2. Insofar as there was a moral element to the NYT piece it was the idea that the company executives were stealing from the stockholders, using the stockholders' money to, at best, promote causes the executives favored, at worst buying status for themselves. Consider opera donations.
If the company maximized profits instead the extra money goes to the stockholders who can spend it on what they think are good causes. If the stockholders want someone else to spend their money for good causes they can donate it to a suitable nonprofit.
The economic argument is that the market does a better, although imperfect, job of maximizing welfare than a central planner, and the executive spending the stockholders' money on what he thinks is good is a small scale equivalent of the latter.
3. "They largely rely on statistics from Massachusetts."
Take a look at E.G. West: _Education and the Industrial Revolution_.
4. Private schools might be as propagandist as public schools but they are not all pushing the same ideas. Intellectual diversity is a virtue. A lot of the hostility to home schooling is fueled by the idea that it consists of fundamentalist parents who don't want their kids taught evolution.
Didn't get through it all yet, but interesting. One thing that caught my attention, and I'm not an economist so what do I know, is about the great depression and the money stuff; Sometimes I read post-keynesians who complain that the role of the money supply is not considered important enough in economics (or wasn't for a few decades before 2008), and they talk about debt-deflation, also in relation to the great depression (and 2008 financial crash). But so Friedman his position on the role of the money supply is actually pretty similar ? Except he of course beliefs we shouldn't try to control it, but just let it grow by X% and leave it at that? But then, during a debt deflation, would Friedman have suggested pumping massive amounts of money into the economy to keep money supply growth at the same level?
From what I understand, Post-Keynesianism is a heterodox school in economics, and I don't know much about it. Friedman's natural rate critique was aimed at mainstream Keynesians like Samuelson.
ChatGPT says that Post-Keynesians emphasise money in the sense that they think "Mainstream economics does not take money, credit, banks, and finance seriously enough as constitutive parts of the economy", and also that "many Post-Keynesians are sceptical of the whole idea that the central bank straightforwardly controls the money supply".
To me, that sounds like almost the opposite of the Friedman/monetarist view, which is that the central bank has very direct control over money supply and inflation, and that the money supply per se is very important.
If I understood correctly, debt deflation is an idea from Irving Fisher in which, if households are highly indebted, and incomes fall, then the burden of the debt rises, and people sell those assets and cut spending in response, which further decreases prices. I think it's basically a way that an economy can be more long-term unstable than in the traditional Keynesian story by being "over-leveraged" or "over-financialised". I have no opinion about it; I don't think Friedman ever wrote about it, and I didn't really read anything from him about financial (as opposed to monetary) economics.
So to me, the role of money in monetarism vs the role of debt deflation in Post-Keynesianism seems quite different.
"But then, during a debt deflation, would Friedman have suggested pumping massive amounts of money into the economy to keep money supply growth at the same level?" I think Friedman would say that you wouldn't have gotten deflation in the first place unless the money supply was shrinking. But as mentioned, the short-run relationship between inflation and the monetary aggregates is weaker than you might expect, which is one reason why more mainstream economists would endorse ramping up the production of money during a recession.
If we ran one of these events about Keynes, then we would dig into the diverging legacy of Keynes into the mainstream neoclassical postwar figures (e.g. Solow) versus the more fringe Post-Keynesians (e.g. Robinson). I was just looking into the "Cambridge capital controversy", which may interest you if you are into these things.
Thanks for the reply. As I understood it debt is an increase in the money supply, and debt deflation is a (quite sudden) decrease in the money supply
when, in a downturn, because of bankruptcies, debts have to be written off, and economic insecurity makes people pay off loans without taking on new ones. So the total money supply decreases thereby deflating the economy.
I followed your example by asking chatgpt and one of the differences between Friedman's view and post-Keynesian is that Friedman believed central banks had more direct control over money supply, although bank loans still act as multiplier over base money, whereas post-Keynesians give banks a more active role, putting debt as the core mechanism for money creation (unconstrained by central bank reserves, which are only created after the fact).
So a lot hinges on Friedman's stable money multiplier, and his answer to the great depression (increase money supply) wouldn't necessarily prevent the depression, according to post-Keynesians, if it does not lead to more debt/credit creation.
Chatgpt also gave me what the economic mainstream view is these days (post 2008).
🟡 Modern mainstream synthesis
Today’s mainstream view sits in between:
Accepts Friedman was right that:
monetary collapse worsens crises
But also accepts Post-Keynesians that: balance sheets and debt matter deeply
So policy now includes:
1. Monetary expansion (QE)
Increase reserves and liquidity
2. Financial stabilization
Prevent bank failures
3. Balance sheet repair
Debt restructuring, fiscal policy
Well I'm not sure what I was trying to get at with my original question anymore, but I'm sure I learnt something. ;-)
Tha ks for writing this. I'll have to read it slowly. how does one join such a conference? (not that I'm such a qualified economist, but just the thought of being surrounded by such excleent thinkers and being able to hear them in real time sounds AWESOME!
I think calling him a dwarf was inaccurate and utterly classless. Dwarves are people under 4’10” tall whose short stature results from a genetic or medical condition. This does not apply to Friedman.
"The case against Friedman’s “other people’s money” argument is that corporate social responsibility is priced in. If we say that a business is engaged in charity to the extent that it voluntarily forgoes some of its profitability, that should result in lower stock prices. The shareholders thus implicitly agree to corporate social responsibility, insofar as they bought the stock for a lower price than they otherwise could have. I’m not sure what Friedman would say in response to this."
Right, but that's the case with the existing shareholders and only them though. From the perspective of the existing shareholders the company suddenly deciding to start doing charity basically robbed them; it's not hard to see this as securities fraud.
I think "fraud" is a strong way of putting it because (as mentioned) the company is not under a legal obligation to generate returns to begin with.
But if you are an existing shareholder and the company, for the first time, starts engaging in corporate social responsibility, I can see why you would be very annoyed.
1. My father was 5'3"
2. Insofar as there was a moral element to the NYT piece it was the idea that the company executives were stealing from the stockholders, using the stockholders' money to, at best, promote causes the executives favored, at worst buying status for themselves. Consider opera donations.
If the company maximized profits instead the extra money goes to the stockholders who can spend it on what they think are good causes. If the stockholders want someone else to spend their money for good causes they can donate it to a suitable nonprofit.
The economic argument is that the market does a better, although imperfect, job of maximizing welfare than a central planner, and the executive spending the stockholders' money on what he thinks is good is a small scale equivalent of the latter.
3. "They largely rely on statistics from Massachusetts."
Take a look at E.G. West: _Education and the Industrial Revolution_.
4. Private schools might be as propagandist as public schools but they are not all pushing the same ideas. Intellectual diversity is a virtue. A lot of the hostility to home schooling is fueled by the idea that it consists of fundamentalist parents who don't want their kids taught evolution.
If you want to correspond I am at ddfr@daviddfriedman.com
Thank you for the comment! On #1, Wikipedia (and all the sources I saw online) says 5'0". Weird for it to be off by that much.
depends on which age, I assume. ppl start shrinking at some point
Didn't get through it all yet, but interesting. One thing that caught my attention, and I'm not an economist so what do I know, is about the great depression and the money stuff; Sometimes I read post-keynesians who complain that the role of the money supply is not considered important enough in economics (or wasn't for a few decades before 2008), and they talk about debt-deflation, also in relation to the great depression (and 2008 financial crash). But so Friedman his position on the role of the money supply is actually pretty similar ? Except he of course beliefs we shouldn't try to control it, but just let it grow by X% and leave it at that? But then, during a debt deflation, would Friedman have suggested pumping massive amounts of money into the economy to keep money supply growth at the same level?
Thanks for the comment.
From what I understand, Post-Keynesianism is a heterodox school in economics, and I don't know much about it. Friedman's natural rate critique was aimed at mainstream Keynesians like Samuelson.
ChatGPT says that Post-Keynesians emphasise money in the sense that they think "Mainstream economics does not take money, credit, banks, and finance seriously enough as constitutive parts of the economy", and also that "many Post-Keynesians are sceptical of the whole idea that the central bank straightforwardly controls the money supply".
To me, that sounds like almost the opposite of the Friedman/monetarist view, which is that the central bank has very direct control over money supply and inflation, and that the money supply per se is very important.
If I understood correctly, debt deflation is an idea from Irving Fisher in which, if households are highly indebted, and incomes fall, then the burden of the debt rises, and people sell those assets and cut spending in response, which further decreases prices. I think it's basically a way that an economy can be more long-term unstable than in the traditional Keynesian story by being "over-leveraged" or "over-financialised". I have no opinion about it; I don't think Friedman ever wrote about it, and I didn't really read anything from him about financial (as opposed to monetary) economics.
So to me, the role of money in monetarism vs the role of debt deflation in Post-Keynesianism seems quite different.
"But then, during a debt deflation, would Friedman have suggested pumping massive amounts of money into the economy to keep money supply growth at the same level?" I think Friedman would say that you wouldn't have gotten deflation in the first place unless the money supply was shrinking. But as mentioned, the short-run relationship between inflation and the monetary aggregates is weaker than you might expect, which is one reason why more mainstream economists would endorse ramping up the production of money during a recession.
If we ran one of these events about Keynes, then we would dig into the diverging legacy of Keynes into the mainstream neoclassical postwar figures (e.g. Solow) versus the more fringe Post-Keynesians (e.g. Robinson). I was just looking into the "Cambridge capital controversy", which may interest you if you are into these things.
Thanks for the reply. As I understood it debt is an increase in the money supply, and debt deflation is a (quite sudden) decrease in the money supply
when, in a downturn, because of bankruptcies, debts have to be written off, and economic insecurity makes people pay off loans without taking on new ones. So the total money supply decreases thereby deflating the economy.
I followed your example by asking chatgpt and one of the differences between Friedman's view and post-Keynesian is that Friedman believed central banks had more direct control over money supply, although bank loans still act as multiplier over base money, whereas post-Keynesians give banks a more active role, putting debt as the core mechanism for money creation (unconstrained by central bank reserves, which are only created after the fact).
So a lot hinges on Friedman's stable money multiplier, and his answer to the great depression (increase money supply) wouldn't necessarily prevent the depression, according to post-Keynesians, if it does not lead to more debt/credit creation.
Chatgpt also gave me what the economic mainstream view is these days (post 2008).
🟡 Modern mainstream synthesis
Today’s mainstream view sits in between:
Accepts Friedman was right that:
monetary collapse worsens crises
But also accepts Post-Keynesians that: balance sheets and debt matter deeply
So policy now includes:
1. Monetary expansion (QE)
Increase reserves and liquidity
2. Financial stabilization
Prevent bank failures
3. Balance sheet repair
Debt restructuring, fiscal policy
Well I'm not sure what I was trying to get at with my original question anymore, but I'm sure I learnt something. ;-)
Tha ks for writing this. I'll have to read it slowly. how does one join such a conference? (not that I'm such a qualified economist, but just the thought of being surrounded by such excleent thinkers and being able to hear them in real time sounds AWESOME!
Do you have anything planned for this summer?
There has been no specific criteria other than either already being my friend or someone whose work on related topics I admire.
Originally yes, but it looks like the timeline on that will be pushed out.
I'm fortunate that a lot of great people show up to my monthly reading groups and that the discussion is consistently super interesting.
I will aspire to be someone you admire
being friends to get invited to a conference is slimy
I hope to dazzle you with my thoughts
I think calling him a dwarf was inaccurate and utterly classless. Dwarves are people under 4’10” tall whose short stature results from a genetic or medical condition. This does not apply to Friedman.
"The case against Friedman’s “other people’s money” argument is that corporate social responsibility is priced in. If we say that a business is engaged in charity to the extent that it voluntarily forgoes some of its profitability, that should result in lower stock prices. The shareholders thus implicitly agree to corporate social responsibility, insofar as they bought the stock for a lower price than they otherwise could have. I’m not sure what Friedman would say in response to this."
Right, but that's the case with the existing shareholders and only them though. From the perspective of the existing shareholders the company suddenly deciding to start doing charity basically robbed them; it's not hard to see this as securities fraud.
I think "fraud" is a strong way of putting it because (as mentioned) the company is not under a legal obligation to generate returns to begin with.
But if you are an existing shareholder and the company, for the first time, starts engaging in corporate social responsibility, I can see why you would be very annoyed.