In carrying on the distinctive National Bureau business-cycle work begun by their mentors Arthur Burns and Wesley Mitchell, Milton Friedman and Anna Schwartz revived interest in monetary economics and built a consensus on the macroeconomic power of changes in the money supply. Economists and public officials have a much better understanding of what central banks can and cannot do with regard to income and prices than they had forty years ago, an understanding for which Friedman and Schwartz deserve and are given much credit. To this extent, the court of public and professional opinion has treated their work favorably. Yet their methods and results were intensely controversial every step of the way. What has been called the “black box of monetarism,” or an inadequate theoretical framework, was a persistent theme in reactions to their work, even from critics who shared their views on the significance of money and the role of monetary policy.

When they began their collaboration in the late 1940s, Friedman thought that Marshallian value theory provided a good explanation of relative prices and the quantity theory, of price level statics. But he thought little was known about the dynamic problem of business cycles. Friedman and Schwartz believed that empirical investigations were the surest route to this undiscovered knowledge.

At the time, there were two traditions to call upon for empirical work, the National Bureau approach and the Cowles Commission econometric program.