ABSTRACT

The association between individual freedom and economic prosperity is well-documented. The spontaneous screening of error-learning behaviour fosters positive developments, so that the criticism from those whose focus is upon the inevitable failures is poorly based. By their training in microeconomic theory, economists are alert to the allocative implications of tampering with market prices. Stock-market and house prices surged as former bondholders rebalanced their asset portfolios and as households were encouraged to enter into more debt. Pension funds and insurance companies saw the capitalised value of their liabilities raised in relation to the market value of their assets. The perceived necessity for a general reappraisal of banking and financial structures and of the rationale for monetary and fiscal policy had been evident in the 1930s with the presentation of the Chicago Plan. The key narrative for understanding the Monetarist rejection of Keynesian economics is M. Friedman's presidential address to the American Economic Association in December 1967.