Milton Friedman

Columnists keep saying the Chilean dictator was a brute who modernized the economy. Actually, he was a brute with a rotten economic record. Take heed, Egyptians.

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JARED BERNSTEIN, a Washington wonk and former economic adviser to Joe Biden, recently posed an interesting question. Why is it, Bernstein asked on his blog, that the only part of the government acting with any urgency to ease joblessness—the economic problem affecting the greatest number of Americans—is the unelected Federal Reserve? Bernstein was referring to Chairman Ben Bernanke’s announcement that the Fed would keep interest rates close to zero as long as unemployment remained above 6.5 percent.

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Allow me to join conservative chorus in wishing Milton Friedman (who died in 2006) a very happy 100th birthday. I'm no great fan of the Friedman who persistently demonized government. But I admire the Friedman who thought imaginatively about how the non-rich could pay for college education. It was Friedman who came up with the idea for direct government loans to students at subsidized rates. That model worked pretty well for a long time.

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THE LAST FOUR YEARS have created what economists call a “natural experiment” in economic policy. As a consequence of deregulation and globalization, Britain and the United States experienced the financial crisis of 2008 in much the same way. Large parts of the banking system collapsed and had to be rescued; the real economy went into a nosedive and had to be stimulated. But after 2010, the United States continued to stimulate its economy, while Britain chose the stonier path of austerity.  The British are no more wedded to the idea of fiscal austerity than are the Americans.

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Any serious program for Wall Street reform should start with two words: “term out.” “Terming out” is a financial term of art, but its meaning is easily grasped. It simply means funding your business with long-term financing instead of short-term IOUs. To a far greater extent than is commonly understood, our financial sector funds its operations with extremely short-term borrowings. These IOUs must be paid back in a day, a week, or a month. By contrast, termed-out financial firms shun borrowings that come due in less than a year.

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Everybody hates the No Child Left Behind Act. In the last few weeks, both conservative Republicans and President Obama have announced plans to overhaul George W. Bush’s signature education law by sending power over K-12 schooling back to the states. On the surface, this might seem like a rare moment of bipartisan consensus. Don’t believe it. The two plans actually represent radically different views of the federal government’s responsibility for helping children learn.  To see why, it helps to understand some common misconceptions about NCLB.

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Working in the Dark

Grand Pursuit: The Story of Economic Genius By Sylvia Nasar (Simon & Schuster, 558 pp., $35) I thought I knew what this book was going to be about when I started it, but by the time I came to the end I was no longer sure.

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“Regarding the Great Depression: You’re right, [the Federal Reserve] did it. We’re very sorry. But thanks to you, we won’t do it again.” Those were then-Fed Governor and current Chairman Ben Bernanke’s words to economist Milton Friedman in 2002, when a bunch of economic bigwigs gathered to fête the Nobel laureate on his 90th birthday. Bernanke’s paean to Friedman reflected mainstream Republican economic thought: The Great Depression wasn’t a failure of markets, but rather of central banking.

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Will Wilkinson asks why conservatives have almost uniformly abandoned Milton Friedman's monetarist views in favor of various hard-money approaches: Mr Friedman died a beloved figure of the free-market right. Yet it does seem that his influence on the subject of his greatest technical competence, monetary theory, immediately and significantly waned after his death.

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