Paul Krugman: The Eclipse of Milton Friedman: Noted for August 13, 2013
Paul Krugman: The Eclipse of Milton Friedman:
Friedman’s economic analysis has taken a serious hit. But that’s not the whole story…. Friedman’s larger problem… is… he was… a man trying to straddle two competing world views… an avid free-market advocate, who insisted that the market, left to itself, could solve almost any problem… [and] also a macroeconomic realist, who recognized that the market definitely did not solve the problem of recessions and depressions. So he tried to wall off macroeconomics… and make it… inoffensive to laissez-faire sensibilities…. We do need stabilization policy--but we can minimize the government’s role by relying only on monetary policy… and then not even allowing the monetary authority any discretion.
At a fundamental level, however, this was an inconsistent position: if markets can go so wrong that they cause Great Depressions, how can you be a free-market true believer on everything except macro? And as American conservatism moved ever further right, it had no room for any kind of interventionism…. 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.