Friday, May 7, 2021

High contrast

From Wikipedia:

Say's law has been one of the principal doctrines used to support the laissez-faire belief that a capitalist economy will naturally tend toward full employment and prosperity without government intervention... Say's law was generally accepted throughout the 19th century... John Maynard Keynes argued in 1936 that Say's law is simply not true...

From Milton Friedman's presidential address to the  AEA, 1967:

These theoretical developments ... did undermine Keynes' key theoretical proposition, namely, that even in a world of flexible prices, a position of equilibrium at full employment might not exist. Henceforth, unemployment had again to be explained by rigidities or imperfections, not as the natural outcome of a fully operative market process.

 

Consider the contrast between Keynes's rejection of

the laissez-faire belief that a capitalist economy will naturally tend toward full employment and prosperity

and Friedman's rejection of Keynes:

Henceforth, unemployment had again to be explained by rigidities or imperfections, not as the natural outcome of a fully operative market process.

Keynes rejected the view that "full employment" is the economy's natural state. Friedman rejected the view that it isn't.

1 comment:

The Arthurian said...

"Keynes rejected the view that "full employment" is the economy's natural state. Friedman rejected the view that it isn't."

I accept both views. The economy changes, you know?

I expect the result Keynes described to occur at or after the peak of a debt super-cycle, and I expect the result Friedman described to occur during the opposite leg of that cycle, during the expansion.