Getting it Wrong
The author starts with a simple and interesting puzzle. Most of the articles published on Milton Friedman after his death agree that he was a great economist. Many compare him to John Maynard Keynes, another great economist. But Friedman and Keynes held different, indeed inconsistent, views; an important part of Friedman’s accomplishment was to undo the effect of Keynes' accomplishment. If Keynes was right, how can Friedman be a great economist? If Friedman was right, how can Keynes be?
It is an interesting question, but the author gets the answer wrong. He concludes that both Keynes and Friedman were right. Keynes' version of economics was correct for the forties and fifties, Friedman’s for the seventies and eighties, when the Keynesian model "had played itself out."
That is a claim that neither Keynes nor Friedman would have taken seriously. Keynes titled his magnum opus “The General Theory of Employment, Interest and Money” not “The Theory of How Employment, Interest and Money Will Work from 1930 to 1960.” Part of the work that earned Friedman his Nobel was A Monetary History of the United States (coauthored with Anna Schwartz), in which he demonstrated that the Keynesian analysis of the Great Depression, the centerpiece of the Keynesian view of economics, was based on a historically mistaken account of what actually happened. It is an odd view of science in which the historical facts about the 1930’s changed between 1940 and 1970.
The author starts his discussion by claiming that economics is somehow less of a science than physics, hence its truths more temporary. Yet the history of physics offers precisely the same puzzle. Newton was a great physicist. Einstein was a great physicist. Part of Einstein’s accomplishment was to show that Newtonian physics was, in certain fundamental ways, wrong.
Newton was wrong, wrong not only now but then, but Newtonian physics provided the foundation of ideas on which later generations of physicists, including Einstein, built. Keynes was wrong, but his attempt to make sense of what he believed happened during the Great Depression provided a theoretical foundation on which later theorists, including Friedman, could build. Hence Friedman’s comment on Keynes: “In one sense, we are all Keynesians now; in another, no one is a Keynesian any longer"—misquoted by Time Magazine as “We are all Keynesians now.”