Who was Milton Friedman?
Galbraith, “The Collapse of Monetarism and the Irrelevance of the New Monetary Consensus,” June 24, 2008 Naomi Klein, The Shock Doctrine, June 24, 2008 Responses to The Shock Doctrine: Doug Henwood, “Awe, Shocks!,” Left Business Observer, March 2008 Jonathan Chait, “Dead Left,” The New Republic, July 30, 2008 Michael Hardt, “Capitalism: The Violence of Capital,” New Left Review, February 2008 James Arnt Aune, “How to Read Milton Friedman: Corporate Social Responsibility and Today’s Capitalisms,” in The Debate Over Corporate Social Responsibility For links to articles in support of Friedman’s legacy, see Cato Institute and Milton Friedman (1912-2006).
(February 15, 2007) To the Editors: We begin this response to Paul Krugman’s “Who Was Milton Friedman?” [NYR, February 15] by noting a few of the many inaccuracies in his essay and then go on to note the errors in his references to technical matters concerning monetarism and Keynesianism. Contrary to Krugman’s suggestion, the description of 1930s monetary policy as deflationary is not something Friedman thought up in 1967 to distort the Monetary History. Friedman and Schwartz referred to “deflationary actions on the part of the Federal Reserve System” in the 1930s in their 1963 paper “Money and Business Cycles.” And a 2002 talk by Ben Bernanke twice characterized the 1930s as featuring “contractionary monetary policies,” not unlike Friedman’s description. Krugman claims that Friedman engaged in crude assertion by stating that the Federal Reserve “permitted a sharp reduction in the monetary base.” In fact, the monetary base declined over 5 percent from April 1928 to October 1930, certai
The history of economic thought in the twentieth century is a bit like the history of Christianity in the sixteenth century. Until John Maynard Keynes published The General Theory of Employment, Interest, and Money in 1936, economics—at least in the English-speaking world—was completely dominated by free-market orthodoxy. Heresies would occasionally pop up, but they were always suppressed. Classical economics, wrote Keynes in 1936, “conquered England as completely as the Holy Inquisition conquered Spain.” And classical economics said that the answer to almost all problems was to let the forces of supply and demand do their job. But classical economics offered neither explanations nor solutions for the Great Depression. By the middle of the 1930s, the challenges to orthodoxy could no longer be contained. Keynes played the role of Martin Luther, providing the intellectual rigor needed to make heresy respectable. Although Keynes was by no means a leftist—he came to save capitalism, not to
” seriously mischaracterizes Friedman’s economics and his legacy. In this paper we provide a rejoinder to Krugman on these issues. In the course of setting the record straight, we provide a self-contained guide to Milton Friedman’s impact on modern monetary economics and on today’s central banks. We also refute the conclusions that Krugman draws about monetary policy from the experiences of the United States in the 1930s and of Japan in the 1990s.
