Econ Cage Match: Friedman vs Keynes

Milton Friedman advanced the view that recessions and depressions were primarily monetary phenomena, and that the appropriate weapon against them was expansion of the money supply. He went further, claiming that the Federal Reserve caused the great depression. In fact monetary policies were somewhat effective against recession during most of the later half of the twentieth century, and an anti-Keynesian attitude became standard among conservatives.

Then came the Panic of 2008. Conservatives universally poo-pooed what the called the "leftist" Cassandras like Roubini and Krugman. When the tidal wave hit, Bernanke frantically threw money out of helicopter (a Friedman metaphor) but nothing worked.

Paul Krugman has a series of blog posts on how the current crisis has exposed the hollow core of monetarism and brought Keynesian ideas once again to the fore. The first one (Nov. 29) features Amity Schlaes as monetarist road kill.

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