Milton Friedman: A Reappraisal

The economist Milton Friedman, were he still alive, would have turned 100 this week. (As it was, he got pretty close, dying in 2006 at the age of 94.)

To commemorate the Friedman centennial, Stephen Moore of The Wall Street Journal has penned an appreciation headlined “The Man Who Saved Capitalism.”

Moore argues that President Barack Obama should have followed Friedman’s free-market precepts instead of intervening in the economy to the extent he has. “Imagine how much better things would have turned out, for Mr. Obama and the country,” Moore writes. Friedman was “the economist who saved capitalism by dismembering the ideas of central planning.” Just as important, Friedman led the first “intellectual comeback of free-market economics since the 1930s, when John Maynard Keynes hijacked the profession.”

Moore makes provocative points, but Peter Drucker (a contemporary of Friedman’s, who died in 2005 at age 95) would have been skeptical.

In fact, as far as Drucker was concerned, Friedman was, despite his idiosyncrasies, fundamentally Keynesian in that he believed government could steer the economy via one lever or another.

Milton Friedman is as much a ‘Keynesian’ as the Master himself, rather than the ‘anti-Keynesian’ as which he is commonly depicted,” Drucker wrote in Toward the Next Economics. “Friedman accepts without reservation the Keynesian world view. His economics is pure macroeconomists, with the national government as the one unit, the one dynamic force, controlling the economy through the money supply.”

Milton Friedman

On a more fundamental level, Drucker asserted, economists were always coming up with sweeping theories that proved, in the end, to be “unreasonable and invalid.” Drucker traced this to the Great Depression, which fostered “the development of economics that knew the answers.” (Drucker himself believed more in the power of “creative destruction.”)

In The Ecological Vision, Drucker summarized what he saw as the main variants of this mindset: “Keynes knew the answer,” Drucker wrote. “Whatever ails you, just create more purchasing power. Milton Friedman, who may be the last surviving member of the great generation, refined it and said, ‘You don’t even have to do that. All you have to do is just make sure the money supply grows.’ For the supply-sider it was even easier: just cut taxes. What could appear nicer and more pleasant?”

What do you think: Did Friedman really accept “a Keynesian world view,” as Drucker suggested?