Friday, December 01, 2006

Friedman and Keynes

Brad DeLong explains the "deep gulf in Keynes and Friedman’s moral philosophy":

Keynes saw himself as the enemy of laissez-faire and an advocate of public management. Clever government officials of goodwill, he thought, could design economic institutions that would be superior to the market — or could at least tweak the market with taxes, subsidies, and regulations to produce superior outcomes. It was simply not the case, Keynes argued, that the private incentives of those active in the marketplace were aligned with the public good. ...

Friedman disagreed vociferously. In his view, it usually was the case that private market interests were aligned with the public good: episodes of important and significant market failure were the exception, rather than the rule, and laissez-faire was a good first approximation. Moreover, Friedman believed that even when private interests were not aligned with public interests, government could not be relied on to fix the problem.