A Note on Friedman and the Neo‐bayesian Approach

Pelloni, Gianluigi

doi:10.1111/j.1467-9957.1987.tb01312.x

“…The second concerns his approach to empirical analysis more generally. Friedman at heart was a Bayesian (Pelloni, 1987). He was aware of the potential for ''con'' in econometrics and in statistics more generally.…”

Section: The Demand For Moneymentioning

confidence: 97%

Milton Friedman's monetary economics and the quantity-theory tradition

Lothian¹

2009

Journal of International Money and Finance

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“…And it was as if he were my real instructor in economics" (Schwartz, quoted in Nelson, 2004, p. 595). 10 For discussions of Friedman's Bayesianism and of his empirical approach more generally see Pelloni (1987Pelloni ( , 1996, Lothian (2009Lothian ( , 2016, and Dwyer (2016).…”

Section: Friedman Began His Collaboration With Schwartz On a Monetarymentioning

confidence: 99%

How Friedman and Schwartz Became Monetarists

Lothian

¹

,

Tavlas

²

2016

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. ABSTRACT During the late-1940s and the early-1950s Milton Friedman favored a rule under which fiscal policy would be used to generate changes in the money supply with the aim of stabilizing output at full employment. He believed that the economy is inherently unstable because of endogenous movements in money supply under a fractional-reserve banking system. In her work, Anna Schwartz downplayed the role of monetary factors of business cycles and the role of monetary policy as a stabilization tool. We show how the joint work of Friedman and Schwartz from 1948 to 1958 led Friedman to view money as the "primary mover" in the business cycle and underpinned his shift to a rule based on money growth so that discretionary monetary policy would not act as a source of destabilizing shocks. The decisive factor in the evolution of Friedman's thinking was the empirical confirmation that the Great Depression had been both initiated and deepened by the Fed. The largely neglected influence of Clark Warburton on the evolution of Friedman's thinking provides a missing --but crucial --link in explaining Friedman's recognition of the role of monetary factors in the Great Depression and of the Fed's ability to offset the destabilizing effects produced by shifts from deposits into currency under a fractional-reserve banking system. Terms of use: Documents in

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“…He then provided a detailed explanation of the reasons underlying his interest in a series on government obligations, to which, on May 12, 1948, Schwartz replied, "light has dawned… I now see the point of the series you have in mind" (Schwartz, 1948b (Schwartz, quoted in Nelson, 2004, p. 595). 10 For discussions of Friedman's Bayesianism and of his empirical approach more generally see Pelloni (1987Pelloni ( , 1996, Lothian (2009Lothian ( , 2016, and Dwyer (2016).…”

Section: Friedman Began His Collaboration With Schwartz On a Monetarymentioning

confidence: 99%

How Friedman and Schwartz Became Monetarists

Lothian

¹

,

Tavlas²

2016

SSRN Journal

1

0

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. ABSTRACT During the late-1940s and the early-1950s Milton Friedman favored a rule under which fiscal policy would be used to generate changes in the money supply with the aim of stabilizing output at full employment. He believed that the economy is inherently unstable because of endogenous movements in money supply under a fractional-reserve banking system. In her work, Anna Schwartz downplayed the role of monetary factors of business cycles and the role of monetary policy as a stabilization tool. We show how the joint work of Friedman and Schwartz from 1948 to 1958 led Friedman to view money as the "primary mover" in the business cycle and underpinned his shift to a rule based on money growth so that discretionary monetary policy would not act as a source of destabilizing shocks. The decisive factor in the evolution of Friedman's thinking was the empirical confirmation that the Great Depression had been both initiated and deepened by the Fed. The largely neglected influence of Clark Warburton on the evolution of Friedman's thinking provides a missing --but crucial --link in explaining Friedman's recognition of the role of monetary factors in the Great Depression and of the Fed's ability to offset the destabilizing effects produced by shifts from deposits into currency under a fractional-reserve banking system. Terms of use: Documents in

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A Note on Friedman and the Neo‐bayesian Approach

Cited by 7 publications

References 15 publications

Milton Friedman's monetary economics and the quantity-theory tradition

Milton Friedman's monetary economics and the quantity-theory tradition

How Friedman and Schwartz Became Monetarists

How Friedman and Schwartz Became Monetarists

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