In recent years much has been written about the Chilean economy and its controversial flirtation with Chicago School economics. Economists have eagerly watched Chile's implementation of free market policies. The result of these economic reforms was hailed in the late 1970s, somewhat prematurely, by the Chicago School economists as a resounding success and by the critics as a disaster of catastrophic proportions. In 1981 Chile slid into another deep recession and any ground gained by the monetarist policy of Milton Friedman seemed to disappear. The monetarist experiment in Chile has generated international attention, stirring up controversy in financial and academic circles far beyond its borders. Why so much interest in a country that is somewhat insignificant in the overall world economy? The reasons are many. Firstly, the success or failure of the policy has implications for other developing countries in terms of potential development models. Secondly, it addresses partly the question of applicability of the wholesale adoption of Western orthodox economic models by underdeveloped countries. Thirdly, given the nature of the authoritarian government presently in power in Chile, the experiment has major implications for the much debated problem of the interrelation between economic liberalism and political freedom in the context of developing countries. Fourthly, and probably most importantly from a development economist's point of view is the contribution of Chile's recent reforms to the resolution or widening of the conflict between opposing economic paradigms. Regardless of whether an economist is a proponent or opponent of the neoclassical orthodoxy, ultimately, the goal of resolution should be of paramount importance. For it is only after a unified body of thought has evolved can economists put behind them the mistakes made due to the unquestioned worship of false or unrealistic doctrines. The main aim of this thesis is to give an account of Chile's experience with monetarist policy. The deeper arguments within the school of development, however, are not ignored. Hence, the thesis will not only provide a guide to monetarist theory and the results achieved in Chile, but also appraise the debate surrounding the very foundations of economic thought. This debate has important implications for the success of economic policy. As Boulding points out, …"Whenever it comes to the theory of economic development, the failure to recognize explicitly the essentially epistemological nature of the problem has led to a proliferation of mechanical models of very doubtful value, and one fears the giving of a large amount of bad advice.”1It is the contention of this thesis that the recent policy reforms in Chile fit this description well. The paper will proceed in the following way in an attempt to convince the reader of this. Chapter one will give an overview of the history and structure of the Chilean economy up until September 1973, the date of the military coup d'etat which installed the present regime. It will focus on subsequent government policies formulated in response to the perceived failings of Chile's economy. The chapter will end with a summation of the problems the military Junta faced upon its inauguration to power. Chapter two will outline the Junta's policy response to the economic situation as described in chapter one. The response can be quite distinctly broken down into phases and each will be described in detail. Chapter three will outline the theory of monetarism, underlying both the Junta's short term response of stabilization and its longer term response of liberalization. The explanation of monetarism will cover its methodology, and its policy prescriptions and offer extensive criticism.Chapter four provides a comprehensive guide to the results achieved by the experiment in monetarist economic theory, in the period 1973-1982. The aim being to document the similarities and differences between the results predicted by the monetarist theory and those achieved by the Junta. Chapter five looks at the situation surrounding the 1982 devaluation crisis. It focuses on the events precipitating this crisis. The main aim of this chapter, however, is to provide a thorough evaluation of the outcome of the experiment. Chapter six examines alternative growth strategies that have been applied and could have been applied to Chile. It looks at past models, models implemented in other countries and most importantly applies an alternative growth strategy which can overcome the failings of other models. The final chapter, chapter seven, will provide a summary of the thesis and a restatement of the conclusions drawn from the research.Chile is often labelled, in economic journals as a "laboratory" for the monetarist doctrine in economic journals. This is an analogy making reference to Milton Friedman's dispassionate search for a value free science of economics. Extending this analogy, however, to its logical limits, human beings become the mice in an economist's maze responding to changing circumstances and incentives. What if one of the Chilean mice is to die? A small price to pay in the name of the pursuit of science.-------------------------------------------------------------------------------------------------------------------1 K. Boulding, "The Economics of Knowledge and the Knowledge of Economics". American Economic Review: Papers and Proceedings, Vol. 56, No.2, 1966, pp.1-13 at p.9.