IN the symposium on the controversy over monetary policy, which I was privileged to read in proof, I was impressed by the great difference in practical approach to vital problems which derives from relatively small differences in emphasis among the writers. With much of what the distinguished participants in the symposium have said I am in agreement. There is also a great deal on which I differ, but I shall not take space here to discuss my disagreements. I firmly believe, however, that an airing of conflicting views in a professional publication is a valuable way to develop an area of agreement among economists, which can then be safely trodden by legislators and administrators. I agree emphatically with Friedman that economists must think things out on their merits without regard to political feasibility. Considerations of expediency not only tend to interfere with processes of thought (of the writer as well as of the reader) but also diminish the degree of reliance that legislators and administrators are likely to place on the experts' recommendations. When economists venture into politics, they are apt to cease being good economists and yet to fall far short of being good politicians. Paul Douglas may be an exception which confirms the rule. I wonder how many of the participants would accept the following propositions to which I subscribe. i. Monetary policy has some effect on economic stability, though the magnitude of this effect and the economic price that must be paid for it are controversial. 2. Limitations on the effectiveness of monetary policy are equally applicable to fiscal policy. In fact, in broader terms, they are two aspects of the monetary approach and must both contend with powerful non-monetary factors. 3. Direct controls do not attack the causes of inflation but only moderate its effects. If promptly imposed and effectively administered, they are useful in holding the line while methods of attacking inflation at its source are being adopted and put into operation. 4. size and urgency of government outlays in a modern war and in preparedness are such as to subject a free market economy to a strain that it may not be able to support without losing its character as a market mechanism. Among the participants in the symposium there are vast differences in approach, in analysis, in emphasis, and in proposed programs of action, but I am most interested in determining what area of agreement could be established. In the light of the four propositions stated above, what would be a feasible program for monetary authorities to pursue? It is clear that in an inflationary period they must not contribute freely to a growth in the money supply. Whatever the extent of its influence, it is a factor that cannot be disregarded, and it is the direct (and principal) field of responsibility of monetary authorities. They can have only an indirect and relatively minor influence on the intensity of use of the existing supply of money and must look to other institutions and groups for most of what can be done to influence it. In regulating the supply of money monetary authorities must operate principally, almost exclusively, through bank reserves. This point, in my judgment, is not sufficiently emphasized in the symposium. rate of interest as such is not effective in controlling money creation over the short run in an inflationary situation. Shortage of reserves at the disposal of banks, on the other hand, results in much more restrictive lending practices. Lerner does not like this, and many other economists think that this argument evades the real issue, which they believe revolves around the interest rate. It is true that money is practically always procurable at some rate (though not necessarily for all applicants). Monetary policy, however, deals not with absolutes but with day-to-day realities. A bank having no 1 S. E. Harris, L. U. Chandler, M. Friedman, A. H. Hansen, A. P. Lerner, and J. Tobin, The Controversy over Monetary Policy, this REVIEW, XXXIII (I95I), PP. I79-200.