Twenty-five years ago this week, a seminal event occurred that symbolised a profound change in British - even world - economic policy. In response to Sir Geoffrey Howe's contractionary budget of March 1981, a letter was signed by 364 academic economists, denouncing the central tenets of Thatcherite economic strategy.
Most of the luminaries of the British economic establishment were signatories, including Mervyn King, who became the present governor of the Bank of England. I am happy to say that I narrowly missed signing the letter, having not been asked to do so.
At the time, Britain was not only in its deepest recession since the second world war but was also suffering from sky-high inflation.
The key points of the letter were that inflation would not be controlled "by deflating demand", that output would not necessarily recover even if inflation were controlled, and that Conservative policies would "deepen the depression ... and threaten our political stability".
The letter of the 364 coincided almost precisely with the moment the recession hit bottom.
That coincidence allowed the Tories of the 1980s to turn the economists into 364 laughing stocks, and it hastened the demise of Keynesianism as the dominant economic philosophy of the era.
Yet many of the 364 insist that they were right all along.
Looking back at the 50 years since Britain's economy emerged from its postwar straitjacket, it is clear that 1981 marked a decisive break point. In the 25 years from 1956 to 1981, inflation was on a permanently rising curve, averaging 7.9%per annum over the entire period.
In the quarter century since 1981, inflation has been generally declining, averaging only 4% overall. This has been achieved, as predicted by the Thatcherite monetarists, without any sacrifice to economic growth.
From 1956-81, GDP growth averaged 2.3% per annum, and this has risen to 2.6% since 1981.
Certainly, several key points made by the 364 were wrong. Inflation did come under control.
There was no permanent depression.
And political stability, after the miners' strikes at least, scarcely wobbled. In fact, Britain gradually lapsed into political torpor.
Yet the 364 can make one counter claim. While GDP growth rebounded after 1981, it took a long time for unemployment to come down. In the Keynesian years from 1956-81, it averaged 3.7% of the labour force.
From 1981 onwards, unemployment has never again approached that level, and has averaged a horrible 8.3%. Even after a decade and a half of expansion under the last two governments, the jobless rate has never once reached the levels that were achieved on average in the previous quarter century.
So the monetarists were right that inflation could be brought down by the control of demand, rather than by direct controls over prices and incomes.
They were probably right that output would recover after a demand shock, though perhaps not "automatically", as they claimed. But where they were really wrong was in claiming that the cost in terms of unemployment would also be temporary:
25years in which it averaged 8.3% was one heck of a price to pay for their monetarist experiment.
