Milton Friedman’s economics and political economy - an old Keynesian critique

Milton Friedman’s influence on the economics profession has been enormous. In part, hissuccess was due to political forces that have made neoliberalism the dominant globalideology, but Friedman also rode those forces and contributed to them. Friedman’sprofessional triumph is testament to the weak intellectual foundations of the economicsprofession which accepted ideas that are conceptually and empirically flawed. Hissuccess has taken economics back in a pre-Keynesian direction and squeezedKeynesianism out of the academy. Friedman’s thinking also frames so-called newKeynesian economics which is simply new classical macroeconomics with the additionof imperfect competition and nominal rigidities. By enabling the claim thatmacroeconomics is fully characterized by a divide between new Keynesian and newclassical macroeconomics, new Keynesianism closes the pincer that excludes oldKeynesianism. As long as that pincer holds, economics will remain under Friedman’sshadow. 
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Thomas Palley

Thomas Palley is Schwartz economic growth fellow at the New America Foundation; Senior Economic Policy Adviser, AFL-CIO. His most recent book “From Financial Crisis to Stagnation” has just been released in paperback by Cambridge University Press (February 2013).

Member of Insight Editorial board.