Friedman and Schwartz's A Monetary History of the United States 1867 to 1960: A review

 Nice paper by Michael Bordo and Hugh Rockoff (Free version here).

They review the lessons from the Friedman-Schwartz tome and its lessons for today’s crisis:

A Monetary History of the United States 1867 to 1960 published in 1963 was written as part of an extensive NBER research project on Money and Business Cycles started in the 1950s. The project resulted in three more books and many important articles. A Monetary History was designed to provide historical evidence for the modern quantity theory of money. The principal lessons of the modern quantity theory of the long-run neutrality of money, the transitory effects of monetary policy on real economic activity, and the importance of stable money and of monetary rules have all been absorbed in modern macro models. A Monetary History , unlike the other books, has endured the test of time and has become a classic whose reputation has grown with age. It succeeded because it was based on narrative and not an explicit model. The narrative methodology pioneered by Friedman and Schwartz and the beautifully written story still captures the imaginations of new generations of economists.

The broad lessons from AMH still hold:

AMH is a classic whose reputation has grown with age. It was written as part of a research program which involved several other major books and journal articles. All of the other publications have been virtually forgotten. Why has AMH endured? We think the answer is that AMH is based on narrative and not an explicit model. It was designed to provide evidence for the modern quantity theory of money. The principle lessons of the modern quantity theory of the long run neutrality of money, the transitory effects of monetary policy on real activity, and the importance of stable money and of monetary rules have all been absorbed in modern macro models. Indeed the narrative methodology pioneered by FS and the beautifully written story still capture the imaginations of new generations of economists. Its lessons, especially in chapter 7, have also influenced modern central bankers. As Lucas (1994, 8) said “If I ever go to Washington for some other reason than viewing cherry blossoms, I will pack my copy of AMH and leave the rest of my library—well most of it—at home”. In the recent crisis it seems that many of our policy makers followed his advice but not fully.

 Nice read..

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