The End of the Age of Milton Friedman

[marmar]

from HuffPost:




Jeff Madrick
The End of the Age of Milton Friedman
Posted March 31, 2008 | 10:31 AM (EST)


The Bush administration has thrown in the towel on the long battle begun in the 1970s to minimize government oversight of the economy. In light of the credit crisis, it now wants to regulate Wall Street. Treasury Secretary Paulson has put to together broad set of reforms, not truly effectual, but a serious start.

This marks, at last, the end of the Age of Friedman. And not too soon.

There is a direct line from Milton Friedman's ascendancy in the 1970s to the debacle on Wall Street today. Friedman had been working his brand of economic ideology roughly since the late 1940s and early 1950s, but he did not strike gold with mainstream economists and the public until the hyper-inflation of the 1970s.

He had a double-barreled approach. He was a respected scholar who ingeniously sought to prove his views with empirical and statistical research. These views were largely anti-Keynesian. John Maynard Keynes preached that government spending could ward off recession or at least ameliorate their impact. Friedman argued there was little to do but maintain a regularly growing money supply.

But Friedman's monetarism was discarded long ago -- officially by the Federal Reserve in 1984. They worry about interest rates now, not money, which was always a Keynesian principle, if initially of lesser concern. And, in fact, traditional Keynesian stimulus has made a big comeback. The conservative Bush clambered to get aboard a Keynesian fiscal stimulus package initiated by the House Democrats in December.

The second barrel was Friedman's articulate popular policy writings. What did remain of Friedman's philosophy (aside from one academic contribution, the overstated natural rate of unemployment philosophy) was his deeply held, well-articulated and simplistic view that government regulation was almost always bad for us. ......(more)

The complete piece is at: http://www.huffingtonpost.com/jeff-madrick/the-end-of-the-age-of-mil_b_94228.html

[MrScorpio]

1. Free Lunches for everybody

All on Uncle Milty!

[ananda]

2. Excuse me, but what end?

All I see is talk and obfuscation.

The supposed regulations really don't do
much of anything to change much of anything.

[OzarkDem]

5. GOP faux regulation

They're trying to rush through legislation that looks like re-regulation but will still be full of loopholes. Pelosi, Reid, et al will of course follow along obediently.

[readmoreoften]

14. Agreed. I see no 'end'.

If it is it certainly isn't 'end' enough for my tastes.

[JanMichael]

3. Good riddance to bad rubbish!

They tried his ideas on Chile with Pinochet which just prove you need a murderous Fascist to make it work. Which it did for about 5 years then collapsed in failure.

[Blue_In_AK]

4. And not a minute too soon...

I had no idea he was such an evil bastard until I read Naomi Klein. Wow.

[SteinbachMB]

8. He's not a "bastard"

He was a brilliant thinker, and Naomi Klein is not. She just disagrees with him on economic issues, and presents a different view of economics/society.

[Hippo_Tron]

10. Read up on the Chicago Boys and their involvement in Pinochet's regime

[Blue_In_AK]

11. I have a distinctly different impression from what I've read...

...but you're entitled to your opinion.

[readmoreoften]

16. You are on the wrong site. Friedman and the Democratic party are not compatible

any more than mindless wars.

Go take your union-busting, Reaganomics, crap back to Free Republic.

[SteinbachMB]

17. Who said anything about Union Busting?

...Uh , YOU DID, NOT ME! This is a Keynes/Friedman, economic theory thread. Not a thread about unions. But, alas, some of us don't actually read the articles. (you)

[Yael]

6. I for one welcome the end of the neo-con policies and a return to responsible Keynesian doctrine

[denem]

15. Note no. 12 below: The Fed shackles Keynesian solutions

Without government control over cash (M1) we can be left with the long asset depression of Japan throughout the nineties, without a trade surplus to finance it.

[sharesunited]

7. Don't fall for it.

Smoke and mirrors to try to keep the gravy train rolling.

[SteinbachMB]

9. Friedmann was also interested in the interset rate

as an ecomomic tool. Friedman saw the interest rate as elastic, and therefore small changes in the interest rate could generate significant changes in output. i.e. lower interest rates and you'll see an increase in output (and vice versa) This is what the Fed does today ( Friedman lives) Keynes, OTOH, saw the interest rate as inelastic, and not of much use to his overall theory. So he looked to direct government inveastment as a better way to stimulate the economy in a time of crisis.

Both ideas can work in combination, and still do. Although every economic turndown is unique in some way, so these theories need to be tweaked here and there to fit current times.

[denem]

12. Paul Volcker made Monetarism worthless

20% interest rates could murder inflation (businesses, consumers and the economy) stone dead: M3 or no M3. Reagan put a conservative finish on further expansion of Government.

Since Volcker it's been an article of faith that the Fed manages the economy. If so, we are 3% away from a Depression- At 0% interest there's no how low can you go: JM Keynes' famous liquidity trap.

The orthodox prescription for asset/debt deflation is balancing the scales with more money - cash. But thanks to the Fed's monopoly, we cant do it. Each rescue only creates more debt. Because otherwise some fine feathered creditors might get more hurt than they already are.

[bemildred]

13. Economics as a religion has always failed to work well. nt