Milton friedman

A Theoretical Framework for Monetary Analysis Author(s): Milton Friedman Source: The Journal of Political Economy, Vol. 78, No. 2 (Mar. - Apr., 1970), pp. 193-238 Published by: The University of Chicago Press Stable URL: http://www.jstor.org/stable/1830684 Accessed: 22/10/2010 22:12
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A Theoretical FrameworkforMonetary Analysis

MiltonFriedman
University Chicago and National Bureau of Economic Research of

Every on empirical study rests a theoretical on framework, a setoftentative hypotheses thatthe evidenceis designedto testor to adumbrate. may It helpthereader theseries monographs money of of on thatAnnaJ.Schwartz and I have been writing set out explicitly generaltheoretical to theframeworkthatunderlies them.1 That framework the quantitytheoryof money-a theorythat has is taken many different of formsand traces back to the very beginning systematic thinking abouteconomicmatters. has probably It been" tested " withquantitative data moreextensively thanany otherset of propositions in formaleconomics-unless it be the negatively slopingdemand curve. Nonetheless, quantity the theory been a continualhas bone of contention. Untilthepastthree decades,it was generally supported seriousstudents by of economics, thosewhomwe would todayterm professional economists, and rejected laymen.However, successoftheKeynesianrevolution by the led to itsrejection perhapsmostprofessional by economists. Onlyrecently has it experienced revivalso thatit once again commands adherence a the
Thisarticle adaptedfrom2 is chapter ofa NationalBureauof EconomicResearch

monograph by Anna J. Schwartz and myself,Monetary Trendsin the U.S. and the

U.K., which nearcompletion. first sections thisarticle is The five of drawheavily on Friedman (1968). I am, as always,heavily indebted Anna Schwartz. have also to I benefited fromdiscussion some partsof this articlein a numberof classes in of monetary theory theUniversity Chicago and a numberof meetings the at of of Workshop Moneyand Banking theUniversity Chicago.H. G. Johnson in of of read thesemifinal draft mademany and useful suggestions revision. for This is a study theNationalBureauof EconomicResearch of whichis undergoing review. completion thisreview, will be republished an NBER Occasional On of it as Paper. (Friedman Schwartz and 1963b) criticizedfor making theoretical us not the framework in to employed thatbook explicit. This articleis largely response thatcriticism. a See Culbertson (1964)and Meltzer (1965).
1 Several reviewers of our A Monetary History of the United States, 1867-1960

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JOURNAL OF POLITICAL ECONOMY

economists.Both its acceptanceand its rejection of many professional regularities. about empirical have...