The classical heritage of monetary theory and policy at Chicago and Harvard before the Keynesian conquest

Monetary analysts in the early 1930s were aware that a falling level of prices reduces profits and production and increases unemployment. They understood from the classical Quantity Theory the need to increase the quantity of money to restore the level of prices, profits, production, and employment. But the specifics of antidepression monetary policy differed among them. However, David Laidler and Roger Sandilands (2002) argue that an antidepression memorandum prepared by three young Harvard PhDs in 1932, including a Keynes-influenced Lauchlin Currie, was instrumental in communicating antidepression policies to economists at a Chicago conference in 1932. This chapter explains their error.