By Dan Kervick
Paul Krugman made a remarkable assertion last week about the dwindling legacy of Milton Friedman:
… Friedman has vanished from the policy scene — so much so that I suspect that a few decades from now, historians of economic thought will regard him as little more than an extended footnote.
Krugman’s efforts to deliver a disparaging judgment on the Friedman legacy in macroeconomics may be appreciated, but I’m not sure his critique digs very deep. Friedman was not just a macroeconomist; he was also an important figure in the history of American political thought who left a deep conservative impact on the minds and attitudes of people whose intellectual development occurred during the Friedman heyday. Consequently, Friedman helped define the boundaries of the rigid neoliberalism that still seems to reign supreme among US politicians of both parties, and among elite opinion-makers in the ranks of the professional economists and technocrats. He was possibly more responsible than any other figure for converting a generation of policy makers and pundits to a more conservative, market oriented approach to political economy, an approach that goes beyond the specifics of Friedman’s own macroeconomic theorizing. So I think Krugman overestimates the damage that has been done to Friedman’s legacy. Aspects of Friedman’s macroeconomics might be in trouble; but Friedman’s broader paradigm for political economy is still, regrettably, too much with us. In fact, Krugman himself doesn’t seem to have moved much outside that paradigm, as I will try to show.