The Chicago Tradition, The Quantity Theory, And Friedman

Abstract

l This paper was written while I was visiting at M.I.T. during 1968 under a research grant from the National Science Foundation (NSF Grant GS 1812). I am grateful to both these institutions for making this work possible. I am happy to express my deep appreciation to Mr. Stanley Fischer of M.I.T. for his invaluable assistance at all stages of the preparation of this paper and particularly in the examination of the relevant literature. In addition, I have benefited from discussions with him and from his criticisms of earlier drafts. I am also indebted to my Jerusalem colleagues Yosef Attiyeh, Yoram Ben-Porath, and Giora Hanoch, whose thoughful suggestions have greatly improved the general organization of this paper, as well as the discussion of specific points. As usual, it is a pleasure to thank Miss Susanne Freund for her careful and conscientious checking of the final manuscript and its references. Needless to say, responsibility for the interpretations and views presented in this paper remain entirely my own. 2 I would like to dedicate this paper to the memory of Miguel Sidrauski. His untimely death in August, 1968 was a great loss, not only to his family and friends, but to the economics profession in general and particularly to the development of monetary theory. Though I do not think Miguel had a strong interest in the history of doctrine, I hope that as a Chicago graduate he would have been interested in reading the final product of a work whose beginliings he witnessed. 3 In Studies in the Quantity Theory of Money, ed. M. Friedman [8], pp. 3-21 referred to henceforth as Quantity Theory I. In self-defense, I might, however, note that I have on previous occasions discussed in passing some of the points presented below, and that I have also emp. 81, n.8. See also the implicit criticism in Patinkin [29], p. 480b. See also pp. 60-61 below. 4 Friedman [10], referred to henceforth as Quantity Theory II.