What happened to the term monetarism?
Given the sudden rapid attack on New Zealand monetary policy from various segments I’ve begun to notice a few more things crawling around in political language that confuse me.
For example, the term monetarist. In a discussion with my sister and on this post from the DimPost the term “monetarist” was used to describe a relatively right wing outlook about political issues and policy in general. However, this confuses me. My impression was that monetarists at their most narrow are people that believe money supply growth = inflation completely. While more generally a monetarist is someone that believes money supply growth is in some way related to higher long run inflation.
In this sense, even some of the most left-wing economists have a touch of monetarist in them. Monetarism is a set of beliefs about how changes in the money supply influence inflation – not a set of beliefs regarding the appropriateness of “economic freedom” or “government intervention”.
When replying to my sister I said:
Monetarism is simply people saying, if we print a whole bunch of money it will end up increasing prices. Evidence and logic add some credence to this view, and so even very left wing economists are in some sense monetarists.
However, an early monetarist was Friedman. He also wrote heaps on “economic freedom”, which is viewed as quite right wing a lot of the time. As a result, people have said Friedman=monetarist and have associated that word with political views that have nothing to do with it.
I think what they mean is “capitalism based on the idea that individual freedom almost always leads to the best outcomes for society” instead of “capitalism based on monetarist theory” – as the second statement doesn’t actually make any sense to me.
Update: Paul Walker blogs Milton Friedman’s own views on what monetarism is.
Perhaps a focus on monetary over fiscal instruments for maintaining NGDP in recession could be viewed as right wing.
Matt, this may help …. or not.
Printing a whole bunch of money is definitely not an exit. My point of view here is that people who rule the country should know what they are doing. They should understand the laws of the modern economy and the market.
Otherwise, the strategy of monetarism can just lead to the collapse of the economy.