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Episode 9 Monetarism With Tim Congdon
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Episode 9: 'Monetarism'. With Tim Congdon. • Our guest in this episode is Professor Tim Congdon, a supporter of monetarism as the theoretical framework to explain national income determination. In the podcast Professor Congdon spoke to our director, Dr Juan Castañeda, about the monetarist school of thought, and the link between changes in the amount of money and in the price level. What followed was a discussion on how to define money. While this may seem like an unusual debate, the answer given by various economists has a significant impact on what one views to be the best monetary policy to achieve price stability over the medium and long term. Professor Congdon also emphasised that, while many economists like to think of their discipline as purely being a scientific one, it is in fact one of the humanities, therefore there is always a political element, which is why economists often disagree on key issues. Dr Castaneda asked Professor Congdon about the inflation episode after Covid19 pandemic and whether it vindicates the monetarist school of thought. Both published a joint paper in 2020 which correctly predicted the current inflation episode (https://iea.org.uk/publications/33536/). Professor Congdon explained how it was monetary policy, rather than the pandemic itself, that were to blame. • References on monetarism: • Congdon T. (2005): 'Money and asset prices in boom and bust'. IEA Hobart Paper, no. 153. Institute of Economic Affairs, London. • Congdon T. ed. (2017): Money in the Great Recession. Edward Elgar. • Friedman, M. (1970): 'The Counter-Revolution in Monetary Theory'. IEA Occasional Paper, no. 33. Institute of Economic Affairs, London. • On our guest, Tim Congdon: • Tim Congdon is one of the world's leading monetary analysts. He advised the UK's 1979-97 Conservative government on economic policy, serving as a member of the Treasury Panel (the so-called 'Wise Men' ) from 1992 to 1997. He is usually regarded as the UK's leading exponent of the 'monetarist' school of thought, and was influential in the late 1970s and early 1980s in the defence of 'Thatcherite monetarism'. • After starting his career as a journalist on The Times, he became an economist in the City of London in 1976. He founded the research consultancy, Lombard Street Research, in 1989 after correctly warning that the excessive money growth during the Lawson Chancellorship would lead to double-digit inflation. In his period on the Treasury Panel, he emphasised the importance of monetary variables in determining macroeconomic outcomes, and the difference between his approach to forecasting and that of other Treasury Panel members. • He left Lombard Street Research in 2005, to create more time to write about monetary theory and practice. Four significant works have appeared since then. In 2005 he published a long pamphlet on Money and Asset Prices in Boom and Bust and in 2009 a critique of the Bank of England's conduct in the Northern Rock affair called Central Banking in a Free Society. In 2007 a collection of essays on Keynes, the Keynesians and Monetarism appeared in the UK and in 2011 another collection with the title Money in a Free Society was published by Encounter Books in New York. • Tim Congdon is the Founder and Chair and main patron of the Institute of International Monetary Research.
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