From Academia to Washington

In 1945, 90 per cent of AEA economists polled favoured the adoption of the Bretton Woods agreement (Meier 1982, 52). Eli Shapiro (1970, 84) doubted that 1 per cent of post-war monetary economists would have predicted the extent of Friedman’s ‘Plaguing of the Central Bankers’. But in the 15 years from his seminal 1953 essay to his occupancy of the AEA Presidency, Friedman’s case was transformed from minority to majority academic position. Friedman (1967, 133–4) estimated that in this period, the proportion of academic economists favouring increased flexibility of exchange rates had risen from less than 5 per cent to greater than 75 per cent.1 Others thought that towards the end, at least 90 per cent of academic economists accepted the theoretical soundness of the case for floating rates (Roosa 1967b, 177; Fellner et al. 1966, 5–6; Sohmen 1961b, xi; Halm 1970, vi-vii; Laffer 1973, 25). Friedman (1975, 162, 166, 178) modestly downplayed his own ‘powers of persuasion’, but noted that his ‘fellow believers’ in flexible exchange rates had grown from ‘a meagre platoon to an army’. Some of his opponents (such as Burns and Roosa) maintained their faith in a par value system. But within a remarkably short space of time they had been relegated to ‘the fringes of debate’ (Volcker and Gyohten 1992, 136, 154).