Must government create an economy’s currency? This question exercised economics during the immensely disturbing events of the Great Depression in the 1930s and early 1940s. The “monetarist” view emerged by the late 1940s. Milton Friedman, the standard-bearer of monetarism, held that indeed government was necessary to create and manage the economy’s currency. As he wrote in the American Economic Review in 1948:
Milton Friedman, “A Monetary and Fiscal Framework for Economic Stability,” AER 38, no. 3 (Jun. 1948), 246.
The view that “government must provide a monetary framework…since the competitive order cannot provide one for itself” was one Laffer would orient himself against as he embarked on his career and rose in academic economics in the 1960s and early 1970s. It was Laffer’s contention that money largely will emerge from the marketplace like any ordinary good or service.