SimpleDon
Veteran Member
Medium reprinted an article from The New Republic, The Libertarian Ideas That Wrecked the Fed, subtitled, Milton Friedman’s influence on America’s monetary policy blew up the past and mortgaged our future.
I don't rate Milton Friedman at all as an academic economist. See here. He was a successful political pundit as a political economist. Rather than studying the economy that we have, he crafted a vision of an economy that could never be, an economy that he wished we could have, the holy grail of neoclassical economists, the self-regulating, self-organizing free market. He rescued an Austrian/Libertarian economics idea that had been basking in well-deserved obscurity, the theory that the originators, Ludwig Mises and Friedrich Hayek, resurrected called
Neoliberalism.
Neoliberalism is the idea that we should return to the economics of the "classical liberal" period of the 1830s in England. The economics of that time advocated the free market, a true factor market for labor, free trade, the free flow of capital, money, and labor across borders, the gold standard for money, and the elimination of cash welfare for the poor, which everybody in the US will recognize as Reaganomics.
In an essay, Neo-Liberalism and its Prospects Friedman called for a turn away from collectivism back to 19th-century liberalism and its laissez faire capitalism in the private markets albeit retaining the policing power of the state over the economy to prevent bad behavior, monopolies, as an example. A mixed message if there ever was one.
Unfortunately for his legacy and for us who have to live with the results of his work, the classical liberals of 1830s England that he wanted to emulate didn't have any success putting their ideas into practice, a fact he would have found out easily if he had wanted to. If he had he would have found out that the "classical liberal" period failed in just a few years.
Milton Friedman was a smart man and a trained economist. He certainly realized that Neoliberalism wasn't compelling economics, that it was nothing more than a rehashing of the classical and neoclassical dream that the Great Depression had crushed. It probably didn't escape his attention that wealth and fame along with the support for research for his university that comes from economics used to support the conservative political memes that justify making the rich richer at the expense of everyone else.
His monetarism is half Keynesian, admitting that the government must intervene in the economy but maintaining that it should be done in the manner that offends the rich the least, by restricting the intervention to increasingly ineffective monetary policies and never, ever using the much more effective fiscal policies that might involve taxing the rich. It is probably more accurate to say that monetarism is three-quarters Keynesian. Faced with a problem the government under monetarism can raise or lower interest rates and it can lower taxes, but it can never raise taxes.
So yes, Friedman did use the neoliberalism name for his theory but dropped it because he wanted his theories to become mainstream economics. Unfortunately for us and for our economy, he succeeded in the guise of the current neoclassical synthesis economics.
The main tenets of neoliberalism will be familiar to everyone as it is the political economics that sets our current economic policies of the government. They are a self-regulating free market with deregulation, free trade, the free flow of capital and labor across borders, a true market for labor, the gold standard for money, and canceling of cash welfare for the indigent. It is the political economics of 100% of the Republican party and one half of the Democrats, including Joe Biden, both Clintons, and Obama. It is the political economics that a national politician has to pledge fealty to in order to receive campaign contributions from corporate America and Wall Street. Those who don't toe the neoliberal line are unfairly called "socialists." It is the political economics that has produced the extreme income inequality that is the largest threat to capitalism in the US.
I don't rate Milton Friedman at all as an academic economist. See here. He was a successful political pundit as a political economist. Rather than studying the economy that we have, he crafted a vision of an economy that could never be, an economy that he wished we could have, the holy grail of neoclassical economists, the self-regulating, self-organizing free market. He rescued an Austrian/Libertarian economics idea that had been basking in well-deserved obscurity, the theory that the originators, Ludwig Mises and Friedrich Hayek, resurrected called
Neoliberalism. Neoliberalism is the idea that we should return to the economics of the "classical liberal" period of the 1830s in England. The economics of that time advocated the free market, a true factor market for labor, free trade, the free flow of capital, money, and labor across borders, the gold standard for money, and the elimination of cash welfare for the poor, which everybody in the US will recognize as Reaganomics.
In an essay, Neo-Liberalism and its Prospects Friedman called for a turn away from collectivism back to 19th-century liberalism and its laissez faire capitalism in the private markets albeit retaining the policing power of the state over the economy to prevent bad behavior, monopolies, as an example. A mixed message if there ever was one.
Unfortunately for his legacy and for us who have to live with the results of his work, the classical liberals of 1830s England that he wanted to emulate didn't have any success putting their ideas into practice, a fact he would have found out easily if he had wanted to. If he had he would have found out that the "classical liberal" period failed in just a few years.
Milton Friedman was a smart man and a trained economist. He certainly realized that Neoliberalism wasn't compelling economics, that it was nothing more than a rehashing of the classical and neoclassical dream that the Great Depression had crushed. It probably didn't escape his attention that wealth and fame along with the support for research for his university that comes from economics used to support the conservative political memes that justify making the rich richer at the expense of everyone else.
His monetarism is half Keynesian, admitting that the government must intervene in the economy but maintaining that it should be done in the manner that offends the rich the least, by restricting the intervention to increasingly ineffective monetary policies and never, ever using the much more effective fiscal policies that might involve taxing the rich. It is probably more accurate to say that monetarism is three-quarters Keynesian. Faced with a problem the government under monetarism can raise or lower interest rates and it can lower taxes, but it can never raise taxes.
So yes, Friedman did use the neoliberalism name for his theory but dropped it because he wanted his theories to become mainstream economics. Unfortunately for us and for our economy, he succeeded in the guise of the current neoclassical synthesis economics.
The main tenets of neoliberalism will be familiar to everyone as it is the political economics that sets our current economic policies of the government. They are a self-regulating free market with deregulation, free trade, the free flow of capital and labor across borders, a true market for labor, the gold standard for money, and canceling of cash welfare for the indigent. It is the political economics of 100% of the Republican party and one half of the Democrats, including Joe Biden, both Clintons, and Obama. It is the political economics that a national politician has to pledge fealty to in order to receive campaign contributions from corporate America and Wall Street. Those who don't toe the neoliberal line are unfairly called "socialists." It is the political economics that has produced the extreme income inequality that is the largest threat to capitalism in the US.
