the term ‘monetarism’ encompasses a number of other propositions apart from the quantity theory of money. Unfortunately, this whole set of views is commonly judged as a single unit. This contributes to an unfortunate division of economists into monetarists and Keynesian schools with a resulting polarization. It is my impression that the Keynesians have a predisposition to reject all monetarist propositions on the basis of their ‘guilt by association’ with other monetarist propositions, while monetarists have the opposite tendency. I will therefore try to do two things in this chapter. One is to show the interrelations between the various monetarist propositions, and to illustrate that they do indeed form a coherent whole. The other is to show that despite this, the connection between various monetarist propositions is loose enough so that one can judge each one on its own merits rather than having to accept or reject monetarist doctrine as a whole. However, I will not try to judge the validity of monetarism.
