Milton Friedman’s 100th Birthday – Celebrate by Spending some Time with Milton

Here’s a great conversation with Milton Friedman hosted by Brian Lamb, and another with Russ Roberts from EconTalk.

Google and YouTube have a great collection of Milton Friedman video highlights.

No man was a greater influence on the thinking of Milton Friedman than Friedrich Hayek — and no man influenced by the ideas Friedrich Hayek had a greater impact on the world than Milton Friedman.

Raise a toast to Milton Friedman.  He would have been 100 years old today.

Lots more on Milton Friedman at my Twitter feed.

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Hayek & Wittgenstein — The Parallel Rejection of Formal Modeling as a Proxy for Capturing the Significance of Language or the Causal Mechanism of the Economic Process

Academics attempting to make sense of the significance of words & logical implication had a framework for doing so exactly parallel to that of economists attempting to make sense of the significance of prices & the implication of prices for distribution.

In fact, both modern programs in their mature form came out the the same city — Vienna. In the word & logic domain the key figures were Wittgenstein and Carnap. And you can connect a direct line from Wittgenstein & Carnap to Abraham Wald’s formal existence proof of equilibrium.

BOTH of these programs sought to limn words & logic (language) and prices & distribution (the economy) by mapping these into formal models.

In the first case, by stipulating a mapping of semantics to particular meaning entities & then mapping the formal relation of these in propositional logic, a system of axioms.

In the second case, by stipulating a mapping of values to particular price entities & then mapping the formal value relations of these into an axiomatic system.

These are the “God’s eye view” constructs pretending to limn language and the economy that Wittgenstein & Hayek rejected — rejected because they actually deceive us into misapprehending where the significance we ascribe (as the top-down “God”) to the elements of our constructs actually derive their purchase and significance — i.e. from the social phenomena in which we move and are embedded.  We are embodied within language and within a social pricing system and we never have a synoptic God’s eye or bird’s eye purchase on semantic or price “entities” connected in formal relations — THE WORLD DOES _NOT_ COME THAT WAY.

Prices are signals, imperfectly perceived and imperfect as instruments for orienting ourselves in coordination with others.

Language, ditto, although much more tightly bound in shared practices and successful common ways of going on together (read some Wittgenstein).

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Hayek on the Euro

“I started remarking against the idea of a common European currency, saying why not simply admit all the other currencies competing with yours, and then you don’t need a standard currency.  People will choose the one which is best.  That, of course, led me to the extension: Why confine it to other government moneys and not let private enterprise supply the money?”

F. A. Hayek, 1978, interviewed by Axel Leijonhufvud.

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Hayek endorsed anti-deflationary, publicly announced NGDP targeting in 1975

Friedrich Hayek endorsed the core of ‘NGDP targeting’ 3 years before the idea was ‘first proposed‘ by James Meade in 1978:

“If I were responsible for the monetary policy of a country I would certainly try to prevent a threatening deflation, that is, an absolute decrease in the stream of incomes, by all suitable means, and would announce that I intended to do so. This alone would probably be sufficient to prevent a degeneration of the recession into a long-lasting depression.”

F. A. Hayek, “Full Employment at any Price?”, 1975

“The moment there is any sign that the total income stream may actually shrink [during a post-bust deflationary crash], I should certainly not only try everything in my power to prevent it from dwindling, but I should announce beforehand that I would do so in the event the problem arose.”

F. A. Hayek in 1975, in reply to a question from his old friend Gottfried Haberler in a talk given at the American Enterprise Institute.

Hayek long recognized the problem of the post artificial boom descending into a secondary deflation / depression downward spiral, the product in large measure of a crash in shadow money (see Hayek’s Prices and Production), and recognized this as the biggest of the many economics problems tripping up the American economy in the 1930s:

“I agree with Milton Friedman that once the Crash had occurred, the Federal Reserve System pursued a silly deflationary policy.  I am not only against inflation but I am also against deflation.  So, once again, a badly programmed monetary policy prolonged the depression.”

F. A. Hayek, interviewed in 1979, from Conversations with Great Economists:  Friedrich A. Hayek, John Hicks, Nicholas Kaldor, Leonid V. Kantorovich, Joan Robinson, Paul A.Samuelson, Jan Tinbergen by Diego Pizano.

“I think it is certainly true that ending an inflation need not lead to that long-lasting period of unemployment like the 1930s, because then the monetary policy was not only wrong during the boom but equally wrong during the Depression. First, they prolonged the boom and caused a worse depression, and then they allowed a deflation to go on and prolonged the Depression.”

F. A. Hayek, interviewed in 1977.

 

 

 

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… unless one of them is Lord Keynes, in which case you get three opinions ….

Hayek laughing

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VIDEO Larry White on Economics, the Great Depression & the Clash of Ideas

Lawrence White provides an outline and preview of his remarkable new book The Clash of Economic Ideas:

Lawrence White and Doug Irwin discuss alternative explanations of the depth and causes of the Great Depression:

Lawrence White on money and free banking:

Lawrence White on transitioning to a gold standard:

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