David Glasner: Second Thoughts on Milton Friedman:
Friedman holds up Jacob Viner as an exemplar of the Chicago quantity theory oral tradition…. Friedman writes: “as I have read Viner’s talk for purposes of this paper, I have myself been amazed to discover how precisely it foreshadows the main thesis of our Monetary History for the depression period, and have been embarrassed that we made no reference to it in our account.” OMG! This is the oral tradition that exerted such a powerful influence on Friedman and his fellow students? Viner explains how to get out of the depression in 1933, and in 1971 Friedman is “amazed to discover” how precisely Viner’s talk foreshadowed the main thesis of his explanation of the Great Depression? That sounds more like a subliminal tradition than an oral tradition.
Responding to Patinkin’s charge that his theory of the demand for money – remember the quantity theory, according to Friedman is a theory of the demand for money — is largely derived from Keynes, Friedman plays a word game:
Is everything in the General Theory Keynesian? Obviously yes, in the trivial sense that the words were set down on paper by John Maynard Keynes. Obviously no, in the more important sense that the term Keynesian has come to refer to a theory of short-term economic change… presented in the General Theory and distinctively different from the theory that preceded it…. Keynes uses the law of diminishing returns…. Clearly that does not make the “law of diminishing returns” Keynesian or justify describing the “analytical framework” of someone who embodies the law of diminishing returns in his theoretical structure as Keynesian. In just the same sense, I maintain that Keynes’s discussion of the demand curve for money in the General Theory is for the most part a continuation of earlier quantity theory approaches….
There are two problems with this line of defense. First, the analogy to the law of diminishing returns would have been appropriate only if Keynes had played a major role in the discovery of the law of diminishing returns just as, on Friedman’s own admission, he played a major role in discovering the theory of liquidity preference. Second, it is, to say the least, debatable to what extent “Keynes’s discussion of the demand curve for money was merely a continuation of earlier quantity theory approaches, improved and refined but not basically modified.” But there is no basis at all for the suggestion that a Chicago oral tradition was the least bit implicated in those earlier quantity theory approaches. So Friedman’s invocation of a Chicago oral tradition was completely fanciful.