Economists of the 20th Century

Keynes v Friedman: both can claim victory
By Martin Wolf

John Maynard Keynes, who died in 1946, and Milton Friedman, who died last week, were the most influential economists of the 20th century. Since Friedman spent much of his intellectual energy attacking the legacy of Keynes, it is natural to consider them opposites. Their differences were, indeed, profound. But so was what they shared. More interesting, neither won and neither lost: today’s policy orthodoxies are a synthesis of their two approaches.

Keynes concluded from the great depression that the free market had failed; Friedman decided, instead, that the Federal Reserve had failed. Keynes trusted in discretion for sophisticated mandarins like himself; Friedman believed the only safe government was one bound by tight rules. Keynes thought that capitalism needed to be in fetters; Friedman thought it would behave if left alone.

These differences are self-evident. Yet no less so are the similarities. Both were brilliant journalists, debaters and promoters of their own ideas; both saw the great depression as, at bottom, a crisis of inadequate aggregate demand; both wrote in favour of floating exchange rates and so of fiat (or government-made) money; and both were on the side of freedom in the great ideological struggle of the 20th century.