THANK YOU, MILTON FRIEDMAN
My latest NYT column looks at Milton Friedman's enormous influence on monetary economics, drawing on a speech by Fed Governor Ben Bernanke.
Twenty-five years ago, I took my first economics class. Like many other college students, I wanted to understand why the economy of our teenage years was such a scary mess, with inflation and rising taxes eroding our parents' paychecks, interest rates soaring and unemployment an ever present threat.
By my freshman year, inflation had morphed into "stagflation," combining rising price levels with relatively high unemployment. For most economists, stagflation was a puzzle. There was supposed to be a trade-off--the so-called Phillips curve--between inflation and unemployment. If you had one, you weren't supposed to have the other.
The "Great Inflation" of the 1970's challenged and permanently altered economic theory. It vindicated the once-controversial analysis of Milton Friedman, then at the University of Chicago.
"Friedman's monetary framework has been so influential that in its broad outlines at least, it has nearly become identical with modern monetary theory," said the Federal Reserve governor Ben S. Bernanke, at a recent conference at the Federal Reserve Bank of Dallas.
Not to take anything away from my article, but if you want the full story, you can download a .pdf file of Bernanke's speech here. It's quite well written.