Robert L. Hetzel (ed): The great recession: Market failure
or policy failure?
New York: Cambridge University Press, 2014. xiv + 384 Pages.
Published online: 2 October 2015
Springer Science+Business Media New York 2015
Throughout the history of economic thought, the quantity theory has often been
challenged. When the convertibility of Bank of England notes was suspended in
1797, a number of public figures, financiers, and economists expressed concern that
an excess supply of bank notes would result (and was resulting) in the depreciation of
the currency. Their intellectual opponents, the Anti-Bullionists, challenged this view
and introduced the earliest example of the real bills doctrine. During the Great
Depression, quantity theoretic arguments for the decline in prices and economic activity
were dismissed by Federal Reserve policymakers with arguments again based on the
real bills doctrine. During the 1960s and 1970s, the quantity theory was once again
challenged. This time by Keynesians armed with the Phillips Curve. Finally, the recent
dominance of the New Keynesian brand of monetary policy analysis has abandoned
money entirely, arguing that the inflation rate can be pinned down by an interest rate
rule that follows the Taylor principle.
During these episodes, a number of important contributions to economics have
emerged. Henry Thornton’s Paper Credit represented an early, rather sophisticated
view of the quantity theory complete with a thorough critique of the real bills doctrine.
Milton Friedman and Anna Schwartz’s Monetary History of the United States repre-
sented an antidote to the arguments that the Federal Reserve had done all it could do
during the Great Depression. In addition, the systematic presentation of evidence that
supported monetarist interpretations of inflation and the business cycle was not only
important in and of itself, but was published at an important time such that it
represented a challenge to the prevailing Keynesian view.
Robert Hetzel’s The Great Recession: Market Failure or Policy Failure?deservesa
spot on any monetary economist’s bookshelf next to Thornton and Friedman and
Rev Austrian Econ (2017) 30:251–254
* Joshua Hendrickson
University of Mississippi, University, MS, USA