I took a fabulous course in grad school on Monetary Theory and Policy and at one point the class was discussing how laughably bad the policies of (I think) Arthur Burns were. The professor scolded us pointing out that all the stuff we were being taught had to be learned somehow and what we were describing as laughably bad was this learning.
Right, that is exactly the wrong thing to take from it, that is exactly the kind of misinterpretation of history that people still have (generally speaking, you cannot view history in terms of the present, economists think you can do it because economics is a science...it isn't).
The reason why Burns' policies were poor was because he wasn't making policy within a context that makes sense today. From the mid-60s onwards (before inflation took off), monetary policy was formed politically. The economy used to cycle around elections for this reason. Burns really took this to its logical conclusion...and to be totally clear, a lot of the mistakes that Burns made were made in other countries. Burns was actually fairly hawkish, compared to Miller, but the problem was (partly for reasons of political expediency) people believed that wage restraint policies would be effective.
To loop back, the lesson of the 60-70s is that monetary policy should be free of political influence. Look at what is happening now. Has the lesson been "learned"? And, more importantly, can it ever be "learned"?
