Allan Meltzer, RIP

I was sad to hear that Allan Meltzer passed away today, at the age of 89.  I always thought of him as one of the leaders of monetarism, along with Milton Friedman, Anna Schwartz and Karl Brunner (with whom he frequently collaborated on research.)  Unfortunately I didn’t meet Allan until he was in his 80s, but he was still quite energetic and passionate about both monetary economics and classical liberalism more broadly.  As recently as last year he participated in the Mercatus colloquium on the effect of low interest rates, and also spoke at one of our events.

My views on monetary policy were shaped by many different influences, but none more important that the monetarist revolution of the 1960s and 1970s, in which Meltzer played a key role. He also wrote a very interesting book on Keynes, whom he argues has been widely misunderstood.

Although market monetarism is somewhat different from traditional monetarism, in my view we are carrying the torch forward, with updates that are very much in the monetarist tradition (i.e., the view that markets are more efficient than bureaucrats.)  I would hope that future monetarists improve upon some of our ideas.

I met Meltzer at 3 or 4 conferences over the past 8 years, and he was always very nice to me.  I’ll miss him.




4 Responses to “Allan Meltzer, RIP”

  1. Gravatar of Major-Freedom Major-Freedom
    9. May 2017 at 19:03

    Metzger was not the first monetarist who could not get the Fed to “work” during his lifetime, and given the inherent flaws of socialism, he won’t be the last

  2. Gravatar of Benjamin Cole Benjamin Cole
    9. May 2017 at 20:18

    A younger Allan Meltzer could be quite acerbic.

    Meltzer served on Reagan’s CEA, btw, so he had a bird’s eye view into the Reaganauts, and their monetary policy, which he termed “incoherent.”

    Meltzer’s passing may also be a reminder of just how crippling orthodoxy can be to even the most brilliant minds.

    From Wikipedia:

    “In May 2009, Meltzer warned that “the enormous increase in bank reserves—caused by the Fed’s purchases of bonds and mortgages—will surely bring on severe inflation if allowed to remain.”[19] Four [ed. note now eight] years after Meltzer’s comment, with the Fed’s quantitative easing program still continuing [not unwound], US inflation as measured by the consumer price index (CPI-U) was running at a year-on-year rate of 1.4%,[20] while expected inflation over a 10-year period, as estimated by the Cleveland Federal Reserve, was running at around 1.55%.”

    Inflation now at 1.56% on the PCE.


    Today we have the ongoing example of Japan monetizing its national debt—nearly one-half of Japan national debt (JGB) is owned by the Bank of Japan. They are barely out of deflation.

    So where does this leave orthodox economics? Should nations not reduce national debt through quantitative easing?

    Why not?

  3. Gravatar of Stephen Kirchner Stephen Kirchner
    10. May 2017 at 17:07

    I met Meltzer at a MPS meeting in Prague in 2012 and had an argument with him over whether Friedman would support QE. He maintained not, on the basis that Friedman supported rules and QE was discretionary. I maintained that QE was entirely consistent with a rules-based framework, but he was dismissive of the suggestion. Like you, I found him to be very nice and open to having someone much younger and less authoritative than him challenge his position.

    He wasn’t as dismissive as John Taylor when I suggested to him at the New York MPS meeting in 2009 that recalibrating the latent variable assumptions in his rule meant US monetary policy had been too tight. The subsequent inflation numbers are firmly on my side.

  4. Gravatar of ssumner ssumner
    11. May 2017 at 04:51

    Stephen, Yes, I think both missed the boat on how money was too tight in 2008.

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