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Monetarism: A Historic-Theoretic Perspective The first and most important lesson that history teaches about what monetary policy can do -- and it is a lesson of the most profound importance -- is that monetary policy can prevent money itself from being a major source of economic disturbance.1 Economists usually view their discipline as a progressive science in which new ideas constantly replace inferior old ones. A look at the history of economic thought suggests that new economic doctrines emerge primarily as an alternative or a counter reaction to previously existing orthodoxies. As a result of these "intellectual revolutions," new schools of economic thought form and develop, challenging the validity and diminishing the influence of their predecessors' beliefs and ideas. Modern monetarism emerged in the 1950s as a reaction to the then-prevalent Keynesian approach to macroeconomic theory and policy. In 1956, the American economist Milton Friedman attacked the income-expenditure...

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