What has happened to the ideas and the current of thought that developed out of the original insights of Irving Fisher and his peers? The short answer is that much of this current of thought is still there under another name. The major planks of the New Keynesian research program listed above had much of their development inside the twentieth-century monetarist tradition, and all are associated with the name of Milton Friedman. The importance of analyzing policy in an explicit, stochastic context and the limits on stabilization policy that result comes from Friedman (1953a). The importance of thinking not just about what policy would be best in response to this particular shock but what policy rule would be best in general--and would be robust to economists' errors in understanding the structure of the economy and policy makers' errors in implementing policy--comes from Friedman (1960). The proposition that the most policy can aim for is stabilization rather than gap-closing was the principal message of Friedman (1968). We recognize the power of monetary policy as a result of the lines of research that developed from Friedman and Schwartz (1963) and Friedman and Meiselman (1963). And a large chunk of the way that New Keynesians think about aggregate supply saw its development in Friedman's discussions of the "missing equation" in Gordon (1974).
Thus a look back at the intellectual battle lines between "Keynesians" and "Monetarists" in the 1960s cannot help but be followed by the recognition that perhaps New Keynesian economics is misnamed. We may not all be Keynesians now, but the influence of Monetarism on how we all think about macroeconomics today has been deep, pervasive, and subtle.
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