It was soon afterwards that I made my only big conscious U-turn. At the suggestion of Charles Goodhart, then of the Bank of England, I read Milton Friedman's 1967 Presidential Address to the American Economic Association (Friedman 1968). I had always been sufficiently hard-headed to accept the Phillips curve, which showed that the lower the level of unemployment, the faster wages would rise and the worse inflation would be. It took Friedman, however, to demonstrate that the Phillips curve could never be stable. Eventually workers would take into account the higher inflation, and in a sufficiently tight labour market would insist on still larger wage increases to catch up. This doctrine was sometimes called the 'vertical Phillips curve', sometimes the 'accelerationist hypothesis' and sometimes the 'natural rate of unemployment'. The latter was changed by some economists to the NAIRU - the non-accelerating inflation rate of unemployment - to banish the idea that there was anything natural about it.

The basic propositions are now very familiar among macroeconomists and are summarized in Brittan (1983c); but at the time they were explosive stuff. They dealt a death blow to unreconstructed Keynesian demand management. For if there was only one rate, or range, of unemployment consistent with either price stability or even a stable rate of inflation, attempting to run the economy at a higher pressure through demand management was asking for disaster. For it would lead not only to faster inflation, with which one could live, but to accelerating inflation, with which one could not.

My U-turn had little to do with the much-better-known Friedman doctrines about controlling the money supply. If there was some special angle to my own position it was in seeing that the NAIRU and the vertical Phillips curve were the key points of the counter-revolution and that arguments about the monetary transmission process were second-order.

By about 1969 I had grasped the explosive potential of the Friedman address and was indeed sorry that it had not been fully evident in the second edition of my Treasury book, now entitled Steering the economy Brittan 1969). Indeed, I went to the length of writing a critical review of that edition in The Banker under a pseudonym (A. Shepherd [Brittan] 1970). As a consolation I was able to state my new beliefs in the final edition of Steering the economy, published at the beginning of 1971 (Brittan 1971).

{11 The not-so-Great-and-Good >>>}