Romer on Friedman

Lars Christensen sends us to an interesting post at The Daily Beast.

I find two things interesting about the post. First, the title is a fascinating peek into the way conservatives think about non-conservatives. It's called "Even Obama's Economist Loves Milton Friedman".

Here's a newsflash, in case you aren't aware: most economists are quite fond of Milton Friedman. The man was a giant in the field, and he did excellent work. You will see economists criticize him, to be sure. He said some things that we didn't universally agree with. Most of this stuff got into the realm of normative economics. That's life -we don't all agree. But he's still universally revered, and his monetary and macroeconomic work is extremely highly regarded (even if some of his more political pronouncements aren't). The only people you really find without a deep appreciation for Friedman are non-economists on the left. I say - screw them. They really don't know what they're talking about. Anyway, the title of the post makes it sound like the author is surprised about this, which I find kind of humorous.

The other thing I find fascinating is what Romer actually said (this is in her five books interview):

"When you asked me for my list of books, I debated about whether to put The General Theory by John Maynard Keynes on the list. The General Theory is an incredibly important book, but it's basically a theoretical explanation of how aggregate demand could affect output. It was Friedman and Schwartz who provided the empirical evidence that supported the theory."

You don't often hear about Friedman and Schwartz as vindicating Keynes. I think she's exactly right, given how she's phrased it. There really was a paradigm shift with Keynes towards a view of macroeconomics where output in the short-run is demand determined. Friedman and Schwartz were part of solidifying that paradigm shift, despite the fact that they had nits to pick and that we've been fighting over details.

Generally, I think Keynes's appreciation of monetary factors is undersold. Part of this is the fault of the Old Keynesians themselves. I don't entirely blame them. The Great Depression was really a time that highlighted how important fiscal policy could be, so it's no wonder they would emphasize that. However, they didn't have that big of an excuse. You don't need to wait until Friedman and Schwartz to recognize the 1933 turnaround after all.

I think The General Theory would be on my short list. I'd have to think about what else would be.