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Should-Read: David Glasner: Milton Friedman Says that the Rate of Interest Is NOT the Price of Money: Don’t Listen to Him!

Summary:
Should-Read: The price level is the (inverse) price of symbols of purchasing power in terms of an index of useful commodities. The nominal interest rate is the price of liquidity services. The real interest rate is the slope of the intertemporal price system for useful commodities. Is that clear? David Glasner: Milton Friedman Says that the Rate of Interest Is NOT the Price of Money: Don’t Listen to Him!: “Friedman’s repeated claims that the rate of interest is not the price of money… https://uneasymoney.com/2017/09/07/milton-friedman-says-that-the-rate-of-interest-is-not-the-price-of-money-dont-listen-to-him/ …have been echoed by his many acolytes so often that it is evidently now taken as clear evidence of economic illiteracy (or “a freshman error,” as Patrick Sullivan describes it)

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Should-Read: The price level is the (inverse) price of symbols of purchasing power in terms of an index of useful commodities. The nominal interest rate is the price of liquidity services. The real interest rate is the slope of the intertemporal price system for useful commodities.

Is that clear?

David Glasner: Milton Friedman Says that the Rate of Interest Is NOT the Price of Money: Don’t Listen to Him!: “Friedman’s repeated claims that the rate of interest is not the price of money… https://uneasymoney.com/2017/09/07/milton-friedman-says-that-the-rate-of-interest-is-not-the-price-of-money-dont-listen-to-him/

…have been echoed by his many acolytes so often that it is evidently now taken as clear evidence of economic illiteracy (or “a freshman error,” as Patrick Sullivan describes it) to suggest that the rate of interest is the price of money. It was good of Sullivan to provide an exact reference to this statement of Friedman, not that similar references are hard to find, Friedman never having been one who was loathe to repeat himself. He did so often, and not without eloquence. Even though I usually quote Friedman to criticize him, I would never dream of questioning his brilliance or his skill as an economic analyst, but he was a much better price theorist than a monetary theorist, and he was a tad too self-confident, which made him disinclined to be self-critical or to admit error, or even entertain such a remote possibility…

Bradford DeLong
J. Bradford DeLong is Professor of Economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research. He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations. His role in designing the bailout of Mexico during the 1994 peso crisis placed him at the forefront of Latin America’s transformation into a region of open economies, and cemented his stature as a leading voice in economic-policy debates.

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