Did anyone see "Tory! Tory! Tory!" last night on BBC4? Fascinating, and challenging. I've often agreed with things from the Institute of Economic Affairs, as they have always seemed to be on the correct side of Libertarian to me. And indeed recently they published a very good pamphlet promoting Land Value Tax by a chap called Fred Harrison which definitely got me excited! But I had no idea that they were quite as instrumental as last night's program portrayed in the "creation" of Thatcherism.

It turns out I am a monetarist. And that I rather expect that there's a big difference between Hayek's and Friedman's monetarism and what became diluted and corrupted by governments, including Thatcher's and Reagan's. Just as there is between Keynes's exhortation for governments to ensure the sufficiency of effective demand (enough money in the system to consume the products of that economy) and the application of that by governments of the fifties to seventies in the UK spending money like water to satisfy labour demands and the like.

Though these two economic "camps" are portrayed often as diametrically opposed, I'm not so sure they are now. I always thought that Keynes wanted restraint in government money creation, such that over time it would be hovering around the capacity of the economy. Exceeding that capacity over a prolonged period would indeed be inflationary and he knew it. So you either need to be careful about how much you want to spend into the economy or find a mechanism to regulate it so you can withdraw some if things overheat.

On the other hand the monetarists' political acolytes have also got it horribly wrong. They have never really restrained money supply, just privatised it. Sure, there are only about £50bn in notes and coins circulating in the UK economy, but well over a trillion pounds of debt created money simply willed into existence by the banking system. It is kept approximately in synch with economic activity through varying interest rates, but it's always increasing - have a look at "M4" money supply. Remember how the Tories kept abandoning one or other monetary measures because they could never hold them properly in check - it was because they were doing so "second hand" as it were, via interest rates, and not by some agency directly manipulating the amount of real money in circulation.

How do we know they got it wrong? Well Friedman himself has consistently railed against "fiat money". He has recognised for a long time that this money created by private debt, as most (97%) of ours is, is itself inflationary. And nowadays he acknowledges that he was, in any case, too prescriptive about money supply - presumably acknowledging there is some room for over or under-shooting the monetary base depending on circumstances so long as they line up with economic activity in the longer term.

But the biggest thing I took away from last night's program was that it all started with a small group of outsiders prepared to put twenty odd years into the development of the theory and lobbying for it. How influential were Friedman and Hayek before all this? I don't know - I'm not clear on the timeline. I'm not likely to be getting a Nobel Economics prize any time soon for sure - you tend to have to be an economist for that.

But if we can reconcile Keynes and Friedman (if not, quite, Hayek), promote the careful replacement of fiat money with harder money (if not a return to the sort of specie money Friedman advocates) created for our benefit and not as private debt, and promote a system, such as land value tax, to act as a pressure release if one is needed, we can produce a radical economics that promotes sustainable development, levels many commercial and social playing fields (because it takes the extraordinary power of money creation away from private interests) and solves some of the pressing problems of highly indebted poor countries, the demographic time bomb in the west and the resultant pensions crisis, and reduce the need for a headlong rush for growth just to pay off our debts.

And then I saw this and realised that I cannot be a Tory, just yet anyway.