The monetarist mistake

IDEAS matter. That is the lesson of Hall of Mirrors, the American economist Barry Eichengreen's chronicle of the two biggest economic crises of the past 100 years: the 20th century's Great Depression and the ongoing Great Recession, from which we are still struggling ineffectually to recover.

Eichengreen is my friend, teacher, and patron, and his book is to my mind the best explanation to date of why policymakers in Europe and the United States have reacted to the most dramatic economic collapse in almost four generations with half-hearted measures and half-finished interventions.

According to Eichengreen, the Great Depression and the Great Recession are related. The inadequate response to our current troubles can be traced to the triumph of the monetarist discip…