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Burying Friedman

I’ll present this without much commentary, but in case you missed it, Paul Krugman has a brutal takedown of Milton Friedman here:

“So Friedman has vanished from the policy scene — so much so that I suspect that a few decades from now, historians of economic thought will regard him as little more than an extended footnote.”

James Galbraith said it better in this essay.   I mean, this line (said at a Friedman conference) has to be one of the very best ever in an economics speech:

“Truly I come to bury Milton, not to praise him. But I would like to do so on the terrain that he favored, where he was strong, and over which he ruled for many decades.”

Anyhow, I see where Paul Krugman is coming from.  And I agree with many of his points.  It’s easy to say, especially from a Keynesian or Post-Keynesian perspective, that Milton Friedman muddied the waters in lots of ways.  But you can’t diminish the man’s policy influence.  I think it’s totally wrong to say he’s “vanished from the policy scene”.  In fact, I think monetarism is still the dominant view of the world.  Just look at how much people obsess over every little move the Federal Reserve makes.  The Fed is where it’s at these days.  There’s really no denying that.  Using fiscal policy as a policy tool takes a back seat to everything the Fed does.

We still live in a monetarist world.  We still live in a world highly influenced by the thoughts and views of Milton Friedman.  And that’s not all bad.  Because once the monetarists figure out that Fed policy is most effective when it’s essentially acting like a fiscal entity, then we’ll all basically be on the same page.  In fact, I’d argue that even Milton Friedman understood this to some degree.  His famous view of fighting deflation with helicopter drops is, after all, actually a fiscal policy as Scott Fullwiler has noted brilliantly.

Anyhow, I’ll let the real economists duke this one out as I am sure the Market Monetarists will have some fightin’ words for Senor Krugman….

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