scholarly journals The wrong track also leads someplace: Milton Friedman's presidential address at 50

2018 ◽  
Vol 6 (4) ◽  
pp. 517-532 ◽  
Author(s):  
Servaas Storm
Keyword(s):  
Phillips Curve ◽  
Presidential Address ◽  
Aggregate Demand ◽  
Financial Fragility ◽  
American Economic Association ◽  
Structural Forces ◽  
Long Run ◽  
Economic Association ◽  
The Right ◽  
Do So

Milton Friedman's presidential address to the American Economic Association holds a mythical status as the harbinger of the supply-side counter-revolution in macroeconomics – centred on the rejection of the long-run Phillips-curve inflation–unemployment trade-off. Friedman (seconded by Edmund Phelps) argued that the long run is determined by ‘structural’ forces, not demand, and his view swept the profession and dominated academic economics and macro policymaking for four decades. Friedman, tragically, put macroeconomics on the wrong track which led to disaster: secular stagnation, rising inequality, mounting indebtedness, financial fragility, a banking catastrophe and recession – and no free lunches. This is Friedman's legacy. We have to unlearn the wrong lessons and return macroeconomics to the right track. To do so, this paper shows that Friedman's (and Phelps's) conclusions break down in a general model of the long run in which productivity growth is endogenous – aggregate demand is driving everything again, short and long.

scholarly journals A NEGLECTED INCONSISTENCY IN MILTON FRIEDMAN’S AEA PRESIDENTIAL ADDRESS

2016 ◽  
Vol 38 (1) ◽  
pp. 105-112 ◽  
Author(s):  
James Forder
Keyword(s):  
Phillips Curve ◽  
Presidential Address ◽  
American Economic Association ◽  
Milton Friedman ◽  
Economic Association

Milton Friedman (1968)—his famous Presidential Address to the American Economic Association—contains an elementary error right at the heart of what is usually supposed to be the paper’s crucial argument. That is the argument to the effect that during an inflation, changing expectations shift the Phillips curve. It is suggested that the fact of this mistake and of its having gone all but unnoticed are points of historical interest. Further reflections, drawing on the arguments of Forder (2014), Macroeconomics and the Phillips Curve Myth, are suggested.

scholarly journals Short-Run and Long-Run Effects of Milton Friedman's Presidential Address

2018 ◽  
Vol 32 (1) ◽  
pp. 121-134 ◽  
Author(s):  
Robert E. Hall ◽  
Thomas J. Sargent
Keyword(s):  
Monetary Policy ◽  
Phillips Curve ◽  
Presidential Address ◽  
Real Economy ◽  
The Real ◽  
Long Run ◽  
Invariance Hypothesis ◽  
Short Run ◽  
The Right ◽  
Main Message

The centerpiece of Milton Friedman's (1968) presidential address to the American Economic Association, delivered in Washington, DC, on December 29, 1967, was the striking proposition that monetary policy has no longer-run effects on the real economy. Friedman focused on two real measures, the unemployment rate and the real interest rate, but the message was broader—in the longer run, monetary policy controls only the price level. We call this the monetary-policy invariance hypothesis. By 1968, macroeconomics had adopted the basic Phillips curve as the favored model of correlations between inflation and unemployment, and Friedman used the Phillips curve in the exposition of the invariance hypothesis. Friedman's presidential address was commonly interpreted as a recommendation to add a previously omitted variable, the rate of inflation anticipated by the public, to the right-hand side of what then became an augmented Phillips curve. We believe that Friedman's main message, the invariance hypothesis about long-term outcomes, has prevailed over the last half-century based on the broad sweep of evidence from many economies over many years. Subsequent research has not been kind to the Phillips curve, but we will argue that Friedman's exposition of the invariance hypothesis in terms of a 1960s-style Phillips curve is incidental to his main message.

scholarly journals Explaining the fame of Friedman’s Presidential Address

2019 ◽  
Vol 43 (6) ◽  
pp. 1683-1700 ◽  
Author(s):  
James Forder ◽  
Kardin Sømme
Keyword(s):  
Presidential Address ◽  
American Economic Association ◽  
Close Attention ◽  
Economic Association ◽  
Terminological Confusion ◽  
Do So

AbstractIt is noted that although in fact it lacks the revolutionary content commonly ascribed to it, Friedman’s Presidential Address to the American Economic Association is very highly regarded as an original and formative contribution. It is argued that close attention to the literature shows that it was not initially seen as original, and only after an interval of five years did the idea of its revolutionary status retrospectively, but suddenly become widely accepted. The explanation of this change of view is considered. Four explanations are suggested: one involving terminological confusion, one involving a change in theoretical priorities, and two involving debates of the 1970s, which, although they did not in fact do so, appeared to build on Friedman’s presentation, and by this appearance gave it an undeserved stature.

scholarly journals What was the message of Friedman’s Presidential Address to the American Economic Association?

2017 ◽  
Vol 42 (2) ◽  
pp. 523-541 ◽  
Author(s):  
James Forder
Keyword(s):  
Phillips Curve ◽  
Presidential Address ◽  
American Economic Association ◽  
Policy Rules ◽  
Economic Association

Abstract It is widely accepted that the importance of Friedman’s Presidential Address to the American Economic Association lies in its criticism of policy based on the Phillips curve. However, it is argued here that a reading of the text does not support such a view, and this and other considerations suggest that any such aim was far from Friedman’s mind in 1967. His objective was the quite different one of making a case for policy ‘rules’ rather than ‘discretion’.

Carolingian Religion

2015 ◽  
Vol 84 (2) ◽  
pp. 287-307
Author(s):  
Thomas F. X. Noble
Keyword(s):  
Presidential Address ◽  
Religious History ◽  
Religious Knowledge ◽  
The Right ◽  
Do So

The Carolingian period, roughly the eighth and ninth centuries, was dynamic and decisive in European religious history. The ruling dynasty and the clerical elite promoted wave after wave of reform that I call “unifying,” “specifying,” and “sanctifying.” This presidential address argues that religion was the key unifying and universalizing force in the Carolingian world; that the Carolingians were obsessed with doing things the right way—usually the Roman way; and that the Carolingians sought to inculcate Christian behavior more than religious knowledge. The address concludes by arguing that the Carolingians put a markedly European stamp on Christianity and that they Romanized Christianity well before the papacy attempted to do so.

Theories of Majority Rule

1932 ◽  
Vol 26 (3) ◽  
pp. 452-469 ◽  
Author(s):  
John Gilbert Heinberg
Keyword(s):  
Canon Law ◽  
Majority Rule ◽  
Greek City ◽  
External Resources ◽  
The People ◽  
Long Run ◽  
The Rich ◽  
City States ◽  
The Right ◽  
Do So

The term “majority rule” is as impossible to escape as it is apparently difficult to define with precision. Aristotle generally employed it to designate the conduct of government by the poor citizens, who were more numerous than the rich, in the Greek city states. In canon law, it meant the verdict of the maior and sanior pars of a small group. Frederic Harrison wrote about the “rule” of the “effective majority”—that section of any community or social aggregate, which, for the matter in hand, practically outweighs the remainder. He explains that it may do so “by virtue of its preponderance in numbers, or in influence, or in force of conviction, or in external resources, or in many other ways.” Sir George Cornewall Lewis thought that where the ultimate decision is vested in a body there is no alternative other than to count numbers, and to abide by the opinion of a majority. But in alleging that “no historian, in discussing the justice or propriety of any decision of a legislative body, or of a court of justice, thinks of defending the decision of the majority by saying that it was the decision of the majority,” he did not anticipate the view of the English historian Hearnshaw. According to the latter, “The faith of a democrat requires him to believe that in the long run the majority of the people finds its way to the truth, and that in the long run it tries to do the right.”

A short story of the Phillips curve: from Phillips to Friedman… and back?

2018 ◽  
Vol 6 (4) ◽  
pp. 493-516 ◽  
Author(s):  
Antonella Stirati ◽  
Walter Paternesi Meloni
Keyword(s):  
Short Story ◽  
Path Dependence ◽  
Phillips Curve ◽  
Presidential Address ◽  
Alternative Theory ◽  
Natural Rate ◽  
Macroeconomic Theory ◽  
Long Run ◽  
Change Of Perspective ◽  
Original Approach

A major contribution of Friedman's 1968 presidential address was the introduction of the long-run vertical Phillips curve. That view, which is consistent with neoclassical foundations, has become so profoundly entrenched in macroeconomists' thinking that increasing evidence of ‘hysteresis’ has not as yet dislodged it. The prevailing notion of the non-accelerating inflation rate of unemployment (NAIRU) is constructed in terms of the ‘natural’ unemployment rate, which has allowed for some changes regarding its microeconomic determinants. However, the macroeconomic features of Friedman's natural rate and the NAIRU remain very much the same and unchanged. The blatant path-dependence of empirically estimated NAIRUs creates a dissociation between macroeconomic theory and empirics which, in our view, is unacceptable and demands a change of perspective. Adopting an alternative theory of distribution and employment might rehabilitate the original approach taken by Phillips vis-à-vis Friedman's legacy.

The role of financial policy

2018 ◽  
Vol 6 (4) ◽  
pp. 446-460 ◽  
Author(s):  
Roger E.A. Farmer
Keyword(s):  
Financial Markets ◽  
Economic Activity ◽  
Presidential Address ◽  
Central Banking ◽  
Financial Policy ◽  
American Economic Association ◽  
General Equilibrium Theory ◽  
Economic Association ◽  
Monetary Rules

I review the contribution and influence of Milton Friedman's 1968 presidential address to the American Economic Association. I argue that Friedman's influence on the practice of central banking was profound and that his arguments in favour of monetary rules were responsible for 30 years of low and stable inflation in the period from 1979 through 2009. I present a critique of Friedman's position that market economies are self-stabilizing and I describe an alternative reconciliation of Keynesian economics with Walrasian general equilibrium theory from that which is widely accepted today by most neoclassical economists. My interpretation implies that government should intervene actively in financial markets to stabilize economic activity.

Malthus's Vision of the Population Problem in the Essay on Population

1990 ◽  
Vol 12 (1) ◽  
pp. 1-26 ◽  
Author(s):  
Samuel Hollander
Keyword(s):  
Population Growth ◽  
Population Size ◽  
Presidential Address ◽  
Long Run ◽  
Preventive Check ◽  
Economic Association ◽  
Gary Becker ◽  
The Face ◽  
The Stability

In his Presidential address to the American Economic Association, Gary Becker alludes to Thomas Malthus's “great contribution” (1988, p. 1) in a prologue to a wider exploratory discussion of some of the implications for macroeconomics flowing from recent programs in family economics. The content of the contribution as represented here (p. 2) includes diminishing returns to increases in employment “when land and other capital are fixed;” population growth positively related to the wage, the lower population growth at low wages turning on reduced birth rates (the preventive check) and increased death rates (the positive check); and a long-run equilibrium wage at which population is constant at a level determined by the production function. Becker emphasizes the stability of the equilibrium wage in the face of disturbances. A catastrophic reduction in population size (eg. the Black Death) and consequently a wage increase will be followed by positive population growth which restores both the wage and population size to their respective equilibrium levels. In the event of increases in the amount of usuable land, population size will become permanently higher with the wage ultimately reduced to its original long-run level. Becker represents Malthus as reaching “much more pessimistic conclusions about the long-term economic prospects of the average family” than, for example, Godwin and Condorcet who had maintained that the economic position of mankind will continue to improve over time.

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