Development and Underdevelopment in the History of Economic Thought

The other man of the Great Depression: Milton Friedman’s theoretical findings and policy advices in the light of the Thirties

Rivot Sylvie, University of Haute-Alsace

Friedman is usually depicted as ‘the’ economist of the 70s, the monetary theorist whose influence inside but also outside the academia should be understood in light of the specific context he lived in at that time, namely the inflationary pressures Western countries experienced. Friedman is usually pictured that way in comparison to Keynes, who is usually considered by contrast as ‘the’ economist of the Great Depression. The paper aims to take side with this commonly accepted view regarding the overall matters of concern Friedman aimed to address. Our main argument is that Friedman’s proposals cannot be understood but with regard to the deep influence the Great Depression had on the shaping of his thinking. The paper starts with biographical aspects of Friedman and it first examines how Friedman himself presented the influence the Great Depression had on him, in several interviews as well as in his correspondence. Next, we show that very early in his career Friedman came to achieve the main building blocks of his theoretical apparatus, as well as the core of his policy proposals, and that was already based on his understanding of the Great Depression. ast, we show that despite of his success during the 70s, and in particular the echo his harsh critiques of the Keynesians then had on the profession, his arguments at both the theoretical and the policy levels were still deeply rooted in his understanding of the Great Depression and not in the ‘Great Inflation’ of that time. Friedman never ceased to improve his proposals for the stabilization of the monetary side of the economy accordingly. In conclusion, it appears that the particular historical context that influences an economist is not necessarily the same as the context of his success.


Keywords: Friedman, Great Depression, monetary theory, policy-mix