Your Morning Friedman (Milton)

Libertarian-minded conservatives would do well to remember that the revered Milton Friedman didn’t sympathize with the Austrian view, which holds that financial crises are to a large extent the result of government policy, and that the Great Depression would have been mitigated if the government had done less rather than more.

Friedman via DeLong:

[Abba] Lerner was trained at the London School of Economics [in the 1930s], where the dominant view was that the depression was an inevitable result of the prior [speculative] boom, that it was deepened by the attempts to prevent prices and wages from falling and firms from going bankrupt, that the monetary authorities had brought on the depression by inflationary policies before the crash and had prolonged it by “easy money” policies thereafter; that the only sound policy was to let the depression run its course, bring down money costs, and eliminate weak and unsound firms…. It was [this] London School (really Austrian) view that I referred to in my “Restatement” when I spoke of “the atrophied and rigid caricature [of the quantity theory] that is so frequently described by the proponents of the new income-expenditure approach and with some justice, to judge by much of the literature on policy that was spawned by the quantity theorists” (Friedman 1969, p. 51).

Note that Friedman wasn’t a Keynesian: he preferred monetary measures to fiscal stimulus, which he thought was too short-lived and impermanent to make a difference. But he certainly was a proponent of vigorous government action in the face of these crises: monetary action which amounts to “Helicopter” Ben Bernanke’s “print money and dump it on the population using helicopters if necessary.” And yes, this both devalues the dollar and causes inflation.

Thing is, monetary expansion has been going full-bore for a while now with little to no effect—we’re still facing deflation, not inflation. So conservatives are faced with either supporting more fiscal stimulus (though more heavily favoring tax cuts than government spending for [debatable] reasons of efficiency), or coming up with new and heretofore untried monetary measures. According to Milton Friedman, anyway, doing anything less—i.e. arguing that letting the market sort this out on its own is the best way forward—is unserious.