Published by EH.Net (August 2022).

Thomas Moser and Marcel Savioz, eds. Karl Brunner and Monetarism. Cambridge: The MIT Press, 2022. xii + 491 pp. $50 (hardcover), ISBN 978-0262046916.

Reviewed by Forrest Capie, Bayes Business School, City, University of London.

Karl Brunner was a distinguished economist and a leading figure in the Monetarist school of monetary economics. He may or may not have coined the word Monetarist, but he is credited with the first use of the term in a lecture in 1968. His published output in many different forms was prodigious – more than 200 articles and books. Brunner was also an academic entrepreneur. He established what became two leading journals, the Journal of Money, Credit and Banking and the Journal of Monetary Economics. He also established and ran two important seminars, the Carnegie-Rochester Conference in the US and the Konstanz Seminar in Germany, both of which are still in good health today. More than that, in 1973 he co-founded with Allan Meltzer the Shadow Open Market Committee (that provides an alternative assessment and policy recommendations to the Fed’s FOMC) – again, still thriving.

He was first of all a Swiss economist, and his first employment was as an economist in the Swiss National Bank (SNB). On the centenary of his birth in 2016 the SNB established the annual Karl Brunner Distinguished Lecture Series and together with the inaugural lecture held a seminar at which Allan Meltzer, Ernst Baltensperger, Benjamin Friedman, and Charles Plosser presented papers that were in large part tributes to a scholar they clearly revered. These papers and the inaugural lecture by Kenneth Rogoff (on central bank design) make up Part I of this book. Following the seminar, David Laidler and Michel de Vroey suggested to the editors that the proposed publication could and should be broadened with contributors invited to explore Brunner’s work and legacy.

There is an excellent Foreword by the Chairman of the SNB, Thomas Jordan, and an introduction by the editors, Thomas Moser and Marcel Savioz, both of the SNB. The book then has four parts: Part I, ‘A Tribute to Karl Brunner,’ as described above; Part II, ‘The Impact of the Monetary Policy Debate’; Part III, ‘Karl Brunner and Allan Meltzer’s Monetarism’; and Part IV, ‘Today’s Legacy of Karl Brunner’. In all there are 16 contributors from 14 different institutions and seven countries. Not all the contributors would claim to be, or have been, monetarists. It was the range of Brunner’s work that attracted and involved them.

Brunner held that macroeconomic analysis must be based on individual behaviour, that is to say on price theory. He argued that was the core feature of Monetarism: ‘The basic tenet of Monetarism is the reassertion of the relevance of price theory to understand what happens in aggregate economics. Our fundamental point is that price theory is the crucial paradigm – as a matter of fact, the only paradigm – that economists have’ (p.vii). In the mid-1980s when Brunner was asked (in an interview with Arjo Klamer) when he became a monetarist he said he believed it began with his conversations with Armen Alchian in the early 1950s. This is the subject of Pierrick Clerc’s chapter, ‘The Pervasive Influence of Armen Alchian on Karl Brunner’s Monetarism.’ Clerc notes and agrees with the view David Laidler had expressed ten years earlier that Brunner’s ‘version of Monetarism paid more attention to the information problems that lay at the heart of monetary economics than did Friedman’ (p. 321). Laidler’s own chapter here touches on both these questions.

In fact there is quite a lot on the importance of price theory for Brunner’s work in the book. Clerc and Michel de Vroey’s chapter, ‘Brunner versus Friedman: Diverging Aspirations for the Monetarist Project,’ is explicitly on the subject. James Forder’s ‘Karl Brunner’s Monetarist Revolution’ offers a substantial and generally critical section on Friedman’s views on the ‘counter revolution’ and related topics, before contrasting this with Brunner. Additionally, in Part III there is a chapter by Kevin Hoover on Brunner’s philosophy of science.

There is plenty for the monetary historian in Part II. Brunner had a keen interest in history. He edited a splendid volume on the Great Depression. He wrote with Allan Meltzer a long report on the Federal Reserve’s first fifty years, explored among other things by Michael Bordo in ‘Karl Brunner and Allan Meltzer: From Monetary Policy to Monetary History to Monetary Rules’. There is also a very long piece by Edward Nelson on the British monetary policy debate, starting where Brunner first worked on British monetary policy in the early 1950s and continuing to when he was in close contact with Margaret Thatcher in the late 1980s. Jurgen von Hagen provides some history of economic thought as he places Brunner’s views of the 1960s in a long-term perspective. In a separate chapter von Hagen describes the origins and development of the Konstanz Seminar, founded after Brunner became a permanent visiting professor at the University of Konstanz in 1969.

In the final Part, on Brunner’s legacy, there are papers by Alex Cukierman (the permanent-transitory hypothesis), Juan Pablo Nicolini (Brunner’s theory of the money supply), and Stephen Williamson (on Monetarism and New Monetarism). All of these illustrate how Brunner’s ideas have had a lasting impact on the subject. Monetarism has certainly evolved, but New Monetarists are still interested in the fundamental role of money.

This is a large book covering most aspects of Brunner’s work, and it will surely have appeal across a wide readership. The book is a powerful reminder of the range and subtlety of Brunner’s work. It will also serve as a caution to those who have been quick to dismiss Monetarism, and even claim it dead.

Forrest Capie is a former editor of the Economic History Review, and Commissioned Historian of the Bank of England. A recent publication was on the Bank of England’s profits across 300 years in the Financial History Review, 2022.

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