Monetarism is an economic doctrine according to which the regulation of the money supply by a central bank (and thus mediated by the state) is the most important way of influencing the course of the economy.
According to this theory, which was mainly developed by the economist Milton Friedman (1912-2006), the money supply should be adjusted according to the course of real economic growth.
Eine Erhöhung der Geldmenge über das Wachstum des Sozialproduktes hinaus führe zur Inflation, eine zu geringe Geldmengenerhöhung zu einer Deflation. Die monetaristische Theorie lehnt andere staatliche Eingriffe als die Anpassung der Geldmenge grundsätzlich ab, etwa Konjunktursteuerungsmaßnahmen wie sie der Keynesianism fordert.
Development of monetarism
The monetarism developed in the 1960s and 1970s falls back on older theories, such as the quantity theory, the main features of which John Locke (1632–1704) and Irving Fisher (1867–1947) in “The Purchasing Power of Money ”(1911) rephrased for the twentieth century.
Friedman formulated the basic theses of monetarism in contrast to the theory of Keynesianism, which declared aggregate demand to be the decisive factor in the economy and as a result of which state intervention in the market in the form of demand control became a means used by many states.
As a classical liberal, Friedman emphasized the importance of a free market that had to be spared from state interference in order to preserve not only economic, but also political and social freedom.
Monetarism and Keynesianism compatible
In real politics, the two theories are not incompatible. In 1974, for example, the Deutsche Bundesbank began to control the amount of money in the Friedmanian sense, without the German state having forego Keynesian intervention in demand.
However, the monetarist theory assumes a fundamental stability of the demand of the private sector and its dependence on the money supply, while Keynesianism is based on unpredictable fluctuations in the private sector, as they are influenced by political and social events.