In researching his seminal two-volume A History of the Federal Reserve, economist Allan Meltzer amassed a large collection of primary sources, many of which are available on FRASER through his generosity.[1] These sources encompass a wide range of documents charting economic and monetary policy history. As a history of U.S. monetary policy, these primary and secondary sources include Fed reports, congressional acts, and presidential addresses, but Meltzer’s work also drew on a myriad of academic works from high-profile research publications such as the American Economic Review, Journal of Economic Perspectives, and the Journal of Monetary Economics. The Meltzer collection is also the source of important books in economics, such as Irving Fisher’s seminal “Debt-Deflation Theory of Great Depressions,” and works by other well-known monetary economists and economic historians. Here are some highlights from the collection:
One example is a groundbreaking textbook: British economist Alfred Marshall’s massive Principles of Economics: An Introductory Volume, first published in 1890, has introduced countless students to some of the most fundamental concepts in economics. Marshall is credited with many early contributions to economic thought and is most often associated with marginalism, a method of inquiry that is now a well-established feature of modern economics. In the preface to the first edition, Marshall notes that he borrowed the new term “marginal” from the German economist Johann Heinrich von Thünen to describe the value of measuring or observing “increments of quantities” rather than “aggregate quantities.” Along with marginalism, Marshall popularized two other critical economic concepts: the short/long run and elasticity.
Another seminal document included in the Meltzer collection is the American Economic Review article “Credit, Money, and Aggregate Demand,” by Ben S. Bernanke and Alan S. Blinder, former Chairman and Vice-Chairman of the Federal Reserve System, respectively. Published in 1988, years before either joined the Fed, the paper explores the separate roles of money, bonds, and “credit”—bank loans—in monetary policy. Bernanke and Blinder modify the “textbook” Keynesian macroeconomic model[2] to include the bank loan interest rate as another tool central banks can use to stimulate the economy. In another 1988 paper, Bernanke explains why: “[B]anks frequently make loans to individuals and businesses who would find borrowing in the open [bond] market prohibitively expensive. Banks thus finance consumption and investment expenditures that would otherwise not take place.”
Last but certainly not least, “The Role of Monetary Policy” by renowned economist Milton Friedman is one of the most iconic speeches in the history of economics.[3] This speech—Friedman’s 1968 presidential address to the American Economic Association—was published in the American Economic Review that March and has been cited thousands of times in the economic literature of the past 50 years. Friedman’s relatively short and accessible essay asks what and how monetary policy can contribute to the employment, price, and growth goals of economic policy. This speech from the early days of monetarism emphasizes that monetary policy’s power lies in long-term goals, a still fairly revolutionary idea at the time. As Friedman himself explains:
From the infinite world of negation, I have selected two limitations of monetary policy to discuss: (1) It cannot peg interest rates for more than very limited periods; (2) It cannot peg the rate of unemployment for more than very limited periods. I select these because the contrary has been or is widely believed, because they correspond to the two main unattainable tasks that are at all likely to be assigned to monetary policy.
Principles of Economics, “Credit, Money, and Aggregate Demand,” and “The Role of Monetary Policy” are just a few examples of the academic works in the Meltzer collection that appeal to different sections of the economics community and help give context for how the Fed is intertwined with the larger community of economic research. These and other sources within the Meltzer collection can be found here.
[1] To learn more about how Meltzer’s research materials came to FRASER, read this Inside FRASER post.
[2] Keynesian IS-LM
[3] See “The Role of Monetary Policy Revisited: A Talk by John Cochrane.” Becker Friedman Institute, University of Chicago, May 2013.
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