Things have been pretty hectic for me this week, as the Sociology Department Annual Cabaret (organized by the first year cohort) is tomorrow night, and we are in full gear making props, rehearsing sketches, doing our statistics problem sets, etc. But Brad DeLong has forced me out of hiding for a moment to link to his excellently written and insightful essay on monetarism and the death thereof. Here’s a snippet from the middle (of a not very long piece) about why Friedman’s plan to just “keep the money supply growing smoothly” is not as easy as it sounds:

No central banker controls all these vast and varied sluices of the money supply – at least not in economic reality. When banks and businesses and households get scared and cautious and feel poor, they take steps to shrink the economic reality that is the “money supply.” Businesses extend less trade credit. Credit card companies cut off cards and reduce ceilings. Banks call in loans and then take no steps to replace the deposits extinguished by the loan pay-downs. Without a single bureaucrat making a single decision to slow down a single printing press, the money supply shrinks—disastrously in episodes like the Great Depression. Thus in emergencies, to say that all the central bank has to do is to keep the money supply growing smoothly is very like saying that all the captain of the Titanic has to do is to keep the deck of the ship level.

Hmm. Now I need to add “measures of the money supply” to my list of economic indicators to learn the history of…