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Source link: http://archive.mises.org/6175/friedman-for-government-intervention-the-case-of-the-great-depression/

Friedman for Government Intervention: The Case of the Great Depression

January 23, 2007 by

We’ve often heard that monetarists and Austrians agree that the government is to blame for the Great Depression. A deeper look shows that this is nothing but empty rhetoric.Here I debunk the popular view that Milton Friedman proved that the Great Depression was not a market failure and that Friedman made a very strong argument against interventionism. FULL ARTICLE

{ 53 comments }

Björn Lundahl January 28, 2007 at 4:29 am

Mateusz Machaj

“My point was just to visibly demonstrate that in the case of a Great Depression Friedman, although anti-government, was definitely not pro-market, since he favored a different type of intervention.”

True, Friedman favoured a different type of intervention.

“One can always make statements like “the government is to blame for X”, but this statement alone is not enough to indicate whether the person is pro-market or anti-market. The proper way to spot pro-market solutions is to concentrate on the basis of a free market — property rights. It is just that simple, and this simplicity is often lost in the myriads of modern policy discussions.”

Your conclusions are obviously correct and therefore, naturally, also fair.

Similarly, Hayek also favoured a lot of government interventions.

The Ethics of Liberty, by Murray Rothbard:

“Thus, we see that Hayek’s Constitution of Liberty can in no sense provide the criteria or the groundwork for a system of individual liberty. In addition to the deeply flawed definitions of “coercion,” a fundamental flaw in Hayek’s theory of individual rights, as Hamowy points out, is that they do not stem from a moral theory or from “some independent nongovernmental social arrangement,” but instead flow from government itself. For Hayek government—and its rule—of law creates rights, rather than ratifies or defends them. It is no wonder that, in the course of his book, Hayek comes to endorse a long list of government actions clearly invasive of the rights and liberties of the individual citizens.”

http://mises.org/rothbard/ethics/twentyeight.asp

Thank you for a very good article.

Björn Lundahl
Göteborg, Sweden

Sam January 28, 2007 at 8:54 am

Hmmm Björn Lundahl your link reminded of the problem facing Buddhist rulers once upon a time. They needed capital punishment for certain crimes yet their religion forbade it. Mindful that murder is pro-active but refusal of life-giving services isn’t, the solution became easy. Anyone faced with the death penalty was simply enforced by doing things such tying prisoners up and putting them in the desert or throwing prisoners down wells and then sealing them.

Björn Lundahl January 29, 2007 at 6:34 am

Still it would be much better if a government would follow a monetarist economic policy than a Keynesian. Monetarism focuses only on a stable and low increase of the supply of money while Keynesians focuses on monetary and fiscal policy. Keynesians would probably increase the money supply much further and more erratically and, also, actively increase the public sector, especially during recessions. The monetarists are much more market oriented while the Keynesians are, philosophically, anti market. Compared to Keynesians, Monetarists are pro market. The economy would, probably, also be a lot more stable if guided by monetarism than by Keynesianism. Even if many people proclaim that monetarism is dead, I do not think that this is really true. I think that their ideas influence central bankers a lot. Because of Milton Friedman and Monetarism, we today have relatively low inflation rates and economic stability throughout the entire world and also, relatively, freer markets.

Björn Lundahl
Göteborg, Sweden

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