The intellectual origins of the monetarist counter-revolution reconsidered: how Clark Warburton influenced Milton Friedman’s monetary thinking

Abstract

Clark Warburton’s contributions during the 1940s and early 1950s are widely considered to have anticipated the key tenets of the monetarist counterrevolution of the 1960s and the 1970s. Hitherto, however, Warburton has not been considered as someone whose views may have directly shaped the development of Milton Friedman’s monetarist views. While it is not possible to establish a direct causal line between Warburton’s views and Friedman’s monetarism, including its emphasis on the efficacy and primacy of open-market operations, the preferability of a monetary-growth rule to attain price-level stability, the need of a clear separation of a government’s fiscal operations from the monetary-policy operations of the central bank, and the destructive role played by the Fed in the Great Depression, this paper shows that the connection between Warburton’s contributions and Friedman’s monetarism is considerably tighter than previously thought.