“We Are All Keynesians Now”

John Maynard Keynes

By Peter Galuszka

John Maynard Keynes, the British economist, advocated government spending and monetary intervention as suitable for modern economies.

When I was a student at a liberal college in New England in the early 1970s, we were taught that Keynes very much had the right idea. As evidence, we had the Great Society programs of Lyndon B. Johnson and, strangely, the Vietnam War. They all relied on vast amounts of deficit public spending.

Since then, free-market types came into favorable light and it all became the magic of the market, little regulation and other panaceas.

According to whom you read, pro-capitalism economist Milton Friedman admitted the necessity of Keynes’ thinking by stating, “We’re all Keynesians now.” President Richard Nixon, a Republican, is also credited with the quote when he took the U.S. off the gold standard.

The phrase is taking on increasing relevance with the COVID-19 pandemic. Virginia is no exception.

The Trump Administration’s woefully bad initial response to the pandemic has been quickly replaced with bipartisan approval for a $2.2 trillion federal spending package. It includes measures unthinkable just a few months ago, such as big bailouts for local and state governments and direct payments to individual citizens.

Virginia should get $1.8 billion for the state and $1.5 billion for counties and cities. The state’s formerly healthy budget will be taking a huge hit as many business are shutting down per Gov. Ralph Northam’s social-distancing orders. Republicans are crying out for re-thinking. That’s doubtful because there are bigger fish to fry at the moment.

Today’s dilemma gives pause for thought. For many years, Virginia’s economy elite tended to side with the low tax, little regulation and pro-business ideas.

Cheering those ideas along are conservative, free-market groups such as the Mercatus Center at George Mason University in Northern Virginia and lobbyist-heavy think tanks such as the Thomas Jefferson Institute for Public Policy. Both have been recipients of funding from the free-market, manipulative and petroleum money-backed Koch group.

Republicans dominated the General Assembly until this year, so such ideas flourished. They were buttressed with a flood of “screw the poor” policies.

Now, they are becoming increasingly irrelevant and likely will be for a long time.

Free-market policies that emphasized short-term returns have squandered the ability of Virginia and the country to be prepared for pandemics that many have predicted for years. That’s why we have massive shortages of personal protective equipment, ventilators and N-95 face masks. Profit-minded businesses just didn’t want to spend the money.

We are paying the price for this with closed businesses and stay-at-home orders.

With so much down time, people might start rethinking the future. One place to start is the writing of Keynes.

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52 responses to ““We Are All Keynesians Now”

  1. The small-govt, low-regulation, free-market types have been fairly quiet as of recent. Crickets, in fact.

    I have no doubts that they have thoughts, PLENTY of thoughts but not sharing so far.

    And I have zero doubts that after all of this blows over, they WILL….

    • Don’t worry. Once their bacon is out of the fire, they’ll return. Did I say, “Bacon?”

      Keynesian? Only the DoD budget.

      • Keynes was not, for the most part, anti-capitalism.

        Spain, which is run by the Socialist Workers Party, is handling coronavirus far worse than the U.S., which is not governed by socialist parties:

        https://www.nbcnews.com/health/health-news/doctors-hit-huge-avalanche-coronavirus-patients-spain-n1173711

        Spain’s socialist government refused to cancel rallies, including a 120,000-strong women’s rally that spready coronavirus to all parts of Spain and two members of the ruling government’s cabinet that participated in the rally. It claimed the rally posed no threat to public health, even though mass gatherings had already been linked to the explosion of coronavirus in Italy.

        • It depends a lot on how you categorize “socialist”. For instance, do you think China or Cuba are also “socialist” but in a different way from Spain?

          In China – an oppressive govt dictates to people what to do in a pandemic. They block off entire cities and then go around grabbing
          anyone that looks like they are infected and hauling them off somewhere.

          They actually can accomplish with citizenry what we cannot and that is when we “advise” social distancing – China does not “advise”, it’s the law and even if you obey it – you can be grabbed if you look sick.

          Don’t confuse “socialism”. It’s not what Spain is.

  2. I am the first and only person to register as a “lobbyist” for the Thomas Jefferson Institute (and I mainly did it for the security badge…). Most of the work is policy analysis and writing, tools and ideas perhaps used by others….but I digress. I’ll let the prez, Chris Braunlich, point out that he’s aware of maybe one small check from the Koch’s over the years. I dare you to produce evidence of more, because it isn’t there. GMU of course has gotten real bucks from them. So what?

    No question, the long term impact of this crisis is hard to predict, but much will change. I’ve said before, Bernie won’t be the nominee but progressive ideas are gaining power. For one, mandatory paid sick leave. There is no question in my mind that the nursing homes became hotspots because their low income workforce was loathe to fail to come to work despite being ill. Trump has already signed a federal version, that dam is broken.

    When the smoke clears it will be evident that the Trump response was mirrored in the Main Stream Media, which also downplayed the threat and dismissed concerns as signs of “racism and xenophobia.” Biden initially attacked Trump’s proposal to cut off travel from China. I don’t like this game, not at this time, but if you force me to engage I will. https://nationalfile.com/flashback-biden-opposed-trumps-chinese-coronavirus-travel-ban-as-xenophobia/

    • REALLY? ” Prior to launching National File, Pappert’s work has been featured in Breitbart, Big League Politics, and Infowars.

      He has been featured on prominent local radio shows, as well as The Alex Jones Show, War Room, and The David Knight Show.

      Gabriel Keane – Gabriel Keane is a social media critic best known for viral content, and a reporter who began working in political news in 2017. Earlier in life, Keane gained an interest in social commentary through listening to talk radio. Keane’s work has been featured on Infowars, and covered by The Alex Jones Show.”

      REALLY?

      • Why can’t you stick to the topic at hand? Did Biden oppose Trump’s January shut down of China travel? Yes or No? Why do you liberals so love dissembling arguments? This is not about a source it is about the Democrat’s presumptive candidate for President. While you’re at it – do you believe Biden is in full possession of his mental facilities? I do not. Sadly, age has taken its toll on Sen Biden’s mental abilities. And I’m sorry if any proglibs don’t like that comment. Anybody who wants to have the nuclear launch codes gets put under the microscope – whether proglibs think it’s politically correct or not.

      • I’d seen it several times. That’s the first link that popped up. Still true.

  3. Does anyone really think that socialist or communist governments were better prepared for the pandemic? Look what’s happening in Europe. It’s stylish to blame capitalism for everything, but like most of these attacks, this one is lacks any evidentiary basis. Even free market advocates concede that intervention in the market is necessary. The questions are when and how. The problem is that many interventions in the market exacerbate inequality (see exclusionary zoning) If we have learned anything from communist and socialist regimes, it’s that humans are not skilled at long-term planning. Capitalism can be part of the answer, however, as companies retool to provide the vital supplies that we need. Is it quick enough? No. Do you have a better solution? I seriously doubt it.

    • Excellent point. Again, best reviewed once more data is in and the crisis is passed, but the single payer health care systems don’t seem to be faring that much better (Italy, Spain) and the treatments and eventual vaccines will come from private sector labs, likely. But some ugly signs of capitalism are there, too. MSNBC is delighting in a report that masks in American warehouses are being shipped overseas. Maybe true. But it is also true that if we cut off exports, so will the other countries we depend on.

      • Remember also – the governments who also are having success as dealing with the pandemic, South Korea, Germany, Singapore, etc.

        All universal health care also and all top-down govt-led response to basically test heavily to find and isolate those who were infected even those who did not show symptoms.

        Yes, the free market was involved – but did not lead the effort, they worked under the guidance of govt delivering what was needed when asked to.

        • I’ll just pick one of those- Germany. They’ve done a good job of testing (collecting data) so their death rate is low. However, in countries with less testing, the death rate is probably similar, we just don’t have the data. But Germany has had a lot of cases (again, good testing). So I don’t think you can hold up Germany as a model of anything but testing and data collection (which is great, but not necessarily a model for all).
          https://www.dw.com/en/coronavirus-germany-to-centralize-supply-chains-set-prices-on-masks-protective-gear/a-52952314

        • Yes. It certainly appears that a country’s economic philosophy and policies have no bearing on that country’s ability to deal with a major pandemic.

          All the more reason to not dismantle our economic system.

        • And then there is Italy.

          There is a balance in life between not being prepared and wasting resources that are not likely to be used. Some of us can remember people who built bomb shelters in their yards and filled them to the brim with food and water. I worked with a guy who had one under his front yard.

          Now there is a TV show with two guys going around and eating “historic food.” I saw a preview of an episode where they were going to eat some 1950s era bomb shelter crackers.

          I’ve worked with engineers and economists for 40 plus years. One needs to build a network that can handle communications traffic that is to be normally expected. But it makes no sense to build one that has capacity that is not likely to be used. It’s a waste of money. Rather, carriers and ISPs will often make arrangements with other carriers to handle overflow traffic and to invest in a scalable network that can grow when needed. Notice that big carriers such as Verizon, AT&T, CenturyLink and T-Mobile, have been able to adjust reasonably well for the higher volumes.

          The same things apply with pandemics. Perhaps, we have too few hospital beds but building extra wings on each hospital would likely involve unused capital investment and dollars that cannot be used elsewhere, as well as higher costs for consumers. The same analysis applies to ventilators. Again, we may not have had a proper amount in reserve but it also makes no sense to have one ventilator for every person in the U.S. The real question is: Are there resources, such as the Dulles Expo Center in Fairfax County, that can be used as a hospital if needed? Can it be reasonably outfitted? How soon can manufacturers shift gears and begin making medical supplies?

          The United States was hardly prepared for WW2. FDR and Congress had taken a number of steps to prepare but the military was highly undermanned and lacked needed tools of war and tools for the support for the war.

  4. It’s not all or nothing. We are in an extraordinary time of international disruption with both health and economic disasters growing. One can be in favor of small and more effective government and still support government action to address the health and economic issues we face today.

    Moreover, one can be skeptical of many economic regulations as ineffective and designed to hobble competition and be supportive of properly tailored health and safety regulations.

    • Regulations in Virginia are too often designed to pick winners among the favored corporations, unions and environmental concerns who stuff money into our state politicians’ pockets. This has because of the biggest regulatory failure of all – the failure to impose any limits on anybody for campaign contributions.

      This last General Assembly session one of the few trustworthy state politicians, Chap Petersen, again proposed a bill to ban campaign contributions from corporations regulated by the state. One would think the new Democratic majority would have been fully in favor of such a restriction on corporate political power. One would have been wrong. Eileen Filler-Corn, a newly empowered Democratic Party leader, stuffed the bill.

      Where is the liberal / progressive / socialist / anti-corporatist outrage at Eileen Filler-Corn and Dick Saslaw – the Democrats’ two legislative leaders? Saslaw drips with Dominion money and is always ready with legislation to pad that sad company’s bottom line with money from the pockets of average Virginians .

      To all the Democrats on this Virginia-based blog … I am calling bull**** on you and your fake political philosophies. Until you and the state politicians you support start calling for Saslaw and Filler-Corn’s ouster you are just a bunch of phonies babbling on and on about the Koch Brothers but unwilling to take the Dominion Twins (Saslaw and Filler-Corn) to task.

      Filler-Corn and Saslaw need to go.

  5. “….they worked under the guidance of govt delivering what was needed when asked to.” OMG, Larry, shades of Obama’s “you didn’t build that business!” What did you do in the real world before joining the ranks of us retiree/pundits? Another lesson I hope people are getting from this is that business drives the world. With businesses shutting down everywhere, the government leeches will need to find other ways to eat. Those providing essential services should remain, but that is only a subset. Plenty of leeches, too.

    It will be interesting to see where the innovations and cures come from. Bets? And the after action will also point to stupid decisions made by the CDC early on, regulations that got badly in the way. They will be reported, since they can ultimately be blamed on Trump. Otherwise, we’d never hear.

    • Just FYI – I don’t think the govt should actually build/manufacture hardly anything save for nuclear material and military-associated drugs and related.

      Virtually everything else in our military is built by the private sector – from uniforms to tanks to ballistic missiles and it should be.

      And that’s the way that virtually the rest of govt works. The private sector is in charge of production and the free-market and competition are alive and well in that realm.

  6. Weird. I wrote the above comment and it shows up as Steve’s

  7. Sigh. I just wish the pandemic were over so Peter and I could have that promised cup of coffee, and I can learn the answer to a new question nagging at me: Is this the first time Peter ever approvingly quoted Richard Nixon? 🙂

    I don’t like public pissing matches, but I’ll just say that Steve nails the main point on the head: Regulatory efforts — whether at the GA, Congress, or by Executive branch officials — are too often naked efforts to crush competition, restrict access, and pick winners and losers. Its’ time for that to end.

    • re: “.. too often naked efforts to crush competition, restrict access, and pick winners and losers. Its’ time for that to end.”

      and we expect Govt to be the one to do that?

      seems to be , we have this conundrum about the role of govt with regard to regulation. No regulation can and does lead to really bad outcomes sometimes. How would you fix that? Govt, right?

      So the issue is how much govt and can the govt regulated “properly” or not? Does anyone really think that the govt should NOT regulate?

      So this is about people’s philosophies about what regulation is needed – or not – and the impacts – good and bad of regulation.

      Too often, those who say regulation picks winners and losers are so focused on that aspect that they willingly would do away with the regulation – they basically, and predictably oppose all regulation – you almost never see them advocate for some level of it – just that in all forms, it’s bad and we should roll as much of it back as we can.

      I’d prefer to see a more balanced approach and so will not sign on to “anti-regulation” groups… that does NOT make me a “liberal”, except in the eyes of those who want to dismiss the view that some regulation is good.

  8. I’ve ALWAYS been with the crowd that wanted to restrict/outlaw corporate (and UNION) campaign donations…and I’ve always been told, usually by folks on the right, that doing so is “unconstitutional” restriction of “free speech”.

    I’ve ALWAYS had this view EVEN WHEN the GOP was in charge of the GA.

    I’m still not exactly sure what this (or Biden) have to do with the fact that the Govt is bailing us out and is the “go to” entity for handling the pandemic.

    Finally, I do realize that people are not entirely happy right now and more on edge – and probably more likely to share their true feelings.. We should but let’s keep it civil. One can debate and even argue without saying “you guys are…. dog doo” and similar.. lighten up! 😉

  9. “Free-market policies that emphasized short-term returns have squandered the ability of Virginia and the country to be prepared for pandemics that many have predicted for years. That’s why we have massive shortages of personal protective equipment, ventilators and N-95 face masks. Profit-minded businesses just didn’t want to spend the money.”

    What does this even mean? PPE, ventilators, etc. are stockpiled in a national stockpile. That’s funded by the federal government, as required by federal law and enumerated in national disaster-preparedness plans. The only way your statement could possibly make sense is if you are claiming that “free-market types” lobbied successfully to reduce funding for the stockpiles? Show me any evidence that this has a shred of truth.

    • Boy is that mixed up. The “free market” would LOVE to sell the govt as much PPE as they will buy!

      It’s NOT the “free market” that decided how much PPE the govt wanted or not!

      geeze…

      • Actually Larry, long ago you first mentioned the real problem and that’s the popularity of “just in time” delivery logistic chains, hardly just in healthcare, which are now being proven vulnerable to a problem not envisioned. People really weren’t thinking 30, 60, 90 day stockpiles, in or out of government.

        Generals always start a war like they are fighting the last one, then get around to adapting. This crisis is outside anybody’s actual experience.

        • Yup – and not just the pipelines – manufacturing – is sized for the demand to keep the pipelines full.

          You may not have any extra manufacturing capacity for a lot of things.

          That’s why they’re now trying to figure out how to re-start or re-purpose manufacturing.

          That’s a pure free-market (and good) behavior – to NOT have any reserve capacity because that reserve costs money and if you are in competition with others, that’s a drag on your expenses.

          Works that way with hospital beds and ventilators also.

          We do not operate our economy as if we are going to have a pandemic.

          Just the simple reality …

    • How the pandemic itself is handled should have nothing to do with political leanings, only science. Whether we have the appropriate government planning for supplies etc does, especially as we hear from the Governor’s that they are bidding against each other for equipment. How we deal with the economic mess it is creating also does. Witness the fuss over how much to extend unemployment insurance.

      That said, another place to start rethinking about the ‘magic of the market‘ might be “Saving Capitalism” by Robert Reich. My favorite history Professor, at another liberal New England college, believed that Roosevelt and his ‘safety net’ saved capitalism when his administration directed the way out of the Great Depression. My CT town was home to several of those Roosevelt people, including a man, known as a liberal economist, who invented Social Security. It is said he told Roosevelt not to tell anyone he was the writer because then it would never pass.

      Now, not only with the Virus and the need for drastic economic safety measures, but the surfacing of regulatory issues being tossed out by the current administration, Reich has written a book about the need to save capitalism “for the many, not the few.” He claims America’s famed ‘middle class’ has been lost, a situation Trump played on, because they no longer have ‘countervailing’ power against the economic winners. Those financial winners use their money to gain the political power that allows them to write the rules. I haven’t finished the book but there are solutions to create a more balanced political economy.

      I am someone who grew up with a Grandmother who talked about the Great Depression. The family built and owned houses in Philadelphia and I asked my Granny what they did about those houses. She said, “We let the people stay. It wasn’t as if there was anyone to take their place.” Scary … so is the unemployment news this morning.

    • Here is an example of how free-market thinking, focused on short-term gains, can harm the long-term health of the nation. About 13 years ago, the U.S. government, in the wake of some near misses in epidemics, contracted with a small company to manufacture easy-to-use, mobile ventilators for a relatively cheap price. Before the design could get into production, a larger medical equipment company bought the small company. The new parent company, after negotiating with the government for more company, eventually asked the government to cancel the contract because there was not enough profit in the project for it. The original contract, thus, resulted in no ventilators. There was some speculation that the larger company bought the smaller one so that it could eliminate a competitor to its larger, more expensive ventilators. https://www.nytimes.com/2020/03/29/business/coronavirus-us-ventilator-shortage.html

  10. It’s a bit like foxholes and atheists, eh? The prospect of dying in an epidemic (unless you’re Dan Patrick) can change ones thoughts of ICG.

  11. Jim,
    Some PPEs, Ventilators and masks are in a federal stockpile but a lot are acquired privately by hospitals and medical practices. There have been lots of warnings about pandemics yet neither the U.S. public or private sector responded.
    You have always tried to place public health in a model of for-profit, free market economics. In “Boomergeddon” you used the example of concierge, specialty doctors as a great model of using the free market to get treatment. The huge flaw is that only the rich can afford it. I have always maintained that good health should be a basic American right and not a privilege.
    We are undergoing a major transition in thinking with COVID-19. There is no room for such ideas as concierge health care. That’s the point I am trying to make. I am not discussing Dick Saslaw or Filler-Corn although I agree entirely that Dems are just as bad at benefiting from Virginia’s corrupt system of government as Republicans. Still, I am being accused of having a blind eye to abuses by Dems, What the hell does that have to do with the central point of my post?

    • Actually, in Boomergeddeon, I raised a concern about concierge medicine — when a business model is predicated on doctors shifting from handling 3,000 patients on average to handling only 300, it’s going to severely aggravate the large and growing shortage of primary care physicians.

      But experimentation is good. On a small scale, concierge health may lead to more effective preventive care. Repeat: On a small scale.

  12. Steve. Good point about the just in time concept

  13. Speaking of re-purposing manufacturing capabilities:

    https://sports.yahoo.com/f1-team-creates-coronavirus-breathing-062214739.html

    The Mercedes Formula 1 team have developed a modified/upgraded CPAP machine (a Super-CPAP?). Apparently these devices are a simple and viable alternative to medical ventilators for many patients.

    Mercedes F1 says they can turn out about 1,000 of them per day from their relatively small bespoke manufacturing facility, and the other Formukla 1 teams are on-board to make them as well, but imagine how many could be built each day if a couple of car companies with large-scale manufacturing capabilities started making them.

  14. Enough to these Zombie Posts, already.

    On a serious note please view carefully this:

  15. For what it’s worth, Keynes would not be a “Keynesian” now.

    Keynes’ intellectual breakthrough was the idea that government spending could counteract the downturn in private spending in a recession. In effect, government spending could become a stabilizer. A corollary, however, is that government would run surpluses during economic expansions. Most western democracies have abandoned the second part. We just spend, spend, spend and run up deficits regardless of where we are in the economic cycle. In effect, we cherry pick the parts of Keynes’ theory that suits our proclivity for spending money we don’t have and ignore the parts that are inconvenient.

    Our society is intellectually and morally bankrupt.

    • Uh yep, and the last thing Jesus would be today is a Christian… although that wouldn’t preclude him from joining Jews For Jesus.

      Democrats throw money at the problems, Republicans throw the money to their friends. Either way money gets thrown.

    • Gotta go do some pantry stuff now but would discuss further later if you are willing…..

    • So here’s the question(s).

      I am NOT advocating more spending or more taxes or anything like that.

      But I AM asking:

      1. – taxes collected are actually spent on something , they do not disappear down a black hole

      2. – The things that taxes pay for – do have value – whether it be a jeep or a new hip for someone, right?

      In BOTH cases – the govt spending actually does flow to the private sector – right?

      What money does the govt collected that does NOT flow back to the private sector economy?
      .

  16. “Our society is intellectually and morally bankrupt.”

    That sums us, and our predicament, up in a nutshell.

  17. Well, tut, tut! You guts sound like the Greek colonels in the 1960s

  18. The Friedman quote, “we’re all Keynesians now”, lacks context. Friedman typically didn’t agree with Keynesian views on policy. He was crediting Keynes with advancing the tools of economics that were used at that time by both Keynesian and Chicago School economists. (Nixon may have been using the quote hopefully, since there was an underlying fear that 1960s Great Society spending and Vietnam War spending [guns and butter] would put the inflation pot on boil.) In fact, this was exactly the time when Friedman’s expectations challenge to the Keynesian assumption of a “trade-off” between inflation and employment was looking prescient. Stagflation took hold shortly after. This was one of reasons cited in the Nobel Prize award announcement for Friedman in 1976.

  19. This is from Investopedia but would be happy to see other views [excerpts]:

    Who Was Milton Friedman?
    Milton Friedman was an American economist and statistician best known for his strong belief in free-market capitalism. During his time as a professor at the University of Chicago, Friedman developed numerous free-market theories that opposed the views of traditional Keynesian economists. In his book “A Monetary History of the United States, 1867-1960,” Friedman illustrated the role of monetary policy in creating and arguably worsening the Great Depression.

    KEY TAKEAWAYS
    Milton Friedman was one of the leading economic voices of the latter half of the 20th century.
    Milton Friedman’s economic theories became what is known as monetarism, which built on and overturned important parts of Keynesian economics.
    Friedman popularized many economic ideas that are still important today.

    Understanding Milton Friedman
    Milton Friedman was born on July 31, 1912, in New York, and died on Nov. 16, 2006, in California. Friedman grew up on the East Coast and attended Rutgers University, studying mathematics and economics. He graduated from college in 1932 and went on to earn a Ph.D. in economics at Columbia University in 1946.

    Withing the general framework of Keynesian economics, Friedman developed his own economic theory with slightly different conclusions for economic policy. Through this theory, called Monetarism, Friedman expressed the importance of monetary policy and pointed out that changes in the money supply have real short-term and long-term effects. Specifically, the money supply affects price levels. Further, Friedman used monetarism to openly contradict the Keynesian principles of the Keynesian multiplier and the Phillips curve.

    Friedman was awarded the Nobel Prize in Economics in 1976 for his research on income and consumption and for his developments in monetary theory. Over the course of his career, he published pioneering books on the modern economy, as well as numerous influential articles, changing the way economics is taught.

    Milton Friedman and Monetarism vs. Keynesian Economics

    John Maynard Keynes and Milton Friedman were two of the most influential economic and public policy thinkers of the 20th century. While Keynes is widely credited with creating the first systematic approach to macroeconomic government policy, Friedman rose to fame in part by criticizing Keynes’ policy proposals and instead arguing for more emphasis on monetary policy.

    Keynes argued that an interventionist government could help smooth out recessions by using fiscal policy to prop up aggregate demand. Strategic government spending could spur consumption and investment, argued Keynes, and help alleviate unemployment. Keynes’s theories gave rise to a new dominant paradigm in economic thought, which was subsequently dubbed Keynesian economics. While still popular, some have argued that Keynesian economics has provided a pseudo-scientific justification for short-sighted elected politicians to run fiscal deficits and accumulate massive levels of government debt.”

    https://www.investopedia.com/terms/m/milton-friedman.asp

  20. The article mentioned Nixon saying “we’re all Keynesians now” when he took the U.S. off the gold standard. In fact, Friedman, a monetarist, disliked the gold standard. He blamed the worldwide spread of the Great Depression and the worsening of a U.S. recession to a depression in large part on the gold standard and its role in contracting the money supply by a third at a time when it should have expanded. Keynes also disliked the interwar Gold Standard and blamed it in significant part for the Great Depression. Keynes died in 1946 and didn’t see Friedman’s later Great Depression analysis. Nixon might have referenced Keynes when he abandoned the Gold Standard, but the reality was the U.S. was no longer in a position to defend convertibility, so his hand was forced.

    Both these economists lived through the Depression and WW2 (Keynes also WW1) and they could both be very practical and for that reason are perhaps misunderstood. I suspect neither Keynes or Friedman would like where the world economies are now. Keynes did not like accumulating debt during periods of expansion, which world governments have been doing for much of the last 50 years. He favored raising taxes to avoid debt during periods of expansion. He would likely now be worried that the huge accumulations of debt would hinder providing needed fiscal stimulus during difficult times (like now) or if another WW2 type of effort was required. Keynes may also not like how his acolyte economists interpreted his theories starting in the 1960s (constantly priming the pump). He also may think governments have used his theories to justify their lack of fiscal control.

    Friedman had great respect for Keynes (the man) for his development of economic tools and theory. As noted, he disagreed with Keynesian economists who dominated in the years after Keynes death in 1946. The two men might have had more areas of agreement than people presume had they been true contemporaries. Friedman would probably not oppose fiscal stimulus during downturns, like the Great Depression, although he would certainly have wanted to execute it differently than Keynes had recommended. He would probably be very concerned at present because Fed monetary levers are getting more and more limited to fight recessions. They both might think Western countries are painting themselves into a corner.

    I guess I’m writing about economics here to forget about Covid-19, but this stuff is going to be important very quickly.

    • Izzo,

      Thank you for your timely (to put it mildly) reminder that “this stuff is going to be important very quickly.”

      On a somewhat different topic, I suspect that Friedman and Keynes would also be appalled at our “morals” today, and our ridiculous posturing and obscene displays of great virtues, in compensation.

      • Reed, I think they both would hate what governments are doing from an economic perspective. Friedman would hate the increase in government spending as a percentage of GDP that DJ showed in a post. Keynes, unless he changed his views, would hate the increase in debt that has occurred during expansions. Yes, he said “in the long run we’re all dead” but he would not have agreed with running up WW2 debt levels when there is no WW2. They were both brilliant theory and numbers guys, so they would certainly hate all the obfuscation and fact-free rhetoric from dimmer lights of contemporary politicians.

    • I would give a pretty penny to hear what the Friedman school of economics folks think we should do right now.

  21. Larry, heck, I’d pay something if you actually understood anything from “the Friedman school of economics”.

    Friedman is dead, but if he looked at this page, I’d guess he’d focus on the graphic in DJ’s piece titled “Expanding an ineffective government solves nothing”. He’d probably have little issue with the spike for the Great Depression (although he’d say it was a failure of Government policy that caused it), and he’d have little issue with the big spike for WW2. He’d have a big issue with the enormous increase in government spending as a percentage of GDP over the past 50 years.

  22. Izzo – do you know if there are any countries that operate according to Friedman’s beliefs?

    But my original question was – right now, today – what would Friedman do?

    Would he be going what we are doing right now or would he have a different philosophy about the mega bail-outs?

    And one more – Did Friedman agree with Laffer?

  23. Larry, you seem to be trying to fit complex people and topics into your simple narrative. You really need to read up on this stuff.

    Countries operating “according to Friedman’s beliefs” — when the U.S., the UK, and many other countries contracted the money supply (remember Paul Volcker) to end runaway inflation/stagflation in the late 1970s it was based on Friedman’s monetary views. The Fed’s (and other central banks) response to prevent meltdown during the 2008 financial crisis was based in significant part on Friedman’s work on the on the causes of the Great Depression. Really, there was limited understanding of the importance of monetary policy before Friedman.

    “Original question” — he’s dead so we don’t know what he would do. The reason I commented on the graphic in DJs piece was to point out he had no problem with debt spending for fiscal stimulus in the Great Depression and WW2. He probably wouldn’t now due to the circumstances. These guys are not as one-dimensional as you would like to portray them.

    Friedman and Laffer — Your tired, old Laffer spiel. Laffer, Kemp, and Jude Wanniski were on the “return to Gold Standard/tax cuts that pay for themselves” side. Friedman was instrumental in moving away from Gold Standard to flexible exchange rates and favored the monetary contraction to cure runaway inflation that these guys hated. I’m sure you can Google vicious Wanniski comments on Friedman. Friedman was proven right.

    • It’s true, I am not a ‘student’ of economics but I did take it in college and no matter who the economist was or his/her theories, I always tried to understand how it actually “fit” into real and practical applications, perhaps that “simplistic” view of “complex” ?

      I just had gotten the impression that pure Monetarism today is mainly associated with the work of Milton Friedman, who was among the generation of economists to accept Keynesian economics and then criticize Keynes’s theory of fighting economic downturns using fiscal policy (government spending).

      Though he opposed the existence of the Federal Reserve, Friedman advocated, given its existence, a central bank policy aimed at keeping the growth of the money supply at a rate commensurate with the growth in productivity and demand for goods.

      I don’t pretend to understand it to the depth that you or others might but if there are countries operating today and their economic policy is primarily based on Monetarism then it’s much more than theory.

      And that’s why I did ask, given Friedman’s views on economic policy, would he agree on the massive bailouts and quantitative easing as the correct/appropriate way to proceed right now?

      Would those associated with the Chicago School be in agreement?

      So I am acknowledging that I do not have a deeper understanding as you do and am asking you for your view. We are all ignorant – just on different subjects and I put myself there – but do enjoy – and do listen to others who may know more and/or have a differing perspective.

      It was a simple title: “We Are All Keynesians Now” but an excellent one, no?

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