| Book Review | The American Historical Review, 108.4

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| Book Review | The American Historical Review, 108.4 | The History Cooperative

Book Review

Canada and the United States

Allan H. Meltzer. A History of the Federal Reserve. Volume 1, 1913–1951. Foreword by Alan Greenspan. Chicago: University of Chicago Press. 2003. Pp. xiii, 800. $75.00.
Allan H. Meltzer's book is the most important contribution to the scholarly literature on the history of the Federal Reserve since Milton Friedman and Anna Schwartz's Monetary History of the United States, 1867–1960 (1963), with which it will inevitably be compared. Meltzer has several advantages over his predecessors. He can take the importance of Federal Reserve policy in the development of the Great Depression as a given, the point having been convincingly demonstrated by Friedman and Schwartz. He can build on their influential historical analysis of the importance of monetary policy for business cycles generally. He can utilize archival materials that were not available forty years ago. And he can consider Federal Reserve decision making in more detail: whereas Friedman and Schwartz covered ninety-three years of U.S. monetary history in 600 pages, Meltzer's rather longer book covers little more than a third of the same period.	1
Although the author is best known for his important contributions to economic theory, and monetary theory in particular, he clearly has an abiding interest in history and no reluctance to immerse himself in primary sources. But Meltzer is first and foremost a theorist, and his interpretation of Federal Reserve policy and its consequences is ultimately guided by a particular theoretical conception of the role of central banking in a market economy. That role, in his view, is to focus on price stability, from which the stability of other macroeconomic variables, notably output and employment, will naturally flow. It follows that any blunders committed by the Federal Reserve reflected the failure of decision makers to embrace the correct theoretical model.	. . .

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