Roland E. Straten, Republican candidate for N.J.’s 8th Congressional district was recently challenged by a constituent, who asked if Straten (an economist) if he’d studied Keynes. Straten, ever the gentleman, said he was tempted to ask if the constituent had studied Milton Friedman, but he didn’t, presumably because he didn’t want to offend a potential voter.
Keynes was a New Deal economist who believed that government was the solution to recessionary woes. Friedman had originally been a Keynesian supporter of the New Deal and of government intervention in the economy.
Originally Friedman was a Keynesian supporter of the New Deal and advocate of government intervention in the economy. However, his 1950s reinterpretation of the Keynesian consumption function, a single mathematical function used to define consumer spending and calculate the amount of total consumption in an economy. It is made up of autonomous consumption that is not influenced by current income and induced consumption that is influenced by the economy’s income level.
Friedman promoted an alternative macroeconomic policy known as “monetarism”. He theorized there existed a “natural rate of unemployment” and he argued the central government could not micromanage the economy because people would realize what the government was doing and change their behavior to neutralize such policies. He argued that excessive expansion of the money supply (printing more money) is inherently inflationary, and that monetary authorities should focus solely on maintaining price stability.
He rejected the Phillips Curve (the lower the unemployment in an economy, the higher the rate of inflation) and predicted that Keynesian policies then existing would cause “stagflation” (high inflation and minimal growth). Friedman refuted the analysis of Keynes, who argued that monetary policy is ineffective during depression conditions and that fiscal policy — large-scale deficit spending by the government (the amount by which spending exceeds income over a particular period of time) — is needed to decrease mass unemployment. Though opposed to the existence of the Federal Reserve, Friedman argued that, given that it does exist, a steady, small expansion of the money supply was the only wise policy, and he warned against efforts by a treasury or central bank to do otherwise.
Friedman’s political philosophy emphasized the advantages of free market economics and the disadvantages of government intervention and regulation, In his 1962 book Capitalism and Freedom, Friedman advocated policies such as a volunteer military, freely floating exchange rates, abolition of licensing of doctors, a negative income tax, and education vouchers. His books and essays were well read and were even circulated illegally, like Hayek’s in Communist countries.
How smart was Friedman? Well, he graduated from high school at age 15 and went on to become an economics professor at the University of Chicago. He averred that the notion that FDR’s economic policies pulled America out of the Great Depression was a mystery. In 1976, Friedman won the Nobel Memorial Prize in Economics “for his achievements in the fields of consumption analysis, monetary history and theory and for his demonstration of the complexity of stabilization policy”.
He was an economic advisor to U.S. President Ronald Reagan. Over time, many governments practiced his restatement of a political philosophy that extolled the virtues of a free market economic system with little intervention by government. As a professor of the Chicago School of Economics, based at the University of Chicago, he had great influence in determining the research agenda of the entire profession.
Keynesian economics have had a long-range, deliterious effect on the American economy, yet most Liberal politicians are guided by Keynesian economics (seeing that it serves as job security for them).
Bill Pascrell is obviously a Keynesian. He is an advocate of deficit spending money. What’s more, he’s your typical snake-in-the-grass politician, pulling all the usual Liberal political tricks, including having his people take down Straten for Congress signs.
According to Straten, Pascrell is mailing out “expensive, four-color brochures claiming that he is ‘independent.’ Apparently he does not want to be linked to either Obama, Pelosi, or the Democrats. He is all over the place campaigning, speaking long and loud, but saying nothing.”
If Straten wants to be heard and elected, he needs to speak longer and more loudly than Pascrell, and straighten out all those dummies who don’t know that the government’s role in economics and business should be extremely limited.