Wednesday, May 29, 2013
Friedman vs. Solow
Excelente artigo de David Henderson: Here's what I found to be the shocking part of Solow's article: The second part of my response to the question is that I'm glad there is no Milton Friedman anywhere on the political-economy spectrum today. I think that Milton Friedmans are bad for economics and bad for society. Fruitless debates with talented (near-)extremists waste a lot of everyone's time that could have been spent more constructively, either in research or in arguing about policy issues in a more pragmatic way. I suppose that such debates also help to clarify implicit assumptions and shady arguments, but I think that is a small benefit compared with the cost in sheer hassle. Do you notice what's missing? Solow doesn't tell us what the "fruitless" debates were. The main debates I can think of between Friedman and many of the rest of the profession were about three things: (1) the relative potence of fiscal and monetary policy, (2) whether the Phillips curve trade-off between inflation and unemployment presented policy-makers with a stable menu of choices, and (3) whether inflation is "everywhere and always a monetary phenomenon." Solow thought fiscal policy was more potent and, in his classic 1960 article co-authored with Paul Samuelson, argued that the Phillips curve gave policy makers a "menu." (The Samuelson-Solow article is more nuanced than I remembered. It's not clear how stable they thought the menu was. What is clear is that they never even hinted that the long-run Phillips curve was vertical.) Friedman thought monetary policy was more potent and argued that the long-run Phillips curve was vertical. Friedman argued that changes in the growth rate of the money supply were the main cause of changes in inflation. Guess who won on all three. And even if you think Friedman didn't win, the debates were still debates worth having. There was nothing fruitless about them.