And just to be clear, while I think Wapshot, the author of the previous book about Keynes and Frederick Hayek, tends to present the nature of the debate more personally, for dramatic effect, and arguably Friedman’s tireless advocate and Samuelson scholar. establishes some false similarities, it makes for a good story – and an appropriately cautious reader can learn a lot from this book.
So, about that political beast: Friedman first achieved widespread fame in academic circles in 1946 as co-author of a pamphlet Condemning rent control (Somehow not mentioned in this book). He received wide notice with his 1953 essay, “The Methodology of Positive Economics,” which sounds pretty succinct—what’s driving that? – until he reaches the end MeatThere is a demand that economists ignore the theories of monopoly and imperfect competition because, they claim, they make no useful predictions beyond what comes from simple supply and demand. And his first best-selling book, “Capitalism and Freedom,” was more of a political sermon than a work of economic analysis.
That said, Friedman was not the only campaigner: he was a brilliant analytical economist capable of pioneering academic work when he set his mind. His work on monetary policy, in particular, persuaded many economists who disagreed with him about almost everything.
Yet given Wapshot’s timeline of Friedman’s career, it’s hard to escape the sense that Friedman viewed his professional research as excellent, though some of it, as a kind of loss leader for his political advocacy— A way to establish your academic authenticity and therefore add credibility to your free market crusade. Even his least political major work, “A Theory of the Consumption Function” (and the first of his works to achieve widespread academic acclaim), a year after lecturing what would become “Capitalism and Freedom”. was published later.
And his magnum opus, “A Monetary History of the United States, 1867–1960” (with Anna Schwartz), while a magisterial work of scholarship, was clearly a major political ax to grind. To its great advantage was the claim that if the Federal Reserve Board had done its job and stabilized the money supply, the Great Depression would not have occurred. That is, simple technical measures would have sufficed – there is no need for the Keynesian stuff. So while the book was devoted to monetary economics, it was also clearly intended to strike against active government.
The influence of Friedman’s monetary ideas peaked around 1980, then went into a sharp decline. Both the United States and Britain attempted to implement Friedman’s belief that officials could stabilize the economy by ensuring a steady, slow growth in the money supply; Both attempts were disappointingly unsuccessful. Friedman didn’t help himself by making wild predictions about runaway inflation and depression, none of which came true.
Still, most economists continued to believe that a more flexible form of monetary policy could keep things under control—that the Federal Reserve could manage the economy without Congress getting into the act. But many economists had taken a closer look at Friedman’s arguments about the Great Depression, and found them desirable. And the outcome of the 2008 financial crisis proved the skeptics right. Fed chairman and a huge Friedman fan Ben Bernanke did everything Friedman and Schwartz said the Fed should have done in the 1930s—and it wasn’t enough. Soon Bernanke was calling on fiscal policy to help – that is, to come to the rescue of Keynesianism.