LAST week saw obituaries of Aubrey Jones, the cool and analytic minister under Edward Heath who operated the futile "Prices and Incomes Policy" in the early 1970s. We must be courteous in death but we might be allowed a snigger at the wild fatuity of the Tory policy of the time.
Aubrey Jones, and the entire panoply of the state and its legal system, were busy fixing prices to stop inflation. In 1971 grown-ups were allowed to think the dissolving of the currency was the result of greedy trade unionists or more sinister Arab oil sheikhs. Businesses were also said to be putting up their prices contrary to the wishes of the defunct Mr Jones.
With its characteristic naÃ¯vety the CBI went along with the nonsense. Inspectors would raid greasy spoon restaurants and fine them for increasing the price of bacon butties. The Scotsman was admonished for raising its price even though the cost of paper had doubled. Petrol prices were a capitalist conspiracy.
The entire venture was pure folly. Prices go up not because of sinful traders or consumers but because the Central Bank is printing more money than is taken in tax receipts. Inflation is wholly and exclusively caused by governments. Double the notes in circulation and prices will double.
For more than a generation Maynard Keynes had mesmerised the policy makers. His bowdlerised thesis was that a little bit of inflation did you good - it dissolved debts and made government procurements cheaper. The idea that inflation was benign seemed true. The years after the Second World War had been ones of rising prosperity accompanied by inflation.
That landscape of assumptions has largely gone now. Only a few tyrants like Robert Mugabe pretend prices rise because of a deceitful citizenry. Several distinguished minds contributed to this counter revolution in economic thinking - endorsed by raw experience - but Milton Friedman has a strong claim to leading the new way of thinking.
Yet Friedmanâs position has a deep anomaly within it. His entire cosmology is a belief in markets and a severe doubt that politicians can deliver any services with anything near the competence of entrepreneurs.
If the state is inept, even corrupt, he seems to have a blind spot about the state running money ... and enjoying monopoly powers. This part of Friedmanâs mental furniture has been adopted and extended by the European Commission to create a supra-national money monopoly - the euro.
All public discussion on the prospects of the UK surrendering the pound are conducted on the assumption that we can be in or out. Who ever asks if the authorities need to preserve their monetary monopoly? There is an alternative: let private banks issue their own notes. Scotland had a long history of private bank note issues and even of private coin issues.
Only coin collectors and economic historians believe the claim that the Scots banking note issue was only extinguished by Sir Robert Peel in the 1840s. We still see Scottish notes in our pockets but they are merely receipts for Bank of England notes.
Could we open up a new front on the policy horizon? Friedrich Hayek, argued in Denationalise Money that the politicians and their agents, the central banks, should forfeit their monopoly. His assertion is that honesty or reputation would be tested daily on the exchanges.
We can see in half the nations of the world the local state monopoly currencies are little more than cruel jokes. People prefer to trade US dollars or possibly gold coins. In some territories the US dollar has displaced the central bank.
Inflation in the UK - how I wish it was termed "dilution" - is bobbing along just beneath 3 per cent. Far better than Edward Heathâs 20 per cent but at our modest rate prices still double every 23 years. So, here is a huge disagreement in the centre of what we might call liberal thinking. Should the state have the power to coerce us and if so should it be forced to obey monetary rules? Gordon Brownâs innovation of