At Jacobin: The Forgotten Case Against Milton Friedman: An interview with Thomas Palley
I love it when economics is exciting! Right from the opening paragraph, I love the Palley interview.
Heh, right from the title I love the interview. Every case against Milton Friedman rises immediately to the top of my reading list.
And I think Palley's informal title of the interview is even better than the title Jacobin used. Thomas Palley calls it "Inflation, the Phillips curve, and the forgotten case against Milton Friedman".
When I came to this part, I had to repeat it here:
"Well, if you go back to the early 1960s, there was a widespread belief that there was a systematic trade-off between inflation and unemployment that policy could use. People believed in the “structural Phillips curve.” Friedman questioned the long-run existence of that trade-off using very conventional economic theory."
And then:
"As I interpret it, the economics profession willingly went along with the story that Friedman was right. And there’s a reason for that. Friedman had based his case on conventional theory."
And the zinger:
"And the economics profession is not in the business of challenging conventional theory. In fact, the exact opposite is true. It’s in the business of defending conventional theory."
Palley also says:
"In my own work, I talk of the “backward bending Phillips curve,” which generates an optimal rate of inflation that I call the minimum-unemployment rate of inflation or MURI — the rate of inflation that will deliver the minimum unemployment rate. I think that is what policy should aim for. And I would say it’s somewhere between 3 percent and 6 percent."
Well you know I'm gonna have something to say about that!
1 comment:
In the opening, the interviewer says to Palley:
"Over the years you have developed a theoretical basis for the view that there is a potentially stable trade-off between unemployment and inflation that policy makers can exploit. In other words, policy makers can choose to have somewhat higher inflation and somewhat lower unemployment, or they can choose the opposite sort of policy, and either one can potentially be a stable policy choice."
That is a big deal. I take a different tack, but if Palley's theoretical basis is correct it is a really big deal because it means Friedman was wrong and, basically, that all of modern economics is wrong.
And forcing people into a corner where they'd actually have to admit that modern econ is wrong, well, that would really make my day!
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