The Encyclopedia Americana, 2002 edition, concludes its entry on Milton Friedman as follows: “His major work, A Monetary History of the United States, 1867–1960, was published in 1963.” That might be seen as an indirect compliment to Anna J. Schwartz, who coauthored the Monetary History with Friedman but is not mentioned in the encyclopedia entry. Similarly, the Nobel Committee neglected to mention Schwartz when, in awarding Friedman his Prize in 1976, it described A Monetary History as “[h]is major work [and] … one of Friedman's most profound and also most distinguished achievements.” Fortunately, the economics profession as a whole has not been so negligent, and the phrase “Friedman and Schwartz” has become second nature to economists when discussing the importance of monetary policy.
Beside her collaborations with Friedman, Anna Schwartz is perhaps best known for her longevity, which is on an epoch-shattering scale. Her career as an economic researcher began a quarter-century before the publication of A Monetary History, and has continued in the 40 years since. Schwartz's first journal article was published in May 1940, the month Winston Churchill became Prime Minister of the United Kingdom and over 18 months before the United States entered World War II. She has worked at the National Bureau of Economic Research in New York City continuously since 1941. Monetary economics has been a constant interest for her, and she is the only person to have had items published in the inaugural issues of both the Journal of Money, Credit, and Banking (February 1969) and the Journal of Monetary Economics (January 1975).The JME piece was a book review, and so does not appear in the bibliography below. Schwartz's numerous book reviews make rewarding reading and include a prediction in Kyklos in 1968 of an era when economists would use Internet connections to download macroeconomic databases. The JME moved into its fiftieth volume in 2003, and Schwartz became one of only two authors (the other being Thomas Sargent) to have published in both volumes 1 and 50 of the journal. With the NBER branching out in the 1970's into a national network of researchers, Schwartz has been for a quarter century an unmistakable fixture at the NBER monetary economics program's regular meetings at Cambridge, Massachusetts. At the time of the interview, her contributions to the NBER's various working paper series spanned from NBER Technical Paper No. 4, 1947, to NBER Working Paper No. 9321, November 2002. The latter paper covered the issue of equity price behavior, the same subject of her 1940 publication, implying that Schwartz had entered a remarkable seventh decade of research in that area. Much of Schwartz's early research was on UK economic growth and fluctuations in the nineteenth century, and was reflected in a two-volume study essentially completed in the early 1940's but not published until 1953 [Gayer et al. (1953)]. Robert Lucas, who read the volume as a graduate student in history, describes it as “an amazingly ambitious and exciting mix of history and theory.”
Schwartz's collaboration with Milton Friedman on the relationship between the quantity of money and other variables began in 1948. Their early findings on the importance of money were reported by Friedman in a 1952 American Economic Review paper, but, by and large, he had problems promoting their work in the 1950's. Friedman's solo work in the fifties on flexible exchange rates, the consumption function, and the limits of stabilization policy would cement his reputation and be cited in his eventual Nobel award, but the monetary policy studies initially made a much more limited impact. All of Friedman's remaining 1950's writings on money were in “in-house” University of Chicago publications or in congressional testimony.A short excerpt from a Journal of Political Economy paper by Friedman on money did appear in the 1959 proceedings issue of the American Economic Review. Two books by Friedman in the early 1960's previewed some findings from the monetary history project with Schwartz. The first of these, A Program for Monetary Stability, is now recognized as a classic, but its muted reception is evidenced by the fact that economists have never been able to agree on which year it was published. The second book, Capitalism and Freedom (1962), was intended for a wide audience, but was virtually driven underground when all major U.S. newspapers declined to review it. In 1969, a Federal Reserve Bank of New York official, Richard Davis, gave this perspective on reactions to early monetarist work of the 1950's and early 1960's: “[E]conomists regarded this group—when they regarded it at all—as a mildly amusing, not quite respectable collection of eccentrics…. The fact is that the view held by Friedman and others on the predominant importance of money was just not given serious attention by most economists.”
The turning point was in 1963, when Friedman and Schwartz's 15 years of research finally saw print in their Monetary History and the article “Money and Business Cycles.” The Monetary History is justly celebrated, and has remained in print for 40 years.Furthermore, of the 93 books listed by Princeton University Press in its Economics and Finance Catalogue 2003, the Monetary History is the only pre-1994 publication included. The “Cycles” paper, as Davis acknowledged, provided “[b]y far the largest mass of evidence” on the cyclical relation between money and output. In addition, the paper's “tentative sketch” of the monetary transmission mechanism became a cornerstone of the monetarist literature, and an inspiration to many monetary economists, including the late Rudiger Dornbusch, as they endeavored to escape the “single interest rate channel” view of the transmission mechanism.
Schwartz began the 1970's with another collaboration with Friedman, Monetary Statistics, and went on in 1973 to join a number of economists, including fellow monetarists Karl Brunner and Allan Meltzer, in forming the Shadow Open Market Committee (SOMC). The SOMC commented regularly on U.S. economic policy and, in particular, offered monetary policy recommendations to address the severe inflation problem of the 1970's. Schwartz remains on the SOMC 30 years later, the only founding member to serve since the SOMC's inception.
Friedman and Schwartz's final major collaboration, Monetary Trends in the United States and the United Kingdom, was published in 1982. Among monetary economists, the response to Monetary Trends was mild compared to the reception for the Monetary History. Work by Friedman and Schwartz and other monetarists had already changed macroeconomic thinking substantially, and most academic work was now concerned with rigorous modeling of short-run dynamics, rather than the empirical evidence on long-run relations that concerned Friedman and Schwartz in their Trends study.
Schwartz's own work over the past 20 years has been prolific, and has often been in collaboration with Michael Bordo, with whom she has written some 25 articles. While her areas of research have included banking regulation and the role of international financial institutions, Bordo's and her mutual interest in monetary economics and economic history has repeatedly been evident in their work. Among the issues that their studies, sometimes with further collaborators, have addressed are the role of monetary targets in Canada and the United Kingdom in the face of money demand instability, whether monetary policy rules could have avoided the Great Contraction, the historical record of alternative monetary policy regimes, and the history of economic thought, including the development of monetarism.
