My attention has been drawn, by none other than the great Sir Douglas Wass (whom some believe to be the model for my fictional character Sir Douglas Corridor) to news that most of us have missed. Older readers will recall that Wass was Permanent Secretary to the Treasury during the late Seventies and early Eighties. Sir Douglas, in common with others, had to endure the experience of Margaret Thatcher and her close colleagues arriving in office as fully paid-up believers in a half-baked economic doctrine known as monetarism. They had picked up a theory that the many difficulties of running the British economy could be overcome by controlling the money supply (or the 'money stock', as purists preferred to call it). At its extreme, this theory was broadened into the view that, if governments simply left the economy alone, and instructed the central bank to control the money supply, inflation would be banished, entrepreneurial activity would thrive, economic growth would deliver the goods, unemployment would disappear, and so on. This was always a far-fetched theory - and indeed it had been fetched all the way from Chicago, Illinois, where Professor Milton Friedman was Professor of Economics, and from which base he had managed to convince far too many influential people that he had discovered the economic philosopher's stone. Sir Douglas and other members of what was in those days a Rolls-Royce Whitehall machine had to suffer this nonsense. For a time Sir Douglas was left out because he was doing the job of all good civil servants and asking probing questions about the intellectual and empirical basis of the new policy. Sir Douglas lived to fight many another day, but one senior Bank of England official, John Fforde, never quite recovered from the feeling of isolation brought on by the reaction to his expression of honest doubts about monetarism. Fforde not only knew about the money supply: he had once been chief cashier and signed the bank notes. There were honest doubters in the Cabinet, too, such as Sir Ian Gilmour, Peter Walker, Jim Prior and Lord Carrington. These were the men Mrs Thatcher dubbed 'the wets'. Indeed, I first met the wets because I myself was attacking monetarism in this column, and it was a sensible step to meet and compare notes. I recall one civil servant - not Wass - telling me at the time: 'Of course monetarism is crazy. But it's our job to make it work properly.' In which pursuit they oversaw a rise in unemployment from one and a quarter million to 2 million to 2.5 million and eventually to well over 3 million. Which brings us to the economic news that so many of us missed while life was dominated earlier this month by the run-up to the unveiling of the Treasury's 'An Assessment of the Five Economic Tests'. Like many a great scoop, this one emerged from a lunch - in this case, Lunch With the Financial Times. At which point I have to confess that it was not my scoop, and I wasn't even at the lunch. No, this was a lunch at which Simon London, the FT's US management writer based in San Francisco, entertained the said Milton Friedman. Friedman retired to San Francisco from Chicago in the late Seventies. He had lunch with London in a regular haunt, San Francisco's North Beach Restaurant. Now we all know that when people reach a certain age they tend to 'open up'. Sometimes they just want to put the record straight; sometimes they feel discretion has been the better part of valour for 70 or 80 years and the time has come to say what they really think. In Friedman's case it has to be said that the professor was never known for being tight lipped. Indeed, way back in the Seventies and Eighties, having established his reputation and won a Nobel Prize, Friedman was very happy to let it all hang out, and often appeared on our television screens peddling suspiciously simple solutions to a variety of problems. In Friedman's case there is no need to open up for the sake of it. He has been doing that for years. No, Friedman, now 91, belongs to that category of veterans who feel it is time to own up. It is 'true confession' time. 'Lunch With the FT's' world scoop is that Friedman has changed his mind: he admits he was wrong. Having had all that baleful influence on economic policy everywhere from the United Kingdom to Chile, Friedman has recanted. The economic quote of the month - and probably the decade - is that Milton Friedman now admits: 'The use of quantity of money as a target has not been a success.' He added: 'I'm not sure I would as of today push it as hard as I once did.' (FT, 7 June 2003). So there we are. It takes some digesting, not least because we have it from the horse's mouth. This seems the perfect point at which to tell another story about Friedman. Way back in 1980, when the application of monetarism was proving an almost instant failure (which did not stop the Thatcher government from indulging in a game of 'double or quits'), I wrote to Professor JK Galbraith asking whether he would like to engage in a debate with Friedman in The Observer. Galbraith replied that it was unlikely that Friedman would: 'We have an understanding that he's better on his feet, but I'm better in print.' But Galbraith suggested I should at least send Friedman a copy of an attack (on Friedman) that he was quite happy to write, and offer him the right of reply. In The Observer of 31 August 1980, Galbraith observed that 'Britain has, in effect, volunteered to be the Friedmanite guinea pig. There could be no better choice. Britain's political and social institutions are solid and neither Englishmen, Scots nor even the Welsh take readily to the streets... British phlegm is a good antidote for anger; but so is an adequate system of unemployment insurance.' Friedman did not exercise his right of reply. But he did send me an advance copy of his evidence to a House of Commons Select Committee in which he had distanced himself from Thatcher's belief that public sector borrowing should be reduced in times of recession. It was a nice scoop - and we didn't even have to buy him lunch.