Thursday, December 1, 2011

Salerno Compares Rothbard and Friedman

And finds Milton Friedman wanting as a monetary theorist. You can watch Joseph Salerno's lecture "Who was the Better Monetary Economist? Rothabard and Friedman Compared" below:

In this provocative lecture, Salerno reminds us that in 2002 Friedman advocated what we now call quantitative easing to prevent deflation after the recession of 2001. He also documents how, throughout the mid-2000s, Friedman utterly failed to see the investment imbalances that were building toward the housing bubble and resulting recession.

While listening, it occurred to me that the Fed did essentially what Friedman suggested. It would be interesting to know, if Friedman was still living, what he would think about his theory and policy now. Pursuing a policy in general agreement with Friedman produced the greatest period of financial upheaval in this country since the Great Depression. Would he, positivist economist that he was, take the Great Recession of 2008 as a giant data point which fails to verify his theory?

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