A Monetary History of the United States, 1867-1960 by {author}: summary and why it matters

What it argues

Friedman and Schwartz present nearly a century of data on the American money stock, banking panics and the Fed, and they argue that changes in the quantity of money are a major influence on output and prices. Their most famous chapter on the Great Contraction, 1929 to 1933, claims that the Depression became so severe because the money supply fell by about a third while the Federal Reserve failed to act as a lender of last resort and let waves of bank failures proceed.

The finding turned the standard view, which blamed capitalism's instability, into an indictment of government monetary policy. The authors accordingly favored rules over discretion in central banking.

The book is a work of scholarship, heavy with tables and charts, and is not light reading.

Why it matters

It is among the most influential works in postwar economics, and Ben Bernanke, as a Fed governor, acknowledged its argument in public remarks about the Fed's role in the Depression. Its claims about inflation as a monetary phenomenon shaped central banking from the 1980s. Debates about the Fed's response to later crises keep the book current.

About the author

The book was written under the auspices of the National Bureau of Economic Research and took Friedman and Anna Schwartz (1915-2012) the better part of a decade. Schwartz did much of the archival and statistical work and, though less well known than her coauthor, was an expert on monetary history in her own right. A separate paperback of the chapter on the Great Contraction was published in 1965.

Who should read it

Economics students and anyone who wants evidence rather than assertion about monetary policy. General readers can start with the chapter on the Great Contraction.