Professor Friedman's Views on Money

Abstract

The publishers tell us this collection of essays constitutes a comprehensive presentation of Professor Friedman's body of monetary thought. I shall assume Professor Friedman agrees with this description and almost all my references will be to this book. The most obvious point to be made at once is Friedman neither has nor claims to have a monetary theory. His strong and influential views are not founded on an understanding of how money works but on what his empirical studies have led him to believe to have been the course of monetary history. He himself, at least this book, claims no more. His celebrated policy recommendations themselves depend on a plea of ignorance. Yet he writes: However consistent may be the relation between monetary change and economic change and however strong the evidence for the autonomy of monetary changes, we shall not be persuaded the monetary changes are the source of the economic changes unless we can specify some detail the mechanism connects one with the other (p. 229). This, to many, very agreeable statement is however found a section headed A Tentative Sketch of the Mechanism Transmitting Monetary Changes, and he emphasizes that this sketch is exceedingly tentative and of course not preclusive (p. 235). Nowhere else is there to be found in some detail, let alone with rigour, a theoretical foundation of the sought-for connection between monetary and real changes. In view of this and the quotation there are two puzzles: Friedman's surprise some economists remain unpersuaded, and the high probability which he evidently attaches to the eventuality his views are the right ones.