And just to be clear, while I think Wapshott, the author of a previous book on Keynes and Freidrich Hayek, overpersonalizes the nature of the debate for dramatic effect, and also arguably establishes a false equivalence between Friedman the lawyer. Relentless and Samuelson the Scholar, that makes a good story – and the sufficiently careful reader can learn a lot from this book.
So, on this political animal: Friedman first gained prominence in academic circles as the co-author of a 1946 pamphlet denouncing rent control (somehow not mentioned in this book). He gained wider notoriety with a 1953 essay, “The Methodology of Positive Economics,” which seems incredibly abstract – what does he want to achieve? – until it finally comes to the meat: a claim that economists ignore theories about monopoly and imperfect competition because, he argues, they don’t make any useful predictions beyond those which come from simple supply and demand. And his first bestseller, “Capitalism and Freedom”, was more of a political sermon than a book of economic analysis.
That said, Friedman was not a mere propagandist: he was a brilliant analytical economist capable of doing ground-breaking academic work when he made up his mind. His work on monetary policy, in particular, convinced many economists who disagreed with him on almost everything else.
Still, looking at the timeline of Friedman’s career from Wapshott, it’s hard to avoid the feeling that Friedman viewed his professional research, albeit excellent, as some kind of shortcut for his political advocacy – a means. to establish his academic good faith and thus add credibility to his liberal crusade. Even his seemingly least political major work, “A Theory of the Consumption Function” (and the first of his works to gain widespread academic acclaim), was published the year after he lectured. became “Capitalism and Freedom”.
And his magnum opus, “A Monetary History of the United States, 1867-1960” (with Anna Schwartz), although a masterful work of scholarship, clearly had a major political focus to grind. For his main conclusion was the claim that the Great Depression would not have happened if the Federal Reserve had done its job and stabilized the money supply. That is, simple technocratic measures would have been sufficient – no need for all that Keynesian stuff. So while the book was devoted to money economics, it was also clearly intended to strike a blow against the activist government.
The influence of Friedman’s monetary ideas peaked around 1980, and then declined sharply. The United States and Britain tried to implement Friedman’s belief that the authorities could stabilize the economy by ensuring steady and slow growth in the money supply; both efforts have failed miserably. Friedman didn’t help himself by making crazy predictions about soaring 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 in check – that the Federal Reserve could run the economy without involving Congress. But a number of economists had looked closely at Friedman’s arguments about the Great Depression and found them insufficient. And the consequences of the 2008 financial crisis proved the skeptics right. Ben Bernanke, the chairman of the Fed and a great admirer of Friedman, did everything Friedman and Schwartz said the Fed should have done in the 1930s – and it wasn’t enough. Soon Bernanke begged for help from fiscal policy, that is, pleading for Keynesianism to come to the rescue.