“I don't like criticizing Milton Friedman not only because he is an old friend but because, outside of monetary theory, we are in complete agreement. Our general views on what is desired and what is not are almost identical until we get on to money. But if I told him what I said before, that I very much doubt whether monetary policy has ever done anything good, he would disagree. He personally is convinced that a good monetary policy is a foundation for everything.”

— Friedrich Hayek

Exclusive Interview with F.A. Hayek by James U. Blanchard III, in Cato Policy Report (May/June 1984)
1980s and later

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Friedrich Hayek 79

Austrian and British economist and Nobel Prize for Economic… 1899–1992

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“There is no doubt, and in this I agree with Milton Friedman, that once the Crash had occurred, the Federal Reserve System pursued a silly deflationary policy. I am not only against inflation but I am also against deflation! So, once again, a badly programmed monetary policy prolonged the depression! So, once again, a badly programmed monetary policy prolonged the depression. One consequence of this policy was, of course, the fact that confidence was destroyed.”

Friedrich Hayek (1899–1992) Austrian and British economist and Nobel Prize for Economics laureate

1960s–1970s, A Conversation with Professor Friedrich A. Hayek (1979)

“I don't know what monetarism is. If monetarism just means a good old-fashioned quantity theory, of course it has not failed. If it means the particular version of Milton Friedman, I think it has because he imagines that he can achieve — ascertain — a clear quantity relationship between a measurable quantity of money and the price level. I don't think that is possible. In fact, just about 40 years ago in the opening sentences of my book, Prices and Production, I wrote that it would be a great misfortune if people ever cease to believe in the quantity theory of money. It would be even worse ever to believe it literally. And that's exactly what Milton Friedman does.”

Friedrich Hayek (1899–1992) Austrian and British economist and Nobel Prize for Economics laureate

"Interview with F. A. Hayek", in Cato Policy Report (February 1983)
1980s and later

“Your friend, rather perversely I think, refers to the "disastrous results" that followed the monetary tightening of Volcker and other more monetarist-minded central bankers without even hinting at the facts that that the tightening was aimed at bringing down inflation rates, and that it succeeded remarkably well in doing precisely that. In other words, the tightening did precisely what monetarism said it would do, and what monetarists' critics at the time, wedded to the view that monetary policy was ineffective, and that inflation was entirely caused by OPEC (or by unions, or by anything except monetary policy) insisted it could not do. And yet your friend imagines that the experience proved the monetarists wrong!”

George Selgin (1957) economist

In Defense of Monetarism (2008)

“In fact, the only person to rival Friedman for policy influence in the twentieth century is John Maynard Keynes, who had a strikingly different view of the role of government. Keynes was influential because he advocated more government intervention into what he perceived as poorly functioning private economies caught up in the Great Depression. In contrast to Keynes, Friedman put the main blame for the Depression on government failures, especially of monetary policy. Hence, the Depression did not make Friedman a fan of big government. He also found in the Federal Reserve’s failure to prevent deflation an argument in favor of monetary rules. As the world evolved— with low inflation becoming the major mission of central banks and free markets and secure property rights becoming the main policies to promote economic growth—Friedman surely won the intellectual battle.”

Robert Barro (1944) American classical macroeconomist

Source: Nothing Is Sacred (2002), p. 2

“I refuse to start from the assumption that the role of monetary policy is to control and stabilize inflation. The only acceptable way to start is, I believe, to think of the goal of monetary policy, together with fiscal policy,as the maximization of welfare.”

Olivier Blanchard (1948) French economist

" Monetary Policy; Science or Art? https://economics.mit.edu/files/742" (2006)

“There is no reason to think that the impact [of monetary policy] will be captured in any single [variable]…, whether it is a monetary stock or a market interest rate.”

James Tobin (1918–2002) American economist

Source: "A general equilibrium approach to monetary theory" (1969), p. 29 as cited in: Andrés, Javier, J. David López-Salido, and Edward Nelson. " Tobin's imperfect asset substitution in optimizing general equilibrium http://research.stlouisfed.org/wp/2004/2004-003.pdf." Journal of Money, Credit and Banking (2004): 665-690.

“Mr Raghuram Rajan is an outstanding man who understands central banking. He is probably only one in the world among the crowds of professors at central banks that actually has a good grip on monetary policies and what you can or cannot achieve with them. He should get the Noble Prize in economics but the others are all money printers at heart, all of them.”

Raghuram G. Rajan (1963) Indian economist

Marc Faber, economist, as quoted in " Raghuram Rajan only central banker I trust, he should get Nobel in Economics: Marc Faber http://articles.economictimes.indiatimes.com/2015-08-12/news/65490521_1_marc-faber-rbi-governor-boom-doom-report", The Economic Times (12 August 2015)

“People say monetary policy is easy and quick to implement. It can even be done overnight on the telephone, they say fiscal policy drags out in political and congressional debate in our country. It might take months to implement. But the point is that once fiscal policy is implemented, it might go to work much faster than monetary policy.”

Lawrence Klein (1920–2013) American economist

"Keynsianism Again: Interview with Lawrence Klein", Challenge (May-June 2001)

“In effect, Japan in the Nineties offered a fresh opportunity to test the views of Friedman and Keynes regarding the effectiveness of monetary policy in depression conditions. And the results clearly supported Keynes’s pessimism rather than Friedman’s optimism.”

Paul Krugman (1953) American economist

"Who Was Milton Friedman?", The New York Review of Books (February 15, 2007)
The New York Review of Books articles

“I believe that monetary policy has a chronic defect. It is asymmetric—it works better in restraining an economy than in stimulating an economy.”

Lawrence Klein (1920–2013) American economist

"Keynsianism Again: Interview with Lawrence Klein", Challenge (May-June 2001)

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Friedrich Hayek 79

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