Monetarism is. Monetarist concept

Forerunners of monetarism

Main article: Quantity Theory of Money

J. Mill

The understanding that price changes depend on the amount of money supply has come into economic theory since ancient times. So, in the III century BC. e. the well-known ancient Roman jurist Julius Paulus claimed this. Later, in 1752, the English philosopher D. Hume, in his Essay on Money, studied the relationship between volume Money and inflation. Hume argued that an increase in the money supply leads to a gradual increase in prices until they reach their original proportion with the amount of money in the market. These views were shared by the majority of representatives of the classical school of political economy. By the time Mill was writing Principles political economy In general, the quantitative theory of money has already taken shape. To Hume's definition, Mill added a clarification about the need for a constancy of the structure of demand, since he understood that the supply of money can change relative prices. At the same time, he argued that an increase in the money supply does not automatically lead to an increase in prices, because money reserves or commodity supply can also increase in comparable volumes.

Within the neo classical school I. Fischer in 1911 gave a formal form to the quantitative theory of money in his famous equation of exchange:

The modification of this theory by the Cambridge school (A. Marshall, A. Pigou) formally looks like in the following way:

Fundamentally, these approaches differ in that Fisher attaches great importance to technological factors, and representatives of the Cambridge School - to the choice of consumers. At the same time, Fisher, unlike Marshall and Pigou, excludes the possibility of the influence of the interest rate on the demand for money.

Despite its scientific acceptance, the quantity theory of money has not gone beyond academia. This was due to the fact that before Keynes, a full-fledged macroeconomic theory did not yet exist, and the theory of money could not receive practical application. And after its appearance, Keynesianism immediately took a dominant position in the macroeconomics of that time. During these years, only a small number of economists developed the quantity theory of money, but, despite this, interesting results were obtained. So, K. Warburton in 1945-53. found that an increase in the money supply leads to an increase in prices, and short-term fluctuations in GDP are associated with the money supply. His work anticipated the emergence of monetarism, however, the scientific community did not pay attention to them. special attention.

The formation of monetarism

In 1963, the famous work of Friedman was published, written by him in collaboration with D. Meiselman "Relative stability of speed monetary circulation and investment multiplier in the United States for 1897-1958", which caused a heated debate between monetarists and Keynesians. The authors of the article criticized the stability of the spending multiplier in Keynesian models. According to them, nominal cash income depended solely on fluctuations in the money supply. Immediately after the publication of the article, their point of view was subjected to harsh criticism from many economists. At the same time, the main complaint was the weakness of the mathematical apparatus used in this work. So, A. Blinder and R. Solow later admitted that such an approach is "too primitive for the presentation of any economic theory."

In 1968, Friedman published an article "The role monetary policy”, which had a significant impact on the subsequent development economics. In 1995, J. Tobin called this work "the most significant ever published in economic journal". This article started a new direction economic research- the theory of rational expectations. Under its influence, the Keynesians had to reconsider their views on the rationale for active politics.

Key provisions

Demand for money and supply of money

Assuming that the demand for money is similar to the demand for other assets, Friedman first applied the theory of demand for financial assets to money. Thus, he obtained the money demand function:

According to monetarism, the demand for money depends on the dynamics of GDP, and the money demand function is stable. At the same time, the money supply is unstable, as it depends on the unpredictable actions of the government. Monetarists argue that long term real GDP will stop growing, so a change in the money supply will not have any effect on it, affecting only the inflation rate. This principle became the basis for monetarist economic policy and was called money neutrality .

monetary rule

In connection with the operation of the principle of money neutrality, monetarists advocated legislative consolidation monetarist rule that the money supply should expand at the same rate as the growth rate of real GDP. Compliance with this rule will eliminate the unpredictable impact of the countercyclical credit monetary policy. According to monetarists, an ever-increasing money supply will support expanding demand without causing an increase in inflation.

Despite the logic of this statement, it immediately became the object of sharp criticism from the Keynesians. They argued that it was foolish to abandon an active monetary policy, since the velocity of money is not stable, and constant growth money supply can cause serious fluctuations in total spending, acting destabilizingly on the entire economy.

The monetarist concept of inflation

Natural rate of unemployment

An important place in the argumentation of monetarists is occupied by the concept of " natural rate of unemployment". Natural unemployment refers to voluntary unemployment, in which the labor market is in equilibrium. Level natural unemployment depends both on institutional factors (for example, on the activity of trade unions) and on legislative ones (for example, on the minimum wage). The natural rate of unemployment is the rate of unemployment that keeps the real wages and the price level (in the absence of labor productivity growth).

According to monetarists, deviations of unemployment from its equilibrium level can occur only in the short term. If the employment rate is above the natural level, then inflation rises, if it is lower, then inflation decreases. Thus, in medium term the market comes to equilibrium. Based on these prerequisites, conclusions are drawn that employment policy should be aimed at smoothing fluctuations in the unemployment rate from its natural rate. At the same time, it is proposed to use monetary policy instruments to balance the labor market.

Permanent income hypothesis

In his 1957 work The Theory of the Consumption Function, Friedman explained the behavior of consumers in permanent income hypothesis. In this hypothesis, Friedman argues that people experience random changes in their income. He considered current income as the sum of permanent and temporary income:

Permanent income in this case is similar to the average income, and temporary income is equivalent to a random deviation from the average income. According to Friedman, consumption depends on permanent income, as consumers smooth out fluctuations in temporary income by saving and borrowed funds. The permanent income hypothesis states that consumption is proportional to permanent income and mathematically looks like this:

where is a constant value.

Monetary theory of the business cycle

The main provisions of Friedman's concept

1. The regulatory role of the state in the economy should be limited to control over money circulation;
2. The market economy is a self-regulating system. Disproportions and other negative manifestations are associated with the excessive presence of the state in the economy;
3. The money supply affects the amount of expenses of consumers, firms. An increase in the mass of money leads to an increase in production, and after full capacity utilization - to an increase in prices and inflation;
4. Inflation must be suppressed by any means, including by reducing social programs;
5. When choosing the rate of growth of money, it is necessary to be guided by the rules of "mechanical" growth in the money supply, which would reflect two factors: the level of expected inflation; growth rate of the social product.
6. Self-regulation of the market economy. Monetarists believe that the market economy, due to internal tendencies, strives for stability and self-adjustment. If there are disproportions, violations, then this occurs primarily as a result of external interference. This provision is directed against the ideas of Keynes, whose call for government intervention leads, according to monetarists, to disruption of the normal course of economic development.
7. The number of state regulators is reduced to a minimum. The role of tax and budgetary regulation is excluded or reduced.
8. As the main regulator influencing economic life, serve as "money impulses" - regular money emission. Monetarists point to the relationship between the change in the amount of money and the cyclical development of the economy. This idea was substantiated in a book published in 1963 American economists Milton Friedman and Anna Schwartz "A Monetary History of the United States, 1867-1960". Based on the analysis of actual data, it was concluded here that the subsequent onset of one or another phase of the business cycle depends on the growth rate of the money supply. In particular, the lack of money is main reason occurrence of depression. Based on this, monetarists believe that the state should ensure a constant money issue, the value of which will correspond to the growth rate of the social product.
9. Rejection of short-term monetary policy. Since the change in the money supply does not affect the economy immediately, but with some delay (lag), short-term methods follow. economic regulation, proposed by Keynes, to be replaced by a long-term policy, designed for a long-term, permanent impact on the economy.

So, according to the views of monetarists, money is the main sphere that determines the movement and development of production. The demand for money has a constant tendency to increase (which is determined, in particular, by the propensity to save), and in order to ensure the correspondence between the demand for money and its supply, it is necessary to pursue a course towards a gradual increase (at a certain pace) of money in circulation. State regulation should be limited to the control of money circulation.

Monetarism in practice

Money targeting

The first step in the implementation of the policy of monetarism by the Central Banks was the inclusion of monetary aggregates in their econometric models. Already in 1966, the US Federal Reserve began to study the dynamics monetary aggregates. The collapse of the Bretton Woods system contributed to the spread of the monetarist concept in the monetary sphere. Central Banks the largest countries have ceased to target the exchange rate in favor of monetary aggregates. In the 1970s, the US Federal Reserve chose the M1 aggregate as an intermediate target, and the federal funds rate as a tactical target. Following the US, Germany, France, Italy, Spain and the United Kingdom announced money growth targets. In 1979, European countries came to an agreement on the creation of the European Monetary System, within which they pledged to maintain the courses of their national currencies within certain limits. This led to major countries Europe conducted targeting, and the exchange rate and the money supply. small countries with open economy, such as Belgium, Luxembourg, Ireland and Denmark continued to target only the exchange rate. Yet in 1975, most developing countries continued to maintain some form of fixed exchange rate. However, beginning in the late 1980s, monetary targeting began to give way to inflation targeting. And by the mid-2000s, most developed countries moved to a policy of targeting inflation rather than monetary aggregates.

Notes

1. Moiseev S. R. The rise and fall of monetarism (Russian) // Economic questions. - 2002. - No. 9. - S. 92-104.
2. M. Blaug. Economic thought in retrospect. - M .: Delo, 1996. - S. 181. - 687 p. - ISBN 5-86461-151-4
3. Sazhina M. A., Chibrikov Economic theory. - 2nd edition, revised and enlarged. - M .: Norma, 2007. - S. 516. - 672 p. - ISBN 978-5-468-00026-7
4. Mishkin F. Economic theory of money, banking and financial markets. - M .: Aspect Press, 1999. - S. 548-549. - 820 p. - ISBN 5-7567-0235-0
5. Sazhina M. A., Chibrikov Economic theory. - 2nd edition, revised and enlarged. - M .: Norma, 2007. - S. 517. - 672 p. - ISBN 978-5-468-00026-7
6. Mishkin F. Economic theory of money, banking and financial markets. - M .: Aspect Press, 1999. - S. 551. - 820 p. - ISBN 5-7567-0235-0
7. B. Snowdon, H. Vane. Modern macroeconomics and its evolution from a monetarist point of view: an interview with Professor Milton Friedman. Translation from the Journal of Economic Studies (Russian) // Ecowest. - 2002. - No. 4. - S. 520-557.
8. Mishkin F. Economic theory of money, banking and financial markets. - M .: Aspect Press, 1999. - S. 563. - 820 p. - ISBN 5-7567-0235-0
9. S. N. Ivashkovsky. Macroeconomics: Textbook. - 2nd edition, corrected, supplemented. - M .: Delo, 2002. - S. 158-159. - 472 p. - ISBN 5-7749-0178-5
10. C. R. McConnell, S. L. Brew. Economics: principles, problems and politics. - translation from the 13th English edition. - M .: INFRA-M, 1999. - S. 353. - 974 p. - ISBN 5-16-000001-1
11. Course of economic theory / Ed. Chepurina M. N., Kiseleva E. A. - Kirov: ASA, 1995. - S. 428-431. - 622 p.
12. M. Blaug. Economic thought in retrospect. - M .: Delo, 1996. - S. 631-634. - 687 p. - ISBN 5-86461-151-4
13. Sazhina M. A., Chibrikov Economic theory. - 2nd edition, revised and enlarged. - M .: Norma, 2007. - S. 483. - 672 p. -

Monetarism is a school of economic thought that assigns a decisive role to money in the oscillatory movement of the economy. Monetary - means monetary (money - money, monetary - monetary). Representatives of this school see the main reason for the instability of the economy in the instability of monetary parameters.

The focus of monetarists is on monetary categories, monetary instruments, banking system, money-credit policy. They look at these processes and categories to identify the relationship between the money supply and the level of aggregate income. In their opinion, banks are the leading instrument of regulation, with the direct participation of which changes in money market are transformed into changes in the market of goods and services.

We can say that monetarism is the science of money and its role in the process of reproduction. This is the theory behind specific methods regulation of the economy with the help of monetary instruments.

Monetarism is one of the most influential currents in modern economics, belonging to the neoclassical direction. He considers the phenomena of economic life mainly from the point of view of the processes taking place in the sphere of money circulation.

The term "monetarism" was introduced into modern literature by Karl Brunner in 1968. It is usually used to characterize the school of economics (mainly the Chicago school), which claims that total money income has a primary influence on the change in the money supply.

The monetarists put forward the slogan "Money matters", which has become a kind of symbol of their teaching. At first glance, a sound and reasonable idea is expressed here about the important role of money circulation in the processes of economic development. In fact, the supporters of the new version of the quantitative theory put a special, hidden meaning into this phrase. They, as a rule, interpret money not just as a significant economic factor, but as the main, central element of the economic system, which essentially determines the state of the economic situation and the entire course of the reproduction process. The monetarists actively promoted the theory of "sustainable money", which has a long tradition in the history of non-Marxist economic thought. Monetarists proceed from a close causal relationship between "monetary stability" and the general economic situation, seeing monetary violations as the main cause of economic crises.

Some tend to regard Friedman's extreme position on the role of money as a kind of polemical device used in the fight against Keynesianism. The nomination of money to the role of the main causal factor in the system of economic relations of capitalism is not a polemical overshoot, not a temporary, transient phenomenon. This is the essence of monetarism as a theoretical doctrine, one of its main features. The choice of the quantitative theory as the central core of the new doctrine allowed its supporters to solve a number of strategically important tasks. First of all, a theoretical springboard was created for attacking the positions of the Keynesians, who, according to the monetarists, ignored important role money in the business process.

The monetarist school put forward its leader and permanent leader - M. Friedman. His influence on modern economic thought is so great that many authors call the new doctrine "Friedman's counter-revolution."

The monetarist doctrine went through a number of stages, at each of which the main attention was paid to the development of a certain range of problems. So, at the initial stage, which occupied the second half of the 50s and the beginning of the 60s, the main efforts were focused on the development of a new version of the quantity theory of money, expressed in the form of a stable money demand function. This function was in the constructions of the monetarists analogous to a stable and reliably predictable velocity of money, serving as a link between the money supply and nominal (monetary) income. In subsequent years, many econometric calculations of the money demand function were carried out. Most researchers sought to identify the validity of the monetarist thesis that this function reflects the stable laws of behavior of economic entities, clearly traceable in various historical situations.

The parallel line of development of the monetarist doctrine in these years is associated with a comparison of the monetarist and Keynesian models of the economic mechanism, the assessment of their "predictive" properties. The monetarists argued that their model of the capitalist economy was more reliable and provided a better basis for forecasting the situation. The work of M. Friedman and D. Meiselman, published in 1963, caused a great resonance, where the investment multiplier, which is a key element of Keynesian models, was chosen as the main object of criticism. The authors associated the investment multiplier theory with the view that "money doesn't matter". This conclusion, they emphasized, did not necessarily follow from Keynes's teachings, but "in practice, many Keynesians were inclined to believe that investments do not respond to changes in interest rates, and focused on the simplest version of the theory, where the stock of money was ignored and regarded as a fragment of past delusions."

Friedman and Meiselman conducted a kind of test to determine which of the two indicators is more reliable for predicting the dynamics of national income - the investment multiplier (in their formulation - "the ratio of the flow of income or consumer spending to the flow of investment") or the velocity of money ("the ratio of income flow or consumer spending to money supply"). For this purpose, two types of regression equations were used: one looked at consumer spending as a function of "autonomous spending" (investment in fixed capital plus government budget deficit in the system of national accounts plus balance of settlements with foreigners); in another, as a function of the money supply (cash in circulation plus demand deposits plus term deposits in commercial banks). The first group of equations, according to the authors, represents the Keynesian approach, the second - the monetarist one.

Calculations based on American statistics for the period from 1898 to 1957 revealed a higher degree of correlation between consumer spending and "explanatory" variables in the equations containing the money supply. From this it was concluded that "in explaining changes in national income, the stock of money is undoubtedly much more important than autonomous spending" (i.e. investment.), That "a simple version of income-expenditure (Keynesian.) theory is almost completely inapplicable to describe stable empirical relationships" and that "the quantity theory approach to the study of changes in income seems to be more fruitful than the income-expenditure theory approach." As for economic policy.

In accordance with Friedman's positivist method, it is the predictive properties that serve as the main criterion for the correctness of the doctrine.

And here, according to the authors, "control over the stock of money is a much more useful tool for influencing the level of aggregate money demand than control over autonomous spending." Another phase of the confrontation between the monetarist and Keynesian doctrines concerned the question of the nature and causes of industrial cycles. In 1963, M. Friedman and A. Schwartz published under the auspices of the US National Bureau of Economic Research a voluminous book "The Monetary History of the United States, 1867-1960", where they tried to prove, using a huge statistical material, that all major cyclical fluctuations in economic activity in recent history The United States was determined by the chaotic fluctuations of the money supply. This step in the development of monetarism is closely connected with the previous phase - the transformation of the traditional quantity theory from the theory - the general price level into the theory of nominal income. It is precisely at the center of the monetarist study of the cycle that the alleged causal relationship between changes in the money supply and fluctuations in the gross national product(income) in monetary terms.

Friedman and other monetarists interpret inflation as a "purely monetary" phenomenon generated by the accelerated emission of means of payment. Here, the neoclassical roots of the doctrine of its connection with quantity theory, proclaiming the existence of a direct and immediate connection between the amount of money and the general price level, clearly stand out. And although the monetarist model of nominal income allows for changes in its physical component under the influence of monetary shifts, the main effect always manifests itself in the area of ​​prices. Money in this scheme is neutral, its effect is expressed in changes in the "price shell".

The Keynesian position on these issues differed significantly from the monetarist one. According to the views of the author of the "General Theory", "genuine" inflation occurs only when the country's economy reaches the level full time; up to this point, in the presence of unloaded capacities in the economy and a large army of unemployed, the growth of the money supply in circulation will have a predominant effect not on the price level, but on the physical volume of production through changes in the rate of interest. A small ("creeping") inflation has, from the point of view of the Keynesians, a useful, "invigorating" effect, it accompanies the process economic development, growth in production and income. But in general, the theory of price was the Achilles' heel of the Keynesian doctrine. The assumption of inelasticity was usually taken price level in the short term, which eliminated from view the analysis of inflation and its negative consequences for the economy. In the 1960s, the Keynesian approach made an attempt to fill this gap using the Phillips curve apparatus. The English economist A. Phillips revealed a statistical correlation between the rate of change in wages and the level (rate of change) of unemployment in England over the period 1861-1957. Later, P. Samuelson and R. Solow replaced the rate of change in wages in the Phillips diagram with the rate of change in the price level and obtained a "modified" Phillips curve, where the price dynamics is inversely related to the unemployment rate. From this, important policy implications have been drawn.

The thesis that the higher the inflation rate, the lower the unemployment rate and, conversely, the slower prices rise, the more people loses his job, was consistent with the Keynesian recipes for managing the conjuncture. Practitioners of economic regulation were encouraged to "slide" along the curve and choose such a combination of inflation and unemployment rates that is consistent with current policy goals and priorities. If, for example, it is desired to substantially increase the level of production through expansionary measures, then price stability must be sacrificed while allowing inflation to accelerate. If there is a need to "cool" the economy and slow down the rise in prices, then this can be achieved by reducing production and employment. Calculations based on the Phillips curve seemed to promise a simple and accessible solution to the problem of the "conflict of objectives" of economic policy. Phillips, for example, believed in the early 1960s that price stability in England could be ensured with an unemployment rate of 2.5%, and in the USA 7-8%. In turn, based on calculations of the parameters of the Phillips curve, the Council of Economic Advisers under the President of the United States decided in 1962 to focus on a 4% unemployment rate, which, in its opinion, corresponded to "an acceptable inflation rate of 4% per year."

The monetarists opposed the Keynesian interpretation of the Phillips curve and the depiction of inflation as the "inevitable price" for achieving a high level of production and employment. They rejected the idea of ​​"constant compromise" of goals, as well as the possibility of endless balancing between moderate inflation and full employment.

This controversy marked a new, perhaps the most important stage of the monetarist offensive. At a meeting of the American Economic Association in December 1967, Friedman suggested the existence of a "natural rate of unemployment", which is strictly determined by the conditions of the labor market and cannot be changed by government policies. If the government makes efforts to maintain employment above its "natural" level through traditional budgetary and credit methods pumping up demand, these measures will have a purely short-term effect and ultimately lead only to higher prices.

An important place in Friedman's reasoning was given to inflationary expectations - assumptions about the future rise in prices, which are formed in the minds of participants in the economic turnover. Keynesians in their constructions did not attach importance to the reaction of economic agents to the depreciation of money. For monetarists, these processes took center stage. They put forward the idea of ​​the adaptive nature of expectations, which, in their opinion, are based on past experience and depend entirely on the rate of price change in the previous period. According to this version, the higher the inflation rate, the more the participants in the reproduction process take into account the upcoming price increase in their forecasts and actions and try to neutralize its consequences with the help of special clauses in labor agreements, business contracts, etc. Therefore, over time, the redistributive and stimulating effects of inflation, which the government is counting on, weaken. In order to activate them, government agencies are forced to resort to new, "sudden" inflationary "shocks" not taken into account in economic contracts and contracts for hiring labor. This leads to larger doses of deficit financing from the budget, causing an unending inflationary spiral. In this regard, Friedman's theory received the name "acceleration doctrine", i.e. doctrine of ever-accelerating rates of inflation. To break the vicious circle, Friedman recommended an end to "meaningless" demand stimulus policies and the removal of high employment from the agenda.

The controversy over the Phillips Curve is closely related to monetary policy advice. Friedman made the first statements on these issues in the article "The Monetary and Fiscal Foundations of Economic Stability" (1948), and then in a series of lectures delivered at Fordham University in 1959. As a fundamental policy principle in money sphere there the idea of ​​the so-called monetary rule was formulated, i.e., the increase in the money supply at a constant rate, regardless of the state of the market and the phase of the cycle.

The war waged by the monetarists for many years against "fiscalism," as they called Keynesian policies emphasizing budgetary methods, also had its phases. At first, among the arguments of the monetarists about the failure of this policy, emphasis was placed on the unpredictability of the results of government measures due to the presence of delays (lags) in the manifestation of the effect of these measures, as well as a reference to the inefficiency of tax and other budgetary methods of regulation. Later, the effect of crowding out private (non-state) investments due to the diversion of large material and monetary resources into the sphere of government operations came to the fore in the system of evidence. The essence of this argument was as follows: what the economy gains from an increase in public investment, it loses due to the simultaneous reduction in the costs of the private capitalist sector.

In the mid-1970s, the confrontation between the Keynesian and monetarist schools was already directly manifested in the field of practical measures of economic policy.

In the late 1970s and early 1980s, the use of monetarism's prescriptions in the formulation of economic policy was an indicator of the sharply increased popularity of monetarism. Widespread in the practice of central banks received various options money rule. This led to significant changes in the strategy of economic regulation in the capitalist countries. The tactic of activism and energetic demand management to correct market "distortions" and accelerate economic growth has lost its appeal. There has been a turn towards "graduality" and "restraint" in the conduct of policy, accompanied by a "clamping" of the money supply and credit restrictions.

The accelerated rise in prices undoubtedly contributed to a change in the moods and preferences of various sections of capitalist society, favored the spread monetarist ideas while the Keynesians' stubborn ignorance of the negative effects of inflation undermined their position in the eyes of public opinion. But the reasons for the rapid growth in the popularity of monetarism are much deeper. Their roots are to be found in the deterioration general conditions capitalist reproduction, which led to a change in the strategic line of the ruling circles of the capitalist countries, their sharp shift to the right.

pace economic growth dropped significantly in the 1970s. A number of unfavorable factors were identified - lack of important species raw materials, shortage of energy resources, some food products. Competition has intensified, and the difficulties of marketing in domestic and world markets have increased. The intensity of the class struggle increased significantly, and the number of bankruptcies increased. At the same time, production efficiency and labor productivity decreased. Under threat was the holy of holies of capitalist entrepreneurship - the rate of profit.

Under these conditions, the Keynesian slogan of full employment was replaced by the goal of ensuring the stability of the purchasing power monetary unit. The leaders of the monopolies took a course of unleashing the elements of the market, curtailing government social programs, and ending the policy of stimulating economic growth. Theoretical schemes have gained popularity calling for the revival of neoclassical principles that sharply limit government intervention in economic process. Monetarism has become an important part of the "new conservatism".

We find a detailed list of properties in Friedman's lecture "Counterrevolution in monetary theory":

• 1) There is a "consistent, though not absolutely exact relationship" between the rate of growth in the quantity of money and the rate of growth in nominal income;
• 2) Changes in nominal income follow changes in the money supply with a delay of 6 to 9 months. In the short run, shifts affect mainly production, and in the long run, prices;
• 3) Inflation "always and everywhere is a monetary phenomenon", being associated with the outstripping growth of money in comparison with production. At the same time, growth public spending may or may not have inflationary effects depending on whether they are covered by additional issue of money;
• 4) The "transmission mechanism" of the effect of money shifts on the amount of nominal income is associated with changes in the relative prices of a wide range of assets, and not only with changes in the rate of interest; these changes (on which, as we remember, the Keynesians emphasized) serve as a "deceptive and unreliable" benchmark for monetary policy.

Friedman stated that, as a first approximation, the quantity theory is "not a theory of production, money income, or prices," but a theory of the demand for money. The search for a stable demand function for money marked the beginning of an open confrontation with Keynes, whose demand for liquid assets (due to the presence of a speculative motive) depends on the rapidly changing and unpredictable moods of economic agents. The monetarists, on the other hand, put forward the assertion that "the demand for money is extremely stable even under very unfavorable conditions," considering this as a guarantee of the stability of the economic mechanism.

It is important to emphasize that a stable money demand function is just another way of expressing the idea of ​​the constancy of the velocity of money, which has always been a key premise of quantity theory. However, in the monetarist version, rigidly determined velocity formulas are replaced by a probabilistic relationship that allows significant fluctuations in the numerical values ​​of this indicator. Referring to the results obtained by F. Kagen, Friedman argued, for example, that the repeatedly observed jumps in the velocity of money during periods of hyperinflation do not contradict the understanding of stability as a stable functional relationship between the demand for money and a number of independent variables.

In constructing a model for the demand for money, Friedman analyzes the behavior of two types of economic agents - households (or "final wealth-owning units") and capitalist firms. In his interpretation, for the former, money is one of the forms of wealth storage, for the latter, it is a capital asset, "a source of production services." In both cases, money, in the spirit of the Cambridge tradition, is analyzed not in motion (not as a "flow"), but as a momentary indicator ("stock"), being a component of a portfolio of accumulated and fungible assets.

With Keynes, the selection procedure is extremely simplified - money or "bonds" (i.e. debentures that earn interest). In Friedman, the economic individual has a wider range of alternatives. In his portfolio, along with money, there are bonds, stocks, commodity stocks, "human capital". Each individual distributes income in accordance with his system of priorities, his tastes and preferences. At the same time, he is also guided by considerations of the prospective profitability of each type of asset, an assessment of the "flow of services" that he hopes to receive from them.

The main element of the portfolio in the monetarist model is money. They provide the owner with a guarantee of making payments, create a liquidity reserve in case of unforeseen circumstances, etc. The expected income from this form of wealth is indicated in the demand equation rm. The value of money, its purchasing power, is inversely related to the price level (P). Monetarists usually take into account the influence of this factor, operating on the "real" values ​​of cash balances. The concept of "human capital" is associated with "investment in people" spending on the acquisition of knowledge, health promotion, etc.

Income from bonds and stocks takes the form of interest payments and dividends (rb and re). Goods bring a "stream of services" in kind. In addition, they are subject to depreciation or appreciation when commodity prices change. Therefore, the rate of change of the general price level (1/P * dP/dt) is introduced into the equation. Concerning " human capital", then Friedman operates with a variable w, designed to reflect the ratio between the "human" and "physical" elements of capital. subjects, - through and.

As a result, the equation for the demand for money for "individual owners of wealth" takes the following form:

M/P = f(y,w;rm,rb,re;1/P*dP/dt;u)

where M/R - real cash balances; y- national income at constant prices; w is the share of the "physical" component of the national wealth; rm - expected nominal rate of return cash balances; rb - expected nominal rate of return valuable papers with fixed income("bonds"); re is the expected nominal rate of return on shares; 1/P * dP/dt is the expected rate of change in the level of commodity prices; and - other factors affecting the demand for money. The equation can be easily converted into an equation for the velocity of money (V), calculated as the velocity in the circulation of income (Y/M). The factors influencing the demand for cash balances also remain valid for the velocity of circulation of money, which, as we have already said, serves in the monetarists' model only as another way of expressing the need for cash balances.

The second category of agents that accumulate money are capitalist firms. Friedman admits that money plays a qualitatively different role in the circulation of funds of a capitalist enterprise than that of consumers. However, with the help of a number of simplifications, the demand of the business sector is reduced to an equation. At the same time, only the coverage of unaccounted factors (i) is expanded.

Combining the demand for cash balances of various categories of economic agents corresponds to the principles of the monetarist approach, where preference is given to aggregated indicators. However, even at a high level of abstraction, such aggregation requires significant reservations.

In the enlarged models of demand for money used by monetarists, social structure capitalist society is not taken into account. Meanwhile, the dynamics of various economic factors may have a very different effect on the demand for cash balances on the part of a financier playing the stock market, or a low-paid employee or farmer. The reaction to changes in individual factors and representatives of various social strata within each class is not the same. These moments of the Friedman equation are not taken into account.

Friedman also ignores the difficulties associated with extending the individual demand function derived for one "typical" agent to the entire economy. He acknowledges, however, that the final result of aggregation "depends on the distribution of units over a number of variables." For example, the expectation of inflation is different for different participants in the turnover: "w and y are clearly and significantly different for individual units." But even in this case, Friedman refers to high level abstraction of his analysis, which, it seems to him, frees him from the need to take into account these differences.

One of the virtues of his approach Friedman considers the consideration of the theory of money as "a special topic in the theory of capital." In Marxist political economy, where a profound scientific analysis system of concepts of the capitalist mode of production, it is shown that capital is a socio-economic category inherent in a certain type of production relations and fully developed under capitalism. Capital is understood as a self-increasing value, i.e. value that brings surplus value on the basis of the exploitation of wage labor. Friedman, on the other hand, uses a non-historical and naturalistic interpretation of capital, coming from the works of Böhm-Bawerk and Fischer, where capital is understood to be any thing that brings a "stream of income" in the form of money, goods or specific services. Accordingly, he has money - " capital asset", part of the accumulated capital fund, along with bonds, stocks, real estate, consumer goods durable, etc. Meanwhile, money, not being capital, can serve as a purchasing means of payment, mediating the exchange of substances in the economic system.

In a 1956 paper, Friedman outlines a way to transform the stable money demand function into a theory of "determining money income", where changes in the money supply in circulation are the main cause of cyclical fluctuations in GNP in current prices. Justifying this transition important place occupies the traditional quantification assertion that the supply of money (money emission) is exogenous in nature, in other words, it is determined autonomously, outside economic system. This is an important condition in the system of proofs of one-way causality: from money to prices and income. In addition, Friedman hypothesizes that the demand for money is inelastic with respect to some arguments of the derived function, which allows him to nullify the effect of the rate of interest.

In constructions of this type, the contours of the old dogmas of quantitative theory clearly appear, although they are expressed in a more complex and veiled form. The former formulas are replaced by a "more modern" functional connection of the type M = f (Y, x)*, but the essence of this does not change. The most complex mechanism social production monetarists reduce to a simplified scheme "money - money income", which includes the old causality formula "money-prices".

Raising the question of dividing the effect of changes in the money supply between the physical and price components of income, Friedman seeks to show that he is not alien to the spirit of the times and is ready to make some adjustments to the quantitative theory. This is a kind of concession to Keynesianism, but a concession more formal than real. Keynes argued that as long as there is unemployment in the economy, a change in the amount of money will not affect the level, but the volume of production and employment. Unlike the old quantists, Friedman recognizes the legitimacy of posing this problem, but believes that the modern analytical apparatus does not allow solving it. Hence the general formulation that "monetary income is a mirror image of changes in the nominal amount of money."

With the advent of monetarism, the search for a stable demand function for money has become one of the most popular areas. economic analysis in the capitalist world. “The presence of a stable demand function,” write J. Judd and J. Scadding, “means that the amount of money is associated with a small group of key variables, which in turn associate money with real sector The discovery of such a connection strengthens the position of those who believe that money will be an important and effective means of influencing the state of the economic situation.

The authors of empirical works on the demand for money usually seek to answer a number of questions that are of particular interest for a meaningful interpretation of the results. This, in particular, includes such issues as the choice of the "best" indicator of the money supply, which provides a reliable connection between the parameters of the demand equation; understanding the role of interest rates in shaping the demand for cash balances and assessing the interest elasticity of demand; determination of an adequate indicator of economic turnover or stock of assets, etc.

The results of empirical calculations are important for evaluating theoretical hypotheses. Thus, the derivation of "statistically reliable" money demand equations using a narrow measure of the money supply is usually interpreted as evidence of the preference for transactional demand models. If, on the other hand, equations with a broad measure of money (including urgent and savings deposits), they are more favorable for supporters of the portfolio approach. On the other hand, the discovery of a high elasticity of demand for money with respect to interest reinforces the Keynesian position.

An example of a monetarist interpretation of the money demand function is the work of M. Friedman in 1958. It indicates the presence of a strange and difficult to explain phenomenon - a discrepancy in the long-term and cyclical dynamics of the velocity of money in the United States during the period 1870-1954. The author points out that changes in the velocity of money and real (at constant prices) GNP coincided within the market cycle, but went in opposite directions if we take the entire period as a whole. In attempting to explain this contradiction, Friedman first turns to looking for factors that, in addition to real income, could influence changes in speed within a business cycle. He dismisses the importance of interest rates, arguing that "their cyclical nature makes them unlikely to be responsible for large, often repetitive and synchronous changes in the velocity of money over the course of the cycle."

Money in Friedman's image is the most inertial element of a portfolio of assets. In his model, cash balances are not a "shock absorber" or "shock absorber" for temporary fluctuations in income. He proposes the hypothesis that the demand for money is determined not by ordinary ("measured") income, but by its stable part - the so-called permanent income. The latter is calculated as a weighted average of a series of income levels for the current and previous years, with weights decreasing exponentially as they move away from the present period. In other words, when presenting a demand for money, economic entities are guided not by the momentary, but by past income, which corresponds to the adaptive model of the formation of expectations. Such a hypothesis, in the author's opinion, contains a clue to the observed discrepancies in the velocity dynamics in the long-term and cyclical aspects.

The constant income hypothesis underlies Friedman's money demand equation, where real per capita income "explains" most of the fluctuations in the demand for money.

Friedman's methodology has been repeatedly criticized. A number of authors have regarded the high income elasticity of demand and its complete "insensitivity" to the rate of interest as the result of the use of smoothed series of constant income, "constant" prices, and a broad money indicator. It was pointed out that in the course of econometric calculations, the effect of the influence of interest rates to a large extent disappears due to the inclusion of fixed-term deposits on which interest is paid in the money supply indicator. At the same time, despite Friedman's findings, many researchers have found a statistically significant relationship between the demand for money and changes in interest rates. So, A. Meltzer, using the functions of demand for money in the USA for 1900 - 1958 in the calculations. Friedman's estimates of permanent income and long-term rates, concluded that interest played an important role. This conclusion is confirmed by other researchers. Summarizing the results of many empirical works on the demand for money, D. Leidler writes: "Regardless of whether income, wealth or permanent income is used as a limitation in calculating the function of demand for money, whether the money supply is defined broadly or narrowly, whether short-term or long-term interest rates, indicators of expected price growth rates, financial intermediary yields, interest rates in foreign markets, stock returns, or even an index of the level and composition of interest in general, there is overwhelming evidence that the demand for money is consistently inversely related to the opportunity cost of holding money ... Of all the problems in calculating the demand for money, this seems to be the most thoroughly solved." Thus, Friedman's "anti-Keynesian" conclusion about the insignificant effect of interest rates on money demand not confirmed in subsequent studies.

By the beginning of the 1970s, the question of the existence of a stable money demand function seemed to have been finally resolved. Princeton University professor S. Goldfeld conducted in 1973 a thorough study of the demand for money in the United States using quarterly data for the period 1952-1972. and got good statistical results for the equations.

In the early 1980s, new evidence of the instability of the demand function for cash balances emerged. In 1982, the velocity of money indicator, calculated as the ratio of GNP to the narrow monetary aggregate M1, fell by 4.7% for the first time in the last 35 years. This was seen as another blow to the monetarist concept. The new "shift" of the demand function coincided with the publication of the book by M. Friedman and A. Schwartz, devoted to the trends in the development of the monetary sphere in the US and England over a period of more than 100 years. The main ideas of this book are based on the position on the stability of the speed indicator. As D. Batten and K. Stone wrote, "it would be ironic and a mystery" if, at the time of the publication of this book, it was discovered that "fundamental ties suddenly fell apart." The authors point to the prevailing view that "recent financial innovations and the increased use of former innovations of this kind have led to such a distortion of the very concept of money and its indicators that the assertions of monetarism are no longer valid." In the popular press, the opinion about "undermining the positions of monetarism" began to spread.

When assessing the situation in the monetary sphere, the demand for money is only one blade of the scissors, the other is the supply of money. In the monetarist doctrine, along with the thesis of a stable demand function for cash balances, an extremely important and necessary component is the provision on the exogenous (i.e., autonomous, not related to the functioning of the economy) nature of the formation of the money supply. As N. Kaldor noted, "Friedman's persistent attempts to substantiate the quantity theory with the help of a stable demand function for money or a stable velocity ... are critically dependent on whether the amount of money is an exogenous quantity, set at the discretion of the authorities monetary control regardless of the demand for money". Monetarists emphasize the independent nature of changes in the money supply, using conditional analytical techniques for introducing money into circulation channels. In "The Optimal Amount of Money", Friedman demonstrates the idea of ​​"imposing" money from the outside using the example when they are dropped from a helicopter and are evenly distributed among the population.Such a method of emission is intended to emphasize the primacy of changes in the money supply in relation to subsequent shifts in the production or circulation of the social product.It is interesting to note that similar methods of demonstrating the independent nature of money emission were characteristic of many supporters of the traditional quantitative theory (from D. Hume to I. Fischer.) A favorite example that can be found in their works is the doubling of the amount of money held by the population "in one night" with subsequent consideration of the reaction of economic agents to this event.

The popularity of "helicopter money" falling to the ground like manna from heaven is easy to explain. The imposition of money on the economy by force makes it the main causal factor in economic shifts. Conversely, if money passively follows changes in economic activity, the automatism of the scheme of quantities is broken. Therefore, the idea of ​​"money shocks" with subsequent adjustment of the price structure to them is invariably present in all variants and modifications of the neoclassical theory of money.

Friedman has repeatedly emphasized the fact that the money supply is "independent" of the demand factors for cash balances. In a 1956 article, he refers to various specifications issuance of money, on the "political and psychological moments" that determine the actions of the central bank. Another paper criticizes the Keynesian approach, where the amount of money passively "adapts to the needs of trade."

The idea of ​​the autonomy of money is consistently carried out within the framework of a more general theme of the monetarist paradigm, namely, the interpretation of money as a causal factor in cyclical fluctuations in the market. Referring to the position of I. Fischer, who in the 1930s called the economic cycle "dance of the dollar", in other words, a reflection of changes in the purchasing power of money, Friedman asks the question: "Is the cycle primarily a reflection of the "dance of the dollar"? dollar", or, on the contrary, the dollar repeats the dance of the cycle in its main features?" If verbal camouflage and protective clauses are omitted, then the conclusion of the monetarists boils down to the assertion that it is shifts in the money supply that determine all major changes in the economic situation, or, following Fisher's terminology, the economy "dances" to the tune of money! This scheme is based on the principle of complete autonomy of the money supply.

It is not surprising that monetarists are met with hostility by any mention of the credit nature. modern money, because it is with such money that the idea of ​​a passive reaction of the money supply to changes in trade is connected. And this contradicts the exogenous principle of issuing means of payment in monetarist schemes. Failure to understand the closest relationship and mutual conditionality of money and credit circulation leads to theoretical confusion in such an important issue for monetarists as the concept of money supply. The Monetary History of the United States gives a broad and essentially meaningless definition of money as "temporary abode of purchasing power, which makes it possible to separate the act of buying from the act of selling." The emphasis of the authors of the book on the "reserve" function of money leads to the loss of clear criteria for separating money from non-money, which gives them complete freedom in choosing the "necessary" aggregate. “The definition of money,” write Friedman and Schwartz in another paper, “should be chosen not on the basis of any principle, but on the basis of considerations of usefulness in organizing our knowledge about economic ties. "Money" is that to which we give a numerical value by means of a conditional procedure."

What should be guided by the construction of the appropriate statistical aggregate? Monetarists answer this question in a utilitarian way, using the principle of "best statistical fit". "The simplest method is to choose the value that gives the highest correlation value ..." Analyzing the problem of including time deposits of commercial banks in the money supply, the authors propose to measure the correlation between the income indicator and two monetary aggregates: a) money supply without term deposits and b) the money supply with the inclusion of term deposits. "If it turns out that b) is more closely correlated with income, then, according to this criterion, it is necessary to apply a broader measure of the money supply ..."

In accordance with this principle, monetarists in most of their empirical work use a broad monetary aggregate, which includes cash and all types of commercial bank deposits. However, they cannot satisfactorily explain why the concept of "temporary store of purchasing power" should include time deposits of banks, but should not include similar obligations of other banks. financial institutions. As Tobin wittily remarked, one gets the impression that the monetarists are saying, "We don't know what money is, but whatever it is, the stock should grow steadily at 3-4% a year."

Among the most common arguments in defense of the exogenous nature of the money supply is the assertion that central bank can effectively control the amount of money and provide the "necessary" level of means of payment in circulation. D. Fand, for example, considers the thesis about the ability of the central bank to fairly strictly control the nominal money supply as one of the most important provisions of the monetarist doctrine. This is just another way of expressing the idea that the amount of money is determined exogenously, according to the principle of discretion.

To demonstrate the ability of a central bank to purposefully regulate money circulation, monetarist literature widely uses a money multiplier scheme based on the regulation of the "monetary base" or "high-powered money". They include the amount of cash issued into circulation, as well as the balances on the reserve accounts of commercial banks with the central bank. It is these components that are, by law, a means of securing bank deposits. Since the central bank can influence the size of the base, and deposits are treated as a derivative of the base, it is assumed that the monetary authorities are always able to adjust the money supply in the right direction. The relationship between the money supply and the reserve base is expressed by the formula

where M is the amount of money, B is the base, and m is the coefficient (multiplier), reflecting the quantitative proportions of the ratio of the base and the total amount of money in circulation.

The idea of ​​a multiplier effect when the amount changes bank reserves was expressed back in the 20s, during the formation of the US Federal Reserve System. However, unlike previous interpretations of the reserve multiplier, modern monetarists seek to strengthen the economic interpretation of this indicator by linking its value with a number of functional parameters that express the behavior various types economic agents - banks, non-financial companies, the state. These include, in particular, the cash ratio C/D (the ratio of the amount of cash C to bank demand deposits D) and the reserve ratio R/D (the ratio of the amount of bank reserves at the central bank R to the total amount of deposits D).

The base-multiplier model plays an important role in substantiating the monetarist thesis about the autonomous nature of the money supply. So, F. Kagen, analyzing changes in the base and two "behavioral" coefficients (cash and reserves) in the United States for the period 1875 - 1960, came to the conclusion that 9/10 of all changes in the money supply were due to base shifts and only 1/ 10 changes - other reasons. As for the reserve base itself, according to his estimates, its shifts before 1914 were determined mainly by fluctuations in the gold reserve, and since the creation of the Fed - by the portfolio of government securities held by the federal reserve banks. Other authors who used similar methods of analysis come to the same conclusions. The dominant influence of the base is interpreted as clear evidence of the ability of the central bank to control the process of money emission, to direct it at its own discretion.

The monetarist concept of the emission mechanism has been sharply criticized by the authors of the post-Keynesian school. Keynes himself did not pay much attention to the mechanism of issuing money. In his works, the money supply was considered as an exogenous quantity. Post-Keynesians have changed this approach. They focused their fire on the most vulnerable link in the concept - the assertion that there is no stable line of causality from the economy to the size of the money supply. In one of the works prepared by a group of scientists from Yale University headed by J. Tobin (G. Johnson called these works "a belated return salvo of the Yale school against the "Essays on the Quantitative Theory" of the Chicago School"), it says: "The amount of money, as usual determine whether it is not an autonomous quantity controlled by government authorities, but an endogenous or "internal" parameter reflecting the behavior of private economic institutions.

The idea of ​​the endogenous nature of money emission was developed in detail by N. Kaldor in his critical work on monetarism. The author draws a sharp line between the monetarist scheme and the Keynesian model representing "an economy based on credit money". “In an economy with credit money, the money supply is not exogenous, but endogenous; it varies in direct proportion to the “demand” of the public for cash and bank deposits, and not independently of this demand." Kaldor rejects the monetarists' assumption that the superstructure credit money changes in direct relation to base money, whether the latter is identified with gold in the vaults of the central bank or simply with the amount of banknotes put into circulation by discounting bills or by transactions on open market. He believes that the central bank itself is forced to passively adjust to demand, since, being a creditor, in the last resort, it cannot refuse to re-discount the amounts presented to it. commercial bills. Moreover, according to Kaldor, in a credit-money economy "unwanted or excess amounts of money could not remain in circulation at all; an increase in the money supply is determined by an increase in the cost of operations, regardless of whether it is associated with an increase in costs or output ..." . Kaldor does not allow the thought of the "monetary roots" of inflation. Like other Keynesians, he attributes rising prices solely to rising production costs.

The debate between monetarists and Keynesians on the issue of money emission is doctrinaire and superficial. Representatives of each faction, in the heat of the dispute, deliberately simplify the picture, snatching out and absolutizing certain features of the monetary mechanism. Modern Process the formation of the money supply is very complex and is influenced by diverse economic forces acting in different, sometimes opposite directions. Undoubtedly, the credit character of the modern emission mechanism determines the strong, in many cases decisive, influence on the part of the capitalist economy. The need for cash balances, ultimately, is decisive in the formation of a stock of means of payment. But only in the end! Credit channels for issuing money do not guarantee full compliance of this issue with the demand of the economy and do not eliminate the independence and autonomy of processes in the monetary sphere, their reverse influence on the market. Contrary to Kaldor's claims, the imbalance of money circulation is a real fact.

This modern economic concept is a kind of neoliberalism. It has money and monetary system considered as a decisive factor in the economic structure of society and the main cause of inflation, and monetary policy - as the most important tool for stabilizing the internal mechanism of reproduction, the implementation of the economic policy of the state. Monetarism arose in the mid-1950s. (this concept was interpreted in the collection "Studies in the Quantity Theory of Money" (1956) edited by Professor of Economics at the University of Chicago M. Friedman).

The theoretical origins of monetarism are the ideas of representatives of the early stage of mercantilism, who defended monetarism and proclaimed money (in the 15th-16th centuries - gold and silver) the only form of wealth, and state regulation was reduced to measures to bring them into the country and prevent their export from the country.

A prerequisite for the emergence of monetarism in the XX century. was a criticism of Keynes's theory in the late 30s by American economists L. Mises and F.-A. Hayek, representatives of the Austrian school of political economy of the so-called second generation, or modern neoliberalism. However, the monetary concept, one of the postulates of which is the quantitative theory of money (it arose in the XVI-XVIII centuries), in the 30-40s of the XX century. did not develop, which was explained by the effectiveness of the Keynesian methods of regulating the economy during this period and the inefficiency of the monetarist ones (demonstrated by the crisis of 1929-1933). Now it is one of the most important trends in the neoclassical direction of Western economic science, the neoclassical concept general equilibrium, which was formed in late XIX in. in the works of the Swiss economist and mathematician L. Walras and in the neoclassical doctrine of equalization of savings and investments developed by the Swedish economist K. Wicksell.

Keynes's theory argued the failure market mechanism to ensure the balance of the economic system of capitalism and the very existence of this system (which is reflected in the theses about the "chronic internal instability of capitalism", the "depression" of its economy) and proclaimed the need for large-scale regulation of macroeconomic processes, and representatives of the neoclassical direction defended the vitality of the principles of free enterprise and the inappropriateness of active intervention states to the economy.

The Keynesians abstracted away from price dynamics (non-monetary explanations of their changes prevailed, in particular with the help of the concept of cost-push inflation), argued that price and wage changes are inflexible to achieve equilibrium over a short period of time, therefore they neglected the important ways in which monetary factors affect the state of the economy. con juncturi (with the exception of the influence of money on the rate of interest, and interest on the market), on the change in aggregate demand, employment and income. These problems were studied mainly using non-monetary concepts, state regulation of macroeconomic processes was carried out primarily through budgetary methods ( significant government spending, budgetary, including deficit, financing of aggregate effective demand, etc.) Inflationary processes in Keynes's theory were considered as unlikely.

Application of Keynesian methods of economic regulation in the 30-50s of the XX century. (partly in the 60s) showed their effectiveness. In the 50-70s, such tools of the neo-Keynesian model of economic regulation were widely used: tax, credit-budget, depreciation policy, licensing of export-import cooperation, development state property and others. But the neglect of monetary levers for regulating macroeconomic processes, the high activity of the economic situation in the 50-60s, was achieved mainly by stimulating effective demand (for means of production and consumer goods), and other factors led to excess demand, increased inflationary trends. In addition, inflation was accompanied by rising unemployment, deepening disproportions in the economy, and a chronic shortage of state budgets and etc.

In the 1960s and 1970s, the fight against inflation was the main task of state stabilization programs. For monetarism, the central problem was inflation, which could be overcome primarily through monetary policy, which was seen as important tool counter-cyclical and anti-crisis regulation (this prompted Friedman to develop the monetary theory of the cycle). Inflation, crises, cyclical unemployment, payment crisis and other negative phenomena and processes are caused, according to monetarists, by chaotic fluctuations in the money supply, ill-conceived monetary policy of the state and an excess amount of money in circulation. All this led to a kind of "renaissance" of the quantitative theory of money (its criticism in the 80s was one of the prerequisites for the formation of Keynesian theory), the strengthening of the positions of the neoclassical trend in Western economic theory, an element of which is the concept of monetarism. The result of these factors is a change in the paradigm of state regulation: some countries adopted the recommendations of the monetarist school, along with the ideas of the theory of supply-side economics of the American economist A. Laffer. Monetarist methods individual countries they also tried to overcome stagflation - the simultaneous rise in prices and unemployment during a decline in production.

One of the most important elements of monetarism is the quantity theory of money, in which the most important is the function of money as a medium of exchange. its connection with the law of markets J.-B. The measure turned out to be in the forecast that the cash income of all participants in economic turnover is fully spent on the purchase of goods, which makes it impossible for a long-term accumulation of cash balances, and any increase in the money supply supposedly means a direct increase in effective demand for goods. If a certain part of monetary income is directed to savings, then these savings, according to supporters of monetarism, are spent on the acquisition of capital goods ( investment costs for the purchase of machinery, equipment, securities, etc.). The logical conclusion from these statements was the following: an increase in the money supply does not affect the real elements of the reproduction process (in particular, the process of capital investment), but only causes a general rise in prices. Economic crises from this point of view is not a natural, but a random phenomenon.

Complementing the quantity theory of money, M. Friedman and others of the monetary one argued that a change in the volume of money supply not only leads to an increase in the average absolute price level, fluctuations in commodity prices (according to the classical theory), but also leads to a change in the volume of output. This happens due to a change in the structure of the "asset portfolio", which includes money, bonds, capital goods (machinery, equipment, structures, materials), durable goods, etc. At the same time, Keynes's ideas are used with certain reservations that if on the farm unused production capacity and free labor force, the increase in the money supply contributes to their involvement in the production process and the growth of real volumes of production. Conversely, in the absence of free production capacity and labor force (or approaching maximum value their use) increase in the money supply leads to a steady excess of demand over supply and rising prices. The closer the economy is to a state of full use of resources, the more the increase in the money supply stimulates growth.

prices, not national income. This approach largely coincides with Keynesian theory (real inflation begins, according to Keynes, with the achievement of full employment).

A new aspect is the thesis of the concept of monetarism about the role of inflationary expectations - in terms of inflation, the expectation of price growth contributes to their even greater growth, and not to an increase in real income. In the concept of monetarism, the key element is the thesis of a high stability of demand for money, in particular for cash balances (cash plus checkable deposits). Friedman called it a highly stable function on cash balances and contrasted Keynes's consumption function. However, the high stability of the demand for money does not mean a constant rate of money turnover, as the representatives of the classical theory claimed. This rate can fluctuate sharply during periods of high inflation. In order to prove the thesis about the high stability of the demand for money, Friedman introduced the concept of "permanent income" into scientific circulation, which is a guideline for consumers in their behavior (in Keynes's theory, this role is played by the total current income). In contrast to the quantitative theory of money, M. Friedman studies the relationship not of money and prices, but of money and income. The concept of "permanent (permanent) income" means that a significant part of consumption is determined not by an increase or decrease in income, but by a stable income for various consumer groups, most of the current consumption does not depend on current income. The level of permanent income is affected by the rate of interest, the degree of preference for current consumption over the future, etc. Comparing the dynamics of permanent income and the money supply, Friedman came to the conclusion that cash balances are growing rapidly compared to income in a long period of time (according to statistical calculations, income growth by one point is accompanied by an increase in the need for money by 1.8 units).

Rejecting Keynes's thesis that the economic cycle is predetermined by fluctuations in investment, Friedman argued that the causes of cycles are changes in the money supply, a mismatch between the demand for money and their supply. This position was argued by the decisive role of the indicator of the dynamics of the money supply in comparison with other economic indicators; the presence of a correlation between the dynamics of the money supply in circulation and the dynamics of national income (or the presence of causal relationships between the change in the amount of money and the value of the gross final product); the absence of a sharp decline in the money supply during economic crises (the crisis of 1929-1933, 1937-1938, etc.). Monetarists analyzed a significant array of statistical data in order to identify the relationship between the dynamics of the growth rate of the money supply and cyclical fluctuations in the US economy for the period 1867-1960, including comparing the dynamics of the money supply and income during 20 economic cycles with an average duration of 10 11 years. This made it possible for them to identify the tendency for the advance change in the money supply by several months in terms of the growth of national income.

M. Friedman and A. Schwartz (supporters of this concept) operated on data that the increase in the US Federal Reserve System discount rate in 1920 to 4.75% led to a decrease in money in circulation by 9%, and this, in turn, - to reduce industrial production at 30%. In 1931, the discount rate was increased from 1.5 to 3.5%, as a result - a decrease in money in circulation by 14% and a reduction in production by 24%. In the process of adjusting money demand to the level economic activity and prices that change with the change in the amount of money in circulation, the boundaries of the equilibrium state (equilibrium state) are violated, since money demand outstrips the increase (or decrease) in money supply. The reason for this advance is that the owners of various assets evaluate them on the basis of not real, but overestimated (or underestimated) price dynamics, that is, they overestimate or underestimate the real value of their assets. The consequence, according to Friedman, is the cyclical nature of the adaptation of these values, which leads to cyclical fluctuations in the economy.

Claiming that the demand for money is a stable value, monetarists consider their supply to be very unstable, caused by the policies of banks and others. credit and financial institutions. With this in mind, the tactics and strategy of the monetary policy of the government and the central bank should be formed. At the same time, M. Friedman notes that attempts to counteract cyclical fluctuations with the help of a flexible monetary policy do more harm than good, due to imperfect knowledge of the mechanism of the influence of money and delays in the implementation of such policies and regulation. In particular, the scientist believes that direct state regulation of the economy gives an effect with a significant delay (from 8 to 14 months). During this time, the situation in the economy can change so much that it will be necessary to apply measures that are opposite in content. Therefore, he suggests that central banks increase the money supply for a long time by about 3-4% annually, regardless of the economic situation, which correlates with the growth rate of national income during this time.

M. Friedman and his supporters consider “cheap” money to be the main means of countercyclical monetary policy, which provides cheaper credit and, on this basis, an increase in total spending and employment, especially in economic crisis(recession - according to their statements) or depression. The main means of anti-inflationary monetary policy, they consider the policy of "expensive" money, that is, a decrease in the money supply, and on this basis, a reduction in total costs in the context of economic growth.

Monetarism has the following disadvantages:

1) a one-sided non-systemic approach to the essence of the influence of money on the economic cycle, on the economic situation. Money is only an element of the economic system, although a very important one. The development of the economy is actively influenced by property, taxes, profits, enterprises, the state, etc. Although money develops according to individual laws and laws, their evolution is also affected by the laws of an integral economic system, existing property relations, economic mechanism and etc.;

2) one-way NOT A complex approach to practical recommendations, the proposal to use only monetary policy. But even the author of the theory of supply-side economics, A. Laffer, argued that not a single serious inflation was overcome by a decrease in the growth rate of the money supply. Therefore, individual supporters of monetarism advocate the development of a synthetic model of state regulation of the economy. Friedman, over time, also began to consider his concept as a component of broader theoretical developments;

3) insufficiently substantiated, a superficial analysis of the causes of the industrial cycle (using the method of formal statistical comparisons, inflation, ways to regulate them). The American economist J. Tobin noted that the cyclic advance of the increase in money compared to money income does not indicate the direction of causality, action, causal relationships. The disadvantage of the monetary concept is the lack of transmission mechanisms (channels and forms) of changes from the dynamics of the money supply to other parameters of the economic system (industrial cycle, national income, etc.);

4) monetarism is largely based on the postulation of provisions on the presence of a stable demand for cash balances from the participants in economic turnover, on a direct relationship between the need for such balances and the amount of cash income, etc.;

5) defending the defining role of money in economic structure, monetarism proceeds from the theoretical and methodological foundations of the exchange concept. Monetarist recommendations are the simplest (among numerous modern methods regulation of the economy) and at the same time inhumane, since they are aimed primarily at reducing the social spending of the state.

These recommendations have been adopted by the IMF experts, they are largely embodied in the programs of economic development of Ukraine developed by several governments in the 1990s under the auspices of this international organization for the purpose of obtaining loans.

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Forerunners of monetarism

The understanding that price changes depend on the amount of money supply has come to economic theory since ancient times. So, back in the 3rd century, the well-known ancient Roman lawyer Julius Paul argued about this. Later, in 1752, the English philosopher D. Hume, in his Essay on Money, studied the relationship between the amount of money and inflation. Hume argued that an increase in the money supply leads to a gradual increase in prices until they reach their original proportion with the amount of money in the market. These views were shared by the majority of representatives of the classical school of political economy. By the time J. S. Mill was writing his "Principles of Political Economy" in general terms, a quantitative theory of money had already taken shape. To Hume's definition, Mill added a clarification about the need for a constancy of the structure of demand, since he understood that the supply of money can change relative prices. At the same time, he argued that an increase in the money supply does not automatically lead to an increase in prices, because monetary reserves or commodity supply can also increase in comparable volumes.

In the framework of the neoclassical school, I. Fischer in 1911 gave a formal form to the quantitative theory of money in his famous exchange equation:

The modification of this theory by the Cambridge School (Fischer) formally looks like this:

Fundamentally, these approaches differ in that Fisher attaches great importance to technological factors, and representatives of the Cambridge School - to the choice of consumers. At the same time, Fisher, unlike A. Marshall and A. Pigou, excludes the possibility of the influence of the interest rate on the demand for money.

Despite its scientific acceptance, the quantity theory of money has not gone beyond academia. This was due to the fact that before Keynes, a full-fledged macroeconomic theory did not yet exist, and the theory of money could not be applied in practice. And after its appearance, Keynesianism immediately took a dominant position in the macroeconomics of that time. During these years, only a small number of economists developed the quantity theory of money, but, despite this, interesting results were obtained. So, K. Warburton in 1945-53. found that an increase in the money supply leads to an increase in prices, and short-term fluctuations in GDP are associated with the money supply. His work anticipated the advent of monetarism, however, the scientific community did not pay much attention to them.

The formation of monetarism

In 1963, Friedman's famous work, written in collaboration with D. Meiselman, "The Relative Stability of the Velocity of Money and the Investment Multiplier in the United States for 1897-1958", was published, which caused a heated debate between monetarists and Keynesians. The authors of the article criticized the stability of the spending multiplier in Keynesian models. In their opinion, nominal money incomes depended solely on fluctuations in the money supply. Immediately after the publication of the article, their point of view was subjected to harsh criticism from many economists. At the same time, the main complaint was the weakness of the mathematical apparatus used in this work. So, A. Blinder and R. Solow later admitted that such an approach is “too primitive for the presentation of any economic theory.”

In 1968, Friedman's article "The Role of Monetary Policy" was published, which had a significant impact on the subsequent development of economic science. In 1995, J. Tobin called this work "the most significant ever published in an economics journal." This article marked the beginning of a new direction in economic research - the theory of rational expectations. Under its influence, the Keynesians had to reconsider their views on the rationale for active politics.

Key provisions

Demand for money and supply of money

By assuming that the demand for money is similar to the demand for other assets, Friedman first applied the theory of demand for financial assets to money. Thus, he obtained the money demand function:

According to monetarism, the demand for money depends on the dynamics of GDP, and the money demand function is stable. At the same time, the money supply is unstable, as it depends on the unpredictable actions of the government. Monetarists argue that in the long run, real GDP will stop growing, so a change in the money supply will not have any effect on it, affecting only the inflation rate. This principle became the basis for monetarist economic policy and was called money neutrality .

monetary rule

In connection with the operation of the principle of money neutrality, monetarists advocated legislative consolidation monetarist rule that the money supply should expand at the same rate as the growth rate of real GDP. Compliance with this rule will eliminate the unpredictable impact of counter-cyclical monetary policy. According to monetarists, an ever-increasing money supply will support expanding demand without causing an increase in inflation.

Despite the logic of this statement, it immediately became the object of sharp criticism from the Keynesians. They argued that it was foolish to abandon an active monetary policy, since the velocity of money is not stable, and a constant increase in the money supply can cause serious fluctuations in aggregate spending, acting destabilizingly on the entire economy.

The monetarist concept of inflation

Natural rate of unemployment

Natural unemployment is understood as voluntary unemployment, in which the labor market is in equilibrium. The level of natural unemployment depends both on institutional factors (for example, on the activity of trade unions) and on legislative ones (for example, on the minimum wage). The natural rate of unemployment is the unemployment rate that keeps the real wage and price level stable (in the absence of labor productivity growth).

According to monetarists, deviations of unemployment from its equilibrium level can occur only in the short term. If the employment rate is above the natural level, then inflation rises, if it is lower, then inflation decreases. Thus, in the medium term, the market comes to an equilibrium state. Based on these prerequisites, conclusions are drawn that employment policy should be aimed at smoothing fluctuations in the unemployment rate from its natural rate. At the same time, to balance the labor market, it is proposed to use the instruments of monetary policy: 483 .

Permanent income hypothesis

In his 1957 work The Theory of the Consumption Function, Friedman explained the behavior of consumers in permanent income hypothesis. In this hypothesis, Friedman argues that people experience random changes in their income. He considered current income as the sum of permanent and temporary income:

Permanent income in this case is similar to the average income, and temporary income is equivalent to a random deviation from the average income. According to Friedman, consumption depends on permanent income, as consumers smooth out fluctuations in temporary income with savings and borrowed funds. The constant income hypothesis states that consumption is proportional to constant income and mathematically looks like this:

where α (\displaystyle (\alpha ))- constant value .

Monetary theory of the business cycle

The main provisions of Friedman's concept

1. The regulatory role of the state in the economy should be limited to control over money circulation;
2. The market economy is a self-regulating system. Disproportions and other negative manifestations are associated with the excessive presence of the state in the economy;
3. The money supply affects the amount of expenses of consumers, firms. An increase in the mass of money leads to an increase in production, and after full capacity utilization - to an increase in prices and inflation;
4. Inflation must be suppressed by any means, including through cuts in social programs;
5. When choosing the rate of growth of money, it is necessary to be guided by the rules of "mechanical" growth in the money supply, which would reflect two factors: the level of expected inflation; growth rate of the social product.
6. Self-regulation of the market economy. Monetarists believe that the market economy, due to internal tendencies, strives for stability and self-adjustment. If there are disproportions, violations, then this occurs primarily as a result of external interference. This provision is directed against the ideas of Keynes, whose call for state intervention leads, according to monetarists, to a violation of the normal course of economic development.
7. The number of state regulators is reduced to a minimum. The role of tax and budgetary regulation is excluded or reduced.
8. As the main regulator influencing economic life, serve as "money impulses" - regular money emission. Monetarists point to the relationship between the change in the amount of money and the cyclical development of the economy. This idea was substantiated in the book published in 1963 by American economists Milton Friedman and Anna Schwartz, A Monetary History of the United States, 1867-1960. Based on the analysis of actual data, it was concluded here that the subsequent onset of one or another phase of the business cycle depends on the growth rate of the money supply. In particular, the lack of money is the main cause of depression. Proceeding from this, monetarists believe that the state must ensure a constant money emission, the value of which will correspond to the growth rate of the social product.
9. Rejection of short-term monetary policy. Since the change in the money supply does not affect the economy immediately, but with some delay (lag), the short-term methods of economic regulation proposed by Keynes should be replaced with a long-term policy designed for a long-term, permanent impact on the economy.

So, according to the views of monetarists, money is the main sphere that determines the movement and development of production. The demand for money has a constant tendency to increase (which is determined, in particular, by the propensity to save), and in order to ensure the correspondence between the demand for money and their supply, it is necessary to pursue a course towards a gradual increase (at a certain pace) of money in circulation. State regulation should be limited to control over money circulation.

Monetarism in practice

Money targeting

The first step in the implementation of the policy of monetarism by the Central Banks was the inclusion of monetary aggregates in their econometric models. Already in 1966, the US Federal Reserve began to study the dynamics of monetary aggregates. The collapse of the Bretton Woods system contributed to the spread of the monetarist concept in the monetary sphere. The central banks of the largest countries have reoriented from targeting the exchange rate to targeting monetary aggregates. In the 1970s, the US Federal Reserve chose the M1 aggregate as an intermediate target, and the Federal Funds interest rate as a tactical target. Following the US, Germany, France, Italy, Spain and the United Kingdom announced money growth targets. In 1979, European countries came to an agreement on the creation of the European Monetary System, under which they pledged to maintain the rates of their national currencies in certain limits. This led to the fact that the largest countries in Europe were targeting both the exchange rate and the money supply. Small open economies like Belgium, Luxembourg, Ireland and Denmark continued to target only the exchange rate. Yet in 1975 most developing countries continued to maintain some form of fixed exchange rate. However, beginning in the late 1980s, monetary targeting began to give way to inflation targeting. And by the mid-2000s, most developed countries switched to the policy of setting an inflation target, rather than monetary aggregates.

see also

Notes

1. Moiseev S. R. The Rise and Fall of Monetarism (Russian) // Questions of Economics. - 2002. - No. 9. - S. 92-104.
2. M. Blaug. Economic thought in retrospect. - M.: Delo, 1996. - S. 181. - 687 p. - ISBN 5-86461-151-4.
3. Sazhina M. A., Chibrikov G. G. Economic theory. - 2nd edition, revised and enlarged. - M. : Norma, 2007. - 672 p. - ISBN 978-5-468-00026-7.
4. Mishkin F. Economic theory of money, banking and financial markets. - M.: Aspect Press, 1999. - S. 548-549. - 820 p. - ISBN 5-7567-0235-0.
5. Mishkin F. Economic theory of money, banking and financial markets. - M. : Aspect Press, 1999. - S. 551. - 820 p. - ISBN 5-7567-0235-0.
6. B. Snowdon, H. Vane. Modern macroeconomics and its evolution from monetary point of view: interview with Professor Milton Friedman. Translation from Journal of Economic Studies (Russian) // Ekovest. - 2002. - No. 4. - pp. 520-557.
7. Mishkin F. Economic theory of money, banking and financial markets. - M. : Aspect Press, 1999. - S. 563. - 820 p. - ISBN 5-7567-0235-0.
8. S. N. Ivashkovsky. Macroeconomics: Textbook. - 2nd edition, corrected, supplemented. - M.: Delo, 2002. - S. 158-159. - 472 p. - ISBN 5-7749-0178-5.
9. C. R. McConnell, S. L. Brew. Economics: principles, problems and politics. - translation from the 13th English edition. - M. : INFRA-M, 1999. - S. 353. - 974 p. - ISBN 5-16-000001-1.