Tim Congdon has been Britain’s leading monetarist for about three decades. His defence of the case for watching broad money growth, and for keeping it steady and low, has always been eloquent and forceful. He has a sharp eye for statistics, for history, for the twists and flows of intellectual fads, and for the political arena where debate hardens suddenly into the stone of decision. He is subtle, practical, bellicose and highly articulate. This volume is vintage Congdon in every sense. It consists of fifteen essays, all published over the years but now revised in varying degrees, set chronologically and placed in context by a meaty preface.

Nowadays, microeconomics and macroeconomics have been reuniting. So, too, theory and econometrics. Data, increasingly in panels, confirm many longer-run predictions (not all) of models based on good theory, and paint up unexpectedly rich short-run dynamics and heterogeneities we used only to guess at. Among professional economists, controversy isn’t dead. But it is technical, muted, and more epistemological by the day: we worry much about who learns what and how and when, for instance. The economic macro policy battles that raged 25-35 years ago – like those of 60-75 years ago, both probed elegantly in this book – are fast fading from memory.

Becalmed as we are in a new consensus today, macroeconomists should definitely read this book. It can recapture for us the flash and thrill of sword and parry. Bring us back to the fight lines. Rediscover why those wars occurred. Try to decide who was right, in what, and why. For there is just one great constant in economic thinking: every generation is appalled by the errors of thirty or so years ago. What is it, we should ask, that we now do and firmly believe, that posterity will deride us for? Looking back in Congdon’s mirror might help us a bit with that troubling question.

Congdon has great admiration for Keynes’s earlier books. But rather less for his General Theory. “Keynesians” are the (oddly, largely unnamed) really bad guys. Their home was Cambridge, in its DAE. Later they infected other universities, the National Institute and only parts of – and quite late, Congdon argues – the citadel, the Treasury itself. Congdon’s reprobates thought lazily in income-expenditure diagrams. They believed in managing demand through high government spending to stop slumps. They pretended they could see the future. If anxious to combat the lesser ill of inflation, they resorted to price and wage controls. For them, aggregate demand was vertical, fitful, and only steadied by big government. Aggregate supply was horizontal, up to the point where labour ran out, and exogenous. The price mechanism they saw as unreliable; monetary policy almost irrelevant; their main goal, a bigger State with jobs for all and greater equality. It is my belief that many ‘mainstream’ macroeconomists of that period, whether academic and practical, were much more sophisticated than this. For Congdon, the 364 economist signatories to the 1981 letter to The Times (criticizing Howe’s deflationary budget) are bad guys too, but he accords them more respect (the volume contains a spicy, 25-years-on, interchange with Nickell on this).

Congdon’s real hero is a British monetarist, who has four precepts (pages 149-150): emphasis on broad money and the control of credit growth; aversion to fiscal activism; belief in a hard-to-predict, medium-term link between money (growth) and inflation; and, for the UK, floating exchange rates.

Today’s consensus plays down the first of these, preferring policy interest rate manipulation by an independent but transparent central bank, with a more or less explicit commitment to low, steady inflation. Both broad and narrow (base) money are treated as passive, and, to Congdon’s chagrin, little studied in Britain today – and even less in the US – but still watched closely in several poor countries. But the other three of Congdon’s British monetarist’s precepts are central to current orthodoxy. The second and fourth were indeed key elements in Gordon Brown’s Chancellorship, and the third is a corollary of the modern (as well as pre-General Theory) view that monetary policy has next to no lasting ‘real’ effects.

Many facets of the Keynesian-monetarist debate are well told in this volume. But some are left unexplored. Foremost, perhaps, is the time horizon: the Keynesian focus was on the coming year or two, while monetarist (or at least New Classical – and indeed New Keynesian) thinking has an infinite horizon with slight discounting. Standard Keynesian models are only still photographs, most glaringly revealed in the belief that (a) private investment is wobbly and enormously important, but (b) the capital stock can be taken as given. Keynes wasn’t blameless here either, witness his hapless remarks about relating investment plans to the marginal efficiency of capital schedule. Another important topic Congdon largely dodges is the issue of expectations and learning; whether our governors have an informational advantage (that they should keep to themselves, and exploit?); how we should proceed when the ‘true’ model is unknown; and in which direction agents look, forward or back. I was sorry, too, to see Tobin relegated to a single footnote. His contributions to the 1960s and 1970s debates with Friedman, sharp and incidentally often closer to a more sophisticated, pre General Theory Keynes, surely merited more space.

My final absentee in Congdon’s book has nothing to do with the Keynesian-monetarist battle, but to war of a different kind. Quite how Britain managed to fight a six-year long and ruinously expensive war with minimal impact on its overt inflation (and with only a trebling of its nominal National Debt, which the First War had decupled) is little short of astonishing. It is perhaps Keynes’s greatest achievement. Keynes always responded to the challenge of the day. In the 1930s, this was to explain a terrible slump, and appraise the policy responses it appeared to require; the General Theory was messy, with many loose ends. But it was a work of extraordinary novelty, written at great speed. It is ironic that Keynes’s intellectual apparatus was in fact first seriously employed to hold back debt and bottle up inflation; and sad, that these successes went unsung. Keynes died before he could write about them; the Keynesians ignored them; and Congdon has bypassed them here, too. But those are relatively minor quibbles, to set against the many virtues of this fine volume.

Peter Sinclair

Professor of Economics, University of Birmingham