How come no economist on the right is asking "Where are the Galbraiths of yesteryear?"? It's because Milton Friedman won the debate, and John Kenneth Galbraith lost. Both Friedman (on the right) and Galbraith (on the left) were once leading public intellectuals and economists. I used to read them both. I wonder how many young economists have even heard of Galbraith?
[I wrote this a couple of days back, but wasn't sure whether to post it. Today I asked a colleague in Political Science/Political Economy about Galbraith's reputation as an academic, and he said it was high – in the same ballpark as Friedman's academic reputation in economics. Then, by sheer chance, I found a Brad DeLong post, recently hoisted from his archives, saying something similar. In an alternate universe, Galbraith won and Friedman lost, and economics would be very different today. So I decided to post this, FWIW.]
I can't think of any economist living today who has had as much influence on economics and economic policy as Milton Friedman had, and still has. Neither on the right, nor on the left.
If you had a time machine, went back to (say) 1985, picked up Milton Friedman, brought him forward to 2015, and showed him the current debate over macroeconomic policy, he could immediately join right in. Is there anything important that would be really new to him?
We are all Friedman's children and grandchildren. The way that New Keynesians approach macroeconomics owes more to Friedman than to Keynes: the permanent income hypothesis; the expectations-augmented Phillips Curve; the idea that the central bank is responsible for inflation and should follow a transparent rule. The first two Friedman invented; the third pre-dates Friedman, but he persuaded us it was right. Using the nominal interest rate as the monetary policy instrument is non-Friedmanite, but the new-fangled "Quantitative Easing" is just a silly new name for Friedmanite base-control.
We easily forget how daft the 1970's really were, and some ideas were much worse than pet rocks. (Marxism was by far the worst, of course, and had a lot of support amongst university intellectuals, though not much in economics departments.) When inflation was too high, and we wanted to bring inflation down, many (most?) macroeconomists advocated direct controls on prices and wages. And governments in Canada, the US, the UK (there must have been more) actually implemented direct controls on prices and wages to bring inflation down. Milton Friedman actually had to argue against price and wage controls and against the prevailing wisdom that inflation was caused by monopoly power, monopoly unions, a grab-bag of sociological factors, and had nothing to do with monetary policy.
Imagine if I argued today: "Inflation is dangerously low. In order to increase inflation, governments should pass a law saying that all firms must raise all prices and wages by a minimum of 2% a year, unless they apply for and get special permission from the Prices and Incomes Board to raise them by less." What are the chances my policy proposal would be accepted?
Friedman had a mountain to move, and he moved it. And because he already moved it, we simply cannot have a Friedman today.
Great men like Friedman require a great job to do, or else they can't become great men. They also require an aristocracy, oligarchy, or monarchy, where only a few voices can get heard, or else they can't become one of the few voices. The internet actually makes it harder to create great public intellectuals, which is probably a good thing, simply because it's harder to stand out as great, when there's lots of competition.
The right won the economics debate; left and right are just haggling over details. The big debate is no longer about economics (sadly for me); and it won't be held on the pages of the New York Times or in the economics journals.
Worthwhile Canadian Initiative 
There is a difference between achieving power and winning a debate. Also, if the right really won the economic debate where is Piketty coming from?
“I wonder how many young economists have even heard of Galbraith?”
Being reasonably young and having read (and enjoyed) two of Galbraith’s books but none of Friedman’s I’d have to argue with you there. Until recently I didn’t even know Friedman had written any books. Add to this the fact that I’m moderately right-wing (at least in the Swedish political context). I will also note that the policy proposal that is (to me) most clearly associated with Friedman is the k-percent rule and it doesn’t appear to be very popular today.
That said, I read Brad DeLong’s post a few days ago and also thought it was far too categorical.
Nick, Excellent post, you convinced me.
Jim, Income and wealth inequality were not major issues when Friedman and Galbraith debated. Friedman won the issues they debated, he would do much less well in this environment.
Hugo, Back when Friedman was alive he was most closely associated with policies like ending the military draft, school vouchers (which I gather are very popular in Sweden) and legalizing drugs. And as Nick noted, many of his views on monetary economics became a part of New Keynesianism.
Jim: “There is a difference between achieving power and winning a debate.”
True. But they are not unrelated. (Though we might want to distinguish between “winning the debate” and “being right”.) Within economics, the Friedmanite perspective achieved power, because economists thought it was right. Outside of economics, it’s different.
“Also, if the right really won the economic debate where is Piketty coming from?”
I haven’t read Piketty, except for snippets, and reviews, so I don’t know. But is his economic analysis any different from the Friedman’s in any important respect?
Hugo Andre: “I will also note that the policy proposal that is (to me) most clearly associated with Friedman is the k-percent rule and it doesn’t appear to be very popular today.”
That’s because you are young. Fish don’t notice the Friedmanite water they swim in. They only associate Friedman with the one policy he advised that was rejected, because it sticks out.
Hugo Andre,
“I will also note that the policy proposal that is (to me) most clearly associated with Friedman is the k-percent rule and it doesn’t appear to be very popular today.”
I think that’s largely a matter of the forgettability of the banal. One of the things about Friedman’s macroeconomics that was different from standard middle-of-the-road New Keynesianism today was the k-percent rule, and so it stands out.
Jim Roothman,
That’s an important distinction, in that very often the right won the debate but didn’t win power, i.e. left-wing parties won office but had been persuaded by many of the ideas that were once fringe right-wing ideas. Indeed, in Australia in the 1980s it was the Australian Labor Party that was the dynamic force in favour of floating exchange rates, deregulation, and lower taxes. And Bill Clinton or Tony Blair certainly didn’t propose a national wage & prices policy, currency controls, or fiscal stimulus in response to 1990s unemployment.
Now you can still think that Friedman was wrong on a lot of these issues, but it’s a fact of intellectual history that there was a widespread change of opinion on them, and so at least in a loose sense a “winning of the debate”.
Actually the National Security Council won the debate in 1950 but had to keep it secret. Friedman was just some guy with a broom sweeping up the droppings after the parade.
Ken: monetary policy is important, and the switch from IT to NGDPLT is important, for human well-being. And I think it’s great what you are doing to support what Scott is doing. But it isn’t really much of a left/right issue. (The small-c conservative in me actually leans towards sticking with IT, because it doesn’t like changing the rules, and IT is the devil we know, and it wasn’t until the Canadian data hit me between the eyes that I gave up on IT.) NGDPLT has support from lefties too, as it should. The left/right debate has moved on from economics.
Scott: thanks! (I was a bit uncertain about this post myself.) You are very nearly my age, so probably remember the debates over price/wage controls, and what caused inflation? I think the “sociological”/anti-monetarist perspective on inflation was more influential in the UK though, which is where I spent my early years. Remember the “competing claims” theory? When British monetarists crossed the Atlantic, it was said they looked like Keynesians.
And by the way, what is Piketty’s actual policy proposal? A wealth tax? Big deal. For someone who as an undergraduate expected the eventual victory of communism (I got that one dead wrong), the eventual full nationalisation of the means of production, who listened to the Beatles singing Taxman Mr Wilson (Labour), taxman Mr Heath (Conservative) about 95% marginal tax rates on income (one for you 19 for me), direct controls on prices and wages, etc., etc., Piketty’s proposed wealth tax is peanuts. Lloyd George destroyed a whole social class, with inheritance taxes.
Ike, September 23, 1952 (cancelled campaign speech):
“The inflation we suffer is not an accident; it is a policy. It is not, as the Administration would have us believe some queer and deadly kind of economic bacteria breathed into the atmosphere by Soviet communism…
“Now the weakness of the Democratic Party for ‘cheap’ or ‘soft’ money is well known. For the last 20 years, it has practiced this policy faithfully. Of late, it has given it a new twist: it is now called ‘controlled inflation.’ But this name does not mean what it says.
“It really means inflation plus controls.
“The way this policy has worked out is easy to describe. With one hand the Administration has been turning up the water pressure at the hydrant, while with the other hand it has been trying to check the water’s flow. The Administration’s controls over prices are nothing but weak stop-gaps…
“There is in certain quarters the view that national prosperity depends on the production of armaments and that any reduction in arms output might bring on another recession. Does this mean, then that the continued failure of our foreign policy is the only way to pay for the failure of our fiscal policy? According to this way of thinking, the success of our foreign policy would mean a depression.”
Richard Nixon brought in wage and price controls in 1971. By the way, it was Nixon’s “Checkers speech” that caused Eisenhower to cancel his scheduled Sept. 23 speech.
See Fred L. Block, “The Origins of International Economic Disorder: A Study of United States International Monetary Policy from World War II to the Present” (1977).
Turns out there was a lot more going on in those days than a “debate” between Milton Friedman and John Kenneth Galbraith.
@Nick Rowe and W. Peden
Of course you have a point. I am a fish.
@Scott Sumner
Thanks for the examples! Yes, the school vouchers work quite well here. On the other hand we are considering switching back to military draft because of the Russian aggression.
Jim Rooghan also has a point though. Yes there was some daft left-wing economics during the post-war years (I didn’t live back then but I do read) but today it seems to have been replaced by some daft right-wing economics. For example I had a course in public economics last term where the teacher apparently saw it as her purpose to convince us that the state is bad. period. I am open to the idea that the state can be inefficient and that many regulations are bad but that course made me wonder if I am wrong about this. Surely this teacher is also a part of Friedman’s legacy.
Another thing: while Friedman certainly did many different kinds of economics his home field was monetary theory. While he got some important things right he also seems to have gotten some big things wrong. Didn’t he for example repeatedly warn that the rapid growth in monetary aggregates during the late 80’s would lead to high inflation?
W Peden: I had forgotten about currency controls. When my parents took us on holiday to France, mid/late 1960’s, we were allowed to take 50 pounds each. There was also a Selective Employment Tax, on every worker not in the export sector, to encourage exports.
Not about economics among economists, but as much bad economics beyond economists as ever, though it doesn’t really qualify as economics or debate and doesn’t even rise above politics.
The permanent income hypo was collaterally invented by Modigliania, although under a different name, but is empirically false. Duesenberry’s relative income hypo is the one that is correct, which Galbraith supported. Friedman was crucial in developing the expectations-augmented Phillips Curve, although others were involved as well such as Phelps (ahead of Friedman to be precise). As you note, Nick, that central banks play an important role in controlling inflation predated Uncle Miltie, but he deserves credit for reminding everybody vigorously of this important fact.
Probably the public policy that he was most responsible for advocating against all forces and odds to achieve, for better or worse, was the flexible exchange rate system.
Barkley: I think there’s a general law in the history of economic thought: any idea that any economist has ever invented was always previously invented by someone else, if you look hard enough for that someone else.
The expectations-augmented Phillips Curve is there, in the Phelps volume, and in more than just Phelps’ chapter in that volume IIRC, but unless you had read that volume after having read Friedman you wouldn’t see the implications of that idea, and you wouldn’t see it as a general property of any reasonable model of a monetary economy, as opposed to a specific model of firms or labour markets.
Modigliani’s version of PIH fits more naturally in OLG models with finite-lived agents. The standard NK model has an infinitely-lived agent. And it was Friedman’s little book that provided the mass of persuasive empirical evidence that made the PIH the standard assumption.
Duesenberry’s RIH has two components, IIRC: 1. C(t) is a function of C(t-1). That idea has survived, in attenuated form, as habit-persistence (though I wonder how many macroeconomists who build NK models with habit-persistence have ever heard of Duesenberry?). 2. My C(t) is a function of average C(t). I still don’t see how that doesn’t violate the long run budget constraint, and how it is empirically compatible with a world in which the distribution of wealth sometimes gets more unequal and sometimes less unequal.
I had forgotten about flexible exchange rates. Again, it is an idea that seems utterly normal now, and we forget that when Canada floated it was seen as breaking the rules of civilised behaviour, and that Friedman was the rebel who supported Canada’s break with Bretton Woods, and said it didn’t mean we were an irresponsible basket case.
I wrote that second comment a bit too late at night. Since there is no delete or edit button, please disregard it.
I do have one (hopefully useful) piece of information. Professor Rowe asks about Piketty’s policy proposals. Since I just finished a thesis work on one of Piketty’s formulas I have been able to ask questions to a few teachers who work with inequality. The consensus is that Piketty’s sugesstion of a wealth tax is less a serious proposal, more a way to get people to discuss what can actually be done about inequality. Basically he and others who worry about inequality want governments to do as much as it takes to halt and reverse the trend. Whatever means are used to achieve this, it would almost certainly mean a pretty radical transformation of economic society.
Hugo: I could delete it if you really want me to, but I thought it was a good comment, except for typos (spelling Jim’s name wrong)! It’s OK to disagree with your teacher’s perspective, or even think it’s daft. She would probably agree it’s OK too, if she’s as libertarian as she sounds.
Hugo Andre,
On Milton Friedman’s mistaken forecasts using monetary aggregates in the 1980s, I recommend looking at some of Edward Nelson’s work, especially his article on Friedman and US monetary policy from 1960-2007.
On consumption, the key question again is who won the debate, and thus who were the contestants. There are now very few economists who would say that the absolute income effect is more important to understanding consumption than consumption smoothing and the permanent/transistory income distinction, whereas if you read a Cambridge University Library copy of “The Theory of the Consumption”, as I did, you can find plenty of increasingly faint pencil comments in the margins on how ridiculous Friedman’s ideas were and how Keynes was clearly right on the consumption function.
Nick Rowe,
To be fair to economists in the 1960s, plenty of those economists not called Nicholas Kaldor thought that SET was a bad idea. And it was predictably farcical: my father was classified as a manufacturing worker for the only time in his life, because he was a sub-editor, and journalists were classified as manufacturing workers rather than service workers, and thus didn’t pay SET. What a peculiar decision by the government! Almost as strange as the notion that hotel workers should pay SET, unless they were in the Scottish Highlands, which coincidentally had a large number of very marginal Labour-Liberal and Labour-Tory seats during that period.
As for Kaldor, I really commend Alec Cairncross’s books on what it was like to work alongside Kaldor in a serious policy environment.
To be precise: SET was paid by most service-sector workers, not export-workers. The idea was that encouraging the development of manufacturing rather than services would increase productivity.
I remember (or at least I think I do) newspaper articles of 30-odd years ago claiming that Bobby Fischer won the Cold War. This post reminded me of that. In reality Friedman had as much to do with the rise of conservatism as Fischer had to do with the collapse of the USSR. The real protagonists were people like Thatcher and Reagan, who triumphed over Callaghan and Carter because they exploited weaknesses in the Labour and Democratic bases. I can’t see that the elections would have gone any differently if Galbraith and Friedman had never been born. Arthur Scargill, Ayatollah Khomeini and General Galtieri, on the other hand, made a difference.
Galbraith and Friedman each produced a fairly popular TV series: respectively, The Age Of Uncertainty and Free To Choose. Neither of them came anywhere close to the sort of viewing numbers David Attenborough regularly achieves.
Of course, this has no bearing on the validity of their arguments. Some of those stand up pretty well and some don’t.
I continue to have trouble seperating Friedman’s economics and his politics in my evaluation. The most extreme was his support of the Pinochet regime. Then there was his idea that anti-discrimination legislation is unnecessary because discrimination against equally qualified workers was inefficient, and firms which practiced it would be competed out of existance. Somehow, I can’t recall any forecast as to how long that might take. (They say it’ll kill me, but they don’t say when.) After all, the slaves were only freed when? Give it time.
He didn’t like unions. He’s gotten his wish; unions are much diminished. He thought inequality would continue to decrease (back in the 70s). Anyone happy with the results? Anyone think they’re not related?
Paul Samuelson is on record as saying that the way he stayed friends with Friedman was to make a point of never mentioning how crazy his libertarian politics were. He also commented that he often had the feeling, debating with Friedman, that he had won all the points and lost the debate.
IMHO a large part (I do not undertake to say how large) of Friedman’s policy influence is the result of the fit those policies have with the interests of the wealthy and powerful.
I’m staying away from technical issues; I’m not entitled to an opinion. (Although I take my actual opinions from Robert Waldmann.) But a fair amount of his policy prescription were driven by his politics, which were not nice.
Jonathan,
“I continue to have trouble seperating Friedman’s economics and his politics in my evaluation.”
And perhaps understanding either. However, this is a distraction from the actual question, which was why there isn’t a Friedman-type figure in economics today.
Kevin Donoghue,
As I noted above, the triumph (or defeat?) of conservativism is a separate question from Friedman’s impact on economics. Nick’s point that New Keynesianism has a lot more to do with Friedman than Keynes is a separate question from what happened with the Reagan administration or the rise of the religious right in the US etc. New Keynesianism is not about the Moral Majority or Victorian Values or Pinochet or whatever else people would rather talk about than a New Keynesian Phillips Curve.
Jonathan, Friedman “supported” the Pinochet regime in exactly the same sense that he “supported” the communist government in China. (I.e. he gave economic policy advice to both governments and opposed the human rights policies of both governments.) His politics were libertarian, not right-wing. Unlike like President Obama, he opposed imprisoning 100,000s of drug users (disproportionately minorities.)
Nick, Yes I do recall that era, and I also recall being confused every time I heard a British reporter talk about “monetarism,” as it was clearly something very different from American monetarism.
I can agree that what Piketty is asking for is not such a big deal, but then the question begs: why is there such feverish opposition to him then?
I’m not naming names though if you insist I can.
In any case, even if Piketty’s answer is not so earth shattering, his claim as to the problem is: if the golden age of productivity and growth are behind us-the golden age according to him was 1700-2000-then it’s earth-shattering indeed. I’m not saying he’s right-obviously one would certainly wish he was wrong if wishes were worth anything.
Mike: “I can agree that what Piketty is asking for is not such a big deal, but then the question begs: why is there such feverish opposition to him then?”
I want to ask the exact opposite question: why do so many lefties treat him like such a big deal, like….a rock star? Nothing I have read about his book, from supporters or detractors, tells me it’s any big deal. Fairly standard economics, by an economist who’s more concerned about inequality than many. (But Sen is also concerned about equality, IIRC, and does more exciting stuff.) And the bit I did read for myself (on the theory of interest rates and capital productivity) suggests he doesn’t understand it very well. But he’s treated like…the Great White Hope of the left?
Justin Bieber isn’t himself particularly annoying. He’s OK. It’s his drooling fans that make people want to take him down.
Hugo Andre said this above, and felt I couldn’t be silent about it either: “The consensus is that Piketty’s sugesstion of a wealth tax is less a serious proposal, more a way to get people to discuss what can actually be done about inequality. Basically he and others who worry about inequality want governments to do as much as it takes to halt and reverse the trend. Whatever means are used to achieve this, it would almost certainly mean a pretty radical transformation of economic society.”
Radical transformation of economic society is the fearful claim here. I don’t know what is meant by ‘economic society’. Like Mike Sax above, why is there such feverish opposition to Piketty’s recommendation? Do you think Milton Friedman justifies a fear of radical transformation?
Every day a person who has net worth has the ability to use this net worth to their advantage. The value of their wealth and their advantage comes from govt providing civil and market order. Govt taxation policies can and should consider net worth – as a matter of economics and as a matter of common sense – people should expect to contribute in some way proportionate to the benefit they receive, even those of high net worth believe in use-taxes or benefit-taxes don’t they.
Does this thing called ‘economic society’ expect people to ignore net worth as a matter of economics? Does entry into this society mean that the accepted, dominating burden of taxation is to be placed on income and consumption in a 12-month period and NOT on net worth? And even though net worth is now, by far, the largest definable tax base in the UK, US, Japan and Europe, it should not be considered in taxation policy? Ouch.
Does Milton Friedman’s writing justify this type thinking and ‘society’? Does monetarism justify this?
W Peden: Ah yes, I misremembered the SET. I remember my father complaining that farm workers originally came under SET, but UK farmers complained that agriculture was import-competing, and I think got an exclusion, IIRC.
Jonathan: I tried (and failed, except perhaps very indirectly) to give economic policy advice to the Castro regime in the 1990’s. Their human rights record is no better than Pinochet’s. Does that make me beyond the pale too?
W. Peden: “the triumph (or defeat?) of conservativism is a separate question from Friedman’s impact on economics.”
Is it? Try to imagine a world in which McGovern and Dukakis were US presidents and Neil Kinnock was a UK prime minister. Can you see Friedman being remembered, in that world, as an important contributor to the development of economics? That seems implausible to me.
Conversely, I can’t see how Lorie Tarshis’s ill-fated textbook could have fared well during the great Red Scare no matter how gifted he might have been. Theory isn’t developed in a sterile environment free of political contamination.
I grant you New Keynesianism has more to do with Friedman than Keynes. But then it has more to do with Louis Bachelier and Frank Ramsey than with either of them. Once economists started farting around with stochastic processes they were bound to produce some stuff of that sort. Which prompts another banal observation about theory: there’s a kind of momentum inherent in it, leading from the likes of Walras to the likes of Debreu.
But it takes a political transformation to make it possible for someone to lift a purely theoretical idea from Ramsey and pass it off as a serious attempt to describe a real-world economy. Nobody could hope get away with that in the 1930s.
I find this essay shockingly bitter, shockingly close-minded. I can understand arguing in favor of Friedman’s ideas but to insult other scholars who might disagree is simply being bitterly close-minded.
Kevin: interesting. But what about Lange and Lerner and the socialist planning debate? Those guys were taking what is basically the same sort of GE theory and applying it (or wanting to apply it) in a very different political system?
Kevin Donoghue,
“Try to imagine a world in which McGovern and Dukakis were US presidents and Neil Kinnock was a UK prime minister. Can you see Friedman being remembered, in that world, as an important contributor to the development of economics?”
Yes, not least because something similar happened in Australia in the 1980s, and as far as I know Friedman’s reputation as an economist in Australia is not significantly different from elsewhere.
One has to distinguish parties from policies, and economic policies from other policies. After all, in the strict sense of the term, Friedman was not a conservative.
Or strict senses of the term, as ‘conservative’ is a highly ambigious term.
ltr: huh? I thought I was giving Galbraith his due, as a serious academic who might have won the debate, and who is still influential, only not (much) in economics. I didn’t feel ‘bitter” writing it. More…nostalgic (old guys get like that).
Incidentally, on the success of right-wing politics in the UK and North America (?) in the 1980s, I remember reading a paper that looked at a lot of opinion polling evidence that suggested that in the US and UK public opinion tended to move to the right on taxation and the size of government BEFORE 1979. During the 1980s, on average American and British opinion moved slightly to the left. This was used as evidence for the claim that the rhetorical powers of Reagan and Thatcher were much less important than people think, and that they were the result of changing public opinion, not the cause.
An alternative explanation could be done in terms of the tax effects and unemployment of inflation/disinflation: during the 1970s there was bracket-creep of income tax, whereas through most of the 1980s there was disinflation and indexation. Moving up tax-brackets quickly will naturally annoy voters, whereas during the 1980s the fall in inflation resulted in a rise in cyclical unemployment (due to the early 1980s recession) and structural unemployment (due to the rise in the real value of benefits) and so people’s concerns were focused more on the social safety net.
Nick Rowe,
I always think that if Galbraith and Buckley could be good friends, the rest of us can at least be fairly civil with each other!
W. Peden: “as far as I know Friedman’s reputation as an economist in Australia is not significantly different from elsewhere.”
Two points: (1) I think Australian lecturers use American textbooks (I know Irish ones do). If American politics had taken a different course then the textbooks would be different and, in consequence, Friedman’s reputation also. (2) To the extent that Australia does have a tradition of its own, I’d say neoclassical thinking holds less sway there than it does in the US. If I’m right about that, then Friedman probably suffers. Like Irving Fisher, he wasn’t truly neoclassical but he tried to be, more than was wise. (In general, for reasons Krugman has often discussed, economists in smaller, more open economies are less likely to be receptive to Chicago ideas; it’s hard to take the neutrality of money seriously if exchange rates impact your daily life.)
Nick: “But what about Lange and Lerner and the socialist planning debate?”
I’m not sure what you’re getting at. I’d have thought that ties in quite well with what I’m saying. To the extent that that stuff was ever taken seriously, it was during the period when Hungary, for example, seemed to be doing reasonably well. This was an illusion which both the commies and the CIA fostered, for different reasons. So the politics led people to take GE theory more seriously than they should have done.
But as I say, you’ve lost me. Still, it’s a good excuse to link to the best-ever title for a blog post:
That’s because Joe Stalin won the debate, and Leon Trotsky lost.
Kevin Donoghue,
“If American politics had taken a different course then the textbooks would be different and, in consequence, Friedman’s reputation also.”
That’s a bold counterfactual.
A bunch of points.
I was too terse in my response. By referencing Piketty I was not so much referring to his work but to the wealth disparities underlying it.
Inequality not being a major issue at that time was a mistake. In about 1970 Leo Johnson at Waterloo calculated that the bottom 10% of income earners in Canada reached a maximum share of total income in 1948. Downhill ever since. Inequality increased throughout the period, reaching higher into the distribution over time. This did not show up in mainstream stats (Statscan) because they used quintiles (minor effect) and household income (major effect). People responded to impoverishment by having more people (women) in the household go to work.
Friedman’s error on inequality is sufficiently large to pretty much invalidate his entire work.
In the model building world Friedman does well, outside, not so much. There was a joke in Chile that the most elite unit in the military was 12 Chicago school economists. They could destroy ANYTHING.
Cuba’s human rights record is not good. Pinochet’s is much worse. Cuba never had desaparecidos.
Yes, Friedman won the ideology battle and millions of unemployed and underemployed are paying the price. Sidelining fiscal policy in favor of monetary policy to manage an economy has been a disaster for millions of unemployed. The Great Recession has proved that Friedman and Schwartz were wrong about the cause of the Great Depression. Friedman was wrong about the ability of monetary policy in the absence of fiscal stimulus and large enough automatic stabilizers to manage economic recovery from large downturns. Greenspan tried monetary policy without appropriate fiscal policy and blew up a housing bubble that eventually tanked the economy. If fiscal policy would have been used instead, the economy would be healthy. Thanks, Milton. Friedman ideology has paralyzed fiscal policy response to economic downturn ruining the lives of millions of long term unemployed. Adequate fiscal stimulus and job creation could have saved millions from misery and poverty.
Monetary policy alone is great for making the rich richer but it is grossly inadequate to manage an economy. Elitist economists can gloat over a win for their ideological side. The masses suffer the consequences.
I think I understand Nick. Advocates probably can get annoying for others who can’t see it. I for one don’t consider myself some big advocate for Piketty in any case.
Saying that I think that if advocates of Piketty get annoying so do some of his most determined opponents. I tend to agree with his policy proposal you mentioned above and I probably follow him in having more concern about inequality than average.
For me really it’s less about even inequality than stagnation of the average guy’s wages. I think there certainly has been a problem of wage stagnation where the average or median person has seen their standard of living flat line. I’ve tried to write about this myself.
http://diaryofarepublicanhater.blogspot.com/2015/01/jared-bernstein-on-wage-stagnation.html
http://diaryofarepublicanhater.blogspot.com/2015/01/more-jared-bernstein-on-technology.html
Just so I’m clear it’s less wage inequality than simply a lot aren’t seeing their wages rise at all.
As for Piketty, he argues that the age of productivity may be over and that we’re going to see much lower GDP in the future. I have certainly seen more than one economist make your complaint: that he doesn’t understand productivity growth and interest rates well.
As I find his theory kind of depressing it may not be a bad thing if that’s true. Do you disagree with his conclusions about slowing growth?
Humble I/O guy joining late and hoping to be not that irrelevant…
Marxism influential? Maybe among those without influence. Being influential among sociologist or litterature majors is about as funny as those Joan Collins mini-series where she fought nazi war criminals by opening a haute couture shop.
Passing a law where prices must rise by 2% a year? If one of my most astute students ask me what’s the difference with BoC having a 2% inflation target, what is humble I/O guy supposed to answer?
My recollections from the time (PhD in 1970) was that the arguments for wage and price controls, fixed exchange rates, and airline/trucking price regulation were pushed by non-economist politicians and resisted by economists (granted, often with less than Friedmanite vigor). And I was sort of surprised to learn that Galbraith (whom I had read in the ’60’s) was an economist.
bakho,
There is nothing in Friedman’s views or those of his descendants, the NGDPLTers that implies that “fiscal policy” — rising fiscal deficits during a recession — should not occur. As the monetary authority pursues returning NGDP to its trend level, interest rates on long-term government bonds will fall. With lowering borrowing rates, standard microeconomic investment theory says governments should start investing more in projects with present costs and future benefits. That this common sense outcome is opposed by VSP (and once they hear about it and understand what it means, VSP won’t like NGDPLT either) is not the fault of Milton Friedman.
Blindly adducing that the right won the argument and obliquely insulting Krugman is childish and not an argument.
The right have made arguments about inflation for the past 5 years and been proved wrong. Austerity has been proved disastrous.
If you’re going to make an argument, make one. Show charts, graphs.
You sound like an amateur.
Oh, and Galbraith’s son has WAY more influence than a nobody like you.
I would add one more political point – Friedman had a side industry of hawking books that if you had some form of capitalism DemocrY as inevitable. Ask China how that worked out. Or Vietnam, or half the Middle East. Or Hungary.
About 10 years ago I picked-up JKG last “The Economics of Innocent Fraud” in an airport bookstore. I wish more lefties would read it. Especially the part where he disabuses the reader of the notion that shareholders matter to (large) corporations. If more lefties understood that labor and capital have a common enemy in the form of a management class who are extracting rents on a massive scale – money that rightly belongs to labour and owners (e.g. Grannies pension fund) – we might make some headway with that thing Piketty is so concerned about.
Patrick: not the first time the mayor of the palace usurped the throne.
http://en.wikipedia.org/wiki/Iznogoud
W. Peden: “I always think that if Galbraith and Buckley could be good friends, the rest of us can at least be fairly civil with each other!”
Yes, just imagine! Two white successful males from OPPOSITE sides of the Ivy Curtain! Such comity! I suppose they found common ground when they noticed that each other held his fork in the same hand when cutting his lamb chop.