When was money less important than we thought?

ModeledBehavior tweeted:

Name the period or event in economic history where we looked backed and said “hmm, money was less important than we thought at the time

I would nominate much of the 19th century.  To be sure, distribution in those times really did matter, more so than today because overall levels of income and wealth were much lower.  And monetary policy redistributes wealth.  But the overall story of the century is one of European peace (mostly but not entirely), economic growth, and the unfolding of various industrial revolutions.  Yet monetary policy was very much in the public eye, including in the United States.  Monetary economics develops much more rapidly than does, say, law and economics or the economics of how to boost innovation.  By the time you reach 1820, monetary economics in Great Britain is quite sophisticated, even though they lacked good data.

In the 1920s and 30s, monetary economics mattered an enormous amount — a world changing, World War-creating amount, I would say.  That alone makes it worthy of very very serious study.  But most important economic stories are about the long run, and if anything the human tendency is to fixate on the short run too much.

Monetary policy also did not matter so much for the East Asian economic revolutions of the postwar era.  No one looks back and worries how often South Korea had double digit inflation, sometimes over twenty percent.  And here is a recent inflation index for some emerging economies.


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