Anna Schwartz is an economist who has changed our understanding of how the world works. And our means not simply economists – it means also politicians, policy makers, journalists, and indeed everyone with any interest in economics. Further, she has changed understanding in more than one field of economic analysis. This she has done in the course of a long career of continuous activity. She graduated from Barnard College in New York at the age of 18, gained her Master’s in Economics from Columbia University when she was 19, and had started her career as a professional economist one year later. Her first published paper appeared only four years subsequently, in the 1940 issue of the Review of Economics and Statistics – then as now a leading journal. Written by Arthur Gayer, Isaiah Finkelstein, and, as she then was still known professionally, Anna Jacobson, the paper was on “British Share Prices, 1811 - 1850”. That paper was a precursor of several aspects of her subsequent work. It was on financial data, on data drawn from Britain, and was meticulous in the presentation, explanation, and interpretation of the data. An example is the discussion of the change in the behaviour of the share price index after 1824. This change, they showed, told nothing about the British economy or capital markets generally, but resulted from the inclusion of mining stocks – then as now sometimes rather speculative investments. As they wrote, “This example … has been cited to illustrate the need for constant reference to the historical meaning of movements in the indices.” The care to put data in its historical context has characterised all her work, and is one of the ways in which it is an example to every economist.

In 1941 she joined the staff of the National Bureau of Economic Research. She has worked in the New York office of that organisation from then right up to the present, and indeed continues to work there five full days a week. When she joined the National Bureau, it was engaged in the study of business cycles, the fluctuations in national income (and also in employment and certain other variables) that occur as an economy grows. She joined the small staff of the National Bureau in this study, and in collaboration with Arthur Gayer and Walt Rostow produced the monumental “Growth and Fluctuations in the British Economy, 1790 – 1850: An Historical, Statistical, and Theoretical Study of Britain’s Economic Development”. It appeared in two volumes in 1953, its publication having been delayed by the war for some ten years after the work on it was actually completed. That book is still among the first a scholar of the economics of the period turns to. It was reprinted in 1975. One of the authors, Arthur Gayer, had died even before the book’s first appearance, but the other two authors wrote a new introduction, reviewing some of the literature on the subject that had appeared since 1953. They admitted that there had developed what they called an “amicable divergence of view” on the interpretation of some the facts set out in the book. In particular, Anna Schwartz indicated that she had in the light of recent theoretical and empirical research revised her view of the importance of monetary policy and her interpretation of interest rate movements.

Much of this recent research was her own. For, some years before her first book was reprinted, another economist had joined what might perhaps even by that stage be called the Schwartz team of co-authors. Prompted by Arthur Burns, then at Columbia University and the National Bureau, subsequently Chairman of the US Federal Reserve System, she and a young economist called Milton Friedman had teamed up to examine the role of money in the business cycle. The first product of this partnership was “A Monetary History of the United States, 1867 – 1960”. That appeared in 1963, along with the equally famous article, “Money and Business Cycles”, which as with her first paper was published in the Review of Economics and Statistics. Subsequently two further books resulted from their partnership, “Monetary Statistics of the United States” appearing in 1970 and “Monetary Trends in the United States and the United Kingdom: Their Relation to Income, Prices, and Interest Rates, 1867 – 1975” in 1982. Each one of these volumes was an astonishing combination of analytical insight, imagination, and rigour, with a massive weight of scrupulously sifted evidence. The effect of the first volume alone was truly extraordinary. It appeared at a time when the influence of money on economic activity and prices was downplayed or denied by the majority of economists who anywhere in the world thought about these subjects. That book changed the consensus. While there of course remain differences, of emphasis at least, among economists, few would now deny the importance of monetary control for the control of inflation. It is to her work with Milton Friedman that many countries enjoy the low level of inflation they do today – for without her work the importance of having monetary policy focussed on the long term, and on the behaviour of the price level, would not have been realised and they would not have monetary policy conducted according to these precepts.

She has also changed minds over financial regulation. Economists, bankers, and policy makers have been and are concerned with the stability of the financial system. Anna Schwartz, in a series of studies in the 1970s, 1980s, and indeed up to the present day – in some remarks at a conference just over a year ago in Helsinki – has emphasised that price level stability is essential for financial system stability. The uncertainty engendered by the absence of the first makes the latter unattainable. But even if we have price level stability, from time to time individual financial institutions will fail. Drawing on evidence from over two centuries she has demonstrated that such failures do not have major consequences for the economy so long as their effects are prevented from spreading through the financial system. Individual institutions should be allowed to fail, not supported with taxpayer’s money. This lesson, too, is widely (although regrettably not yet universally) accepted.

There have been other areas of work – on the international transmission of inflation and of business cycles, on the role of government in monetary policy, on measuring the output of banks, on the behaviour of interest rates, on deflation, on monetary standards, and many more. Looking at this work it is immediately obvious not only that it is of high quality, but also that she – although holding teaching positions for only a short part of her career – has continually helped and developed younger scholars by being willing to work with them. They have learned not only methods of work from her, but also her approach – the scrupulous examination of the past, so as both to understand it better and to draw lessons for the present.

She has also done such work overseas. Some years ago the Department of Banking and FInance at City University, London, England, started a research project on the monetary history of the United Kingdom. Anna Schwartz was for many years an adviser to that project. She commented on papers, suggested lines of approach, came and spoke to students and at academic conferences where the work was discussed.

She is most famous for her collaboration with Milton Friedman on A Monetary History of the United States, 1867-1963 which put forward the hypothesis that changes in monetary policy have large effects on the economy. In particular, they lay a large portion of the blame for the Great Depression at the door of the Federal Reserve. But although well known and important, that is only a small part of her work. Milton Friedman Milton Friedman (born July 31, 1912) is a U.S. economist, known primarily for his work on macroeconomics and for his advocacy of laissez-faire capitalism. ... Monetary policy is the process of managing money supply to achieve specific goals—such as constraining inflation, achieving full employment or economic growth. ... The Great Depression was a massive global economic recession (or depression) that ran from 1929 to approximately 1939. ... The Federal Reserve System is headquartered in the Eccles Building on Constitution Avenue in Washington, DC. The Federal Reserve System (also the Federal Reserve; informally The Fed) is the central banking system of the United States. ...