08/08/2012 05:42 pm ET Updated Oct 08, 2012

Conservatives Dumped Milton Friedman on His Centennial

Tuesday last week would have been Milton Friedman's 100th birthday. The American conservative establishment effectively renounced him on that day.

Sure, plenty of lip service was paid to the most famous conservative economist on the occasion of his centennial. But the tributes mostly focused on his public advocacy of economic freedom. That advocacy is a lot less relevant nowadays, when nobody even talks about raising the top federal tax rate to anywhere near 91% (where it was when Capitalism and Freedom was published half a century ago), the Soviet Union is no more, markets are fully embraced by their former opponents ranging from the British Labour Party to the Chinese Communists, and socialism is only being defended by the likes of Hugo Chavez.

However, Friedman's scholarly work is of enduring importance, and that work no longer gets much appreciation from conservatives. He is most famous for creating the monetarist school of economics, and his main achievement in that field was proposing a new and convincing explanation of the Great Depression, namely that the Federal Reserve's misguided policies resulted in the serious contraction of the money supply and thus turned an ordinary recession into a major depression. This is much more than a merely academic question, since we have recently experienced a major financial crisis not unlike that in 1929, and the Fed's response was heavily influenced by Friedman's ideas (in fact Ben Bernanke prophetically promised Friedman precisely that in a speech on the occasion of his 90th birthday 10 years ago: "Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again."). The controversial quantitative easing is very similar to what Friedman recommended back in 2000 for Japan (which then had an anemic economic recovery very similar to our current one):

They can buy long-term government securities, and they can keep buying them and providing high-powered money until the high powered money starts getting the economy in an expansion. What Japan needs is a more expansive domestic monetary policy.

And what did the conservative establishment have to say about all that on Friedman's centennial? For example, National Review Online published three articles celebrating the occasion. Two of them not only do not mention Friedman's work on the Great Depression at all, but also lead the reader to believe that Friedman would have favored tighter monetary policy in our present condition. The third, the official National Review editorial, eventually gets around to acknowledging Friedman's most important achievement, albeit in a very peculiar way:

His most influential work (conducted together with his colleague Anna Jacobson Schwartz) was on the causes of the Great Depression, making a powerful case that it was not market failure but government policy -- specifically Federal Reserve policy -- that turned a normal economic downturn into an epic catastrophe.

Got that? All you need to know is that it was "government policy -- specifically Federal Reserve policy". I really love how the word "specifically" here was specifically deployed to avoid providing any actual specifics (which could be expressed in just two short words "tight money").
All this conservative tiptoeing around Milton Friedman's legacy is not the only thing that happened that Tuesday. There were also primary runoff elections in Texas. The entire national conservative establishment (including National Review) enthusiastically supported Ted Cruz for U.S. Senate. Where does Ted Cruz stand on monetary policy? Last September he published a long post at National Review Online which included the following:

We then should restrain the Fed's "quantitative easing" -- a fancy term for printing money -- so that our currency isn't further debased. Since 2008, gold has skyrocketed and the value of the dollar has plummeted creating a cruel tax on every consumer, saver, and investor.

This is a complete rejection of Friedman's economics. Incidentally, the second sentence in this snippet is not exactly based on any reality: over that three year period the value of the dollar actually "plummeted" by 4% (and in fact one of those years, 2009, was the only year in living memory when we experienced deflation instead of inflation). The evidence -- of both omissions in the editorials and the choice of politicians to rally around -- is overwhelming: the Right no longer has much use for Milton Friedman. The only question is why. I think Steve Randy Waldman is right. Older people care about inflation much more than about unemployment. Therefore they prefer tighter monetary policy, even at the expense of economic growth. Their influence in the GOP is well above their numbers. They are overrepresented in the Republican grassroots (especially the Tea Party). They vote in the primaries and donate to the party and campaigns more actively than younger voters. They make up a huge proportion of the talk radio audience. So it is no wonder that conservatives (both the media and politicians) cater more and more to that particular segment of the population. And if that segment is offended by Milton Friedman's monetarist views, Milton Friedman gets jettisoned by conservatives.