Table of Contents

Keynes’s General Theory

Keynes’s General Theory

Seventy-Five Years Later

Edited by Thomas Cate

This volume, a collection of essays by internationally known experts in the area of the history of economic thought and of the economics of Keynes and macroeconomics in particular, is designed to celebrate the 75th anniversary of the publication of The General Theory.

Chapter 9: The Right Kind of an Economist: Friedman’s View of Keynes

Roger E. Backhouse and Bradley W. Bateman

Subjects: economics and finance, economic psychology, history of economic thought, post-keynesian economics


9. ‘The right kind of an economist’: Friedman’s view of Keynes Roger E. Backhouse and Bradley W. Bateman INTRODUCTION Robert Skidelsky (2009, p. 105), in his recent book on Keynes, no doubt speaks for many when he posits a chasm between the ideas of John Maynard Keynes and Milton Friedman.1 Friedman, ‘the high priest of the classical counter-attack’ was a representative of the tradition against which Keynes was rebelling who disagreed with Keynes on policy, economic theory, the interpretation of economic history and on methodology. Friedman’s attack on demand management policies was based on theoretical differences from Keynes: he defined full employment as the point at which the rate of inflation would be stable, something Keynes did not do, and he modelled economic agents as taking logical, rational decisions that were forward looking, paving the way for the more radical critiques of Keynesianism that came from his younger colleagues, notably Robert Lucas. His vision was of an economy that was inherently stable, the Great Depression not being a symptom of the instability of capitalism (Keynes’s diagnosis) but the result of bad monetary policy. Friedman proposed a ‘monetary-disequilibrium’ theory of the Great Depression, a type of theory from which Keynes had moved away. Methodologically, Skidelsky (2009, p. 81) argues, Friedman’s difference from Keynes involved the use of a mechanical schema, in which economic agents were modelled almost as billiard balls, bouncing mechanically from one equilibrium to another. Keynesian economics involved the denial of much of this, for Keynes denied that agents...

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