Economic Review

The rise in the rate of inflation during the 1970s was paralleled by a rise in interest in monetarism, which offered the means for controlling inflation. Despite the increased interest, monetarism is still often misunderstood, as Thomas M. Humphrey points out in "On Nonneutral Relative Price Effects in Monetarist Thought: Some Austrian Misconceptions."

Economists of the Austrian school have portrayed monetarism as oblivious to the effects of monetary disturbances on the real economy of output and jobs. Humphrey exposes their fallacy with selections from monetarist literature from the 19th century to the present. He shows that monetarism is actually similar to Austrian theory in stressing the relative price effects of monetary disturbances. As a result, monetarists and Austrians agree that to decrease disruptions to the real economy, monetary volatility should be minimized.