Economist duo croons counterpoint to sad-song monetarists

Economists Frank E. Morris and Leonard H. Lempert would make a great duet singing about the economy to the tune of that World War I song: ''Pack up your troubles in your old kit bag and smile, smile, smile.''

Their upbeat crooning is aimed at some of their monetarist colleagues - those believing strongly in the dominant influence of money on the business cycle. These troubled economists fear that the recent dramatic slowdown in the growth of money (M1 - currency plus accounts with checking privileges) could prompt a recession next year.

For instance, W. Lee Hoskins, of Pittsburgh National Bank, states: ''If . . . the Fed permits monetary growth to remain near a standstill well into next year, the risks multiply of voters going to the polls next November in the midst of a renewed economic contraction.''

Citibank maintains that, if the Federal Reserve System kept money growth at a 2 percent annual rate between now and January-February, ''that would increase the probability of a stall in the economy sometime in the first three quarters of '84.'' The bank's economists, however, rate that probability as perhaps 30 percent, emphasizing this is not their basic forecast of continued recovery.

Comments Mr. Lempert, director of Statistical Indicator Associates, in Egremont, Mass.: ''Forget about the money supply, federal deficits, Volcker (Paul A. Volcker, chairman of the Fed), interest rates, Federal Reserve policy, the President, Congress. The economy is completing almost a year of genuine cyclical recovery, and it is going to complete its second year in 1984. Never has so much nonsense been expressed about the 'dangers' facing a recovery.''

And Mr. Morris, who is president of the Federal Reserve Bank of Boston and one of 12 people who determine the nation's monetary policy, says it is ''hard to find any place of weakness in the economy.'' Christmas retail spending is ''very positive.'' Capital-goods expenditures are rising. Inventory levels are still low. Defense spending is growing.

''I don't see how you could build a near-term recession out of this scenario, '' he told the press here.

Messrs. Lempert and Morris, though sharing an optimistic outlook, do have different views on the economy.

Mr. Morris, taking the standard Fed position, worries about the federal budget deficit being so large that it will cause a ''serious financial crunch'' and produce a recession in mid- to late-1985.

Mr. Lempert notes that at an annual rate the deficit plunged from a high of $ 208 billion to $166 billion in the second quarter and bounced back somewhat to $ 188 billion in the third quarter.

''If we anticipate the current economic upswing continuing through a second and third year, we can easily envision the deficit being reduced by half to $100 billion by year-end 1985. We do not see why such a level would inhibit additional economic upswing for a fourth year. A fourth year could then see an additional reduction in the deficit to $60 or $70 billion,''says Mr. Lempert.

He believes the direction of the deficit is crucial, that is, whether it is growing or shrinking, not the level.

Even if the recovery ends in late 1985, he adds, it would match the average postwar life of an expansion of about three years.

Mr. Morris considers concern about the measure of money known as M1 misguided , because ''we simply don't understand what M1 means. . . . We don't know why it is coming in low now any more than we knew why it came in high in the spring.'' M1 grew at a rapid rate in the first half of the year. He holds that this measure should be completely dropped as a guide to monetary policy. Other broader measures of money known as M2 and M3 have continued growing this autumn, falling within the Fed targets. Since he puts more trust in these larger measures, he doesn't believe the fire of the economy will be dampened for lack of oxygen - money.

Though not a monetarist, Mr. Lempert tracks deflated money - M2 with the impact of inflation removed - as a leading indicator that tends to point to the future direction of the economy. M2's growth has been adequate to keep the fire burning for many months, and he doesn't believe Fed officials are so dense as to cut off that supply of new oxygen completely.

''It is past the time to wake up to the fact that conjecture about what will bring the upswing to an end is premature at this point,'' he says. ''Such conjecture is an exercise in futility.''