Hayek on Milton Friedman and Monetary Policy

"Anyone advocating a "transitional" or "incremental" change is a sell-out "

I somewhat disagree. Example: try abolishing public schools overnight and see how much support you'll get.

Milton Friedman recognized this problem and came up with a solution which I believe one day will come to fruition, that is "school vouchers." This solution will enable free market to be tried and for it to prove its superiority over state monopolies, eventually putting govt. schools out of business.

My attempt is not to get any support, but to preserve the original doctrine. If we do not, then people later will say "hey, even your Milton Friedman supported government schooling, he just wanted vouchers. I don't believe there will be any gradual process of realisation of the market's superiority unless our actions match our end goals.

I see your point. But you can preserve only something which is still there. America however has largely turned its back to liberty and embraced socialism and the welfare state.

Liberty rather needs restoring, but it may be difficult to do so at once. Socialism too came slowly, through the back door.

Friedman was a key player in the removal of the gold standard, and the move towards fiat monetary nationalism/floating exchange rates. Friedman was a mechanical quantity theorist-- that there's a 1-1 relationship between the money supply and prices (b/c V is constant). Unfortunately, it's simply not true; humans are not robots. They react differently to different situations (V is not constant). Thus, the FED doesn't control the entire supply of money--destroying his theory (M not controllable)

Slazem se druze...

But i think we can agree that even if V is not constant there will, as a rule, be a tendency for prices to rise (not specifying the exact number, or which will rise first, etc.).

I've always been confused as to how Friedman could accurately percieve that inflation raises prices, but still believe he can justifiably support inflation. It seems contrary to even his poorly-worded "choice" system.

Friedman uses monetary aggregates, and doesn't focus on relative price changes (Hayek). Price inflation is one type of inflation, where the money supply exceeds total output. The more general definition of inflation is increasing the money supply in excess of demand for cash holdings (which can lead to general price inflation or not). The latter results in relative price distortions causing misdirections of labor+capital into unwarranted economic activities, which must eventually be liquidated.

The problem with monetary aggregates and a strict mechanical approach to quantity theory is that it ignores human action. The economy is not like a machine which can be directed and beneficially manipulated.

Inflation is not controllable, predictable, or even accurately measurable . There could be price deflation and still massive misallocations of resources (when money supply exceeds demand for cash holdings, but falls short of output/productivity gains). Monetarism is overly simplistic.

YEAH, that is why FED can print whatever amount of money and devalue your wealth and transfer it to elite !
go SOUND Money

So you agree with the notion that Friedman is a statist? That is what I was commenting on.

I was joking obviously. But I do disagree with your statement that being ideologically pure will get us nowhere. Unless those who want to get rid of government are uncompromising, they will simply join the mainstream and the government will continue to grow, and not even a footnote will exist to let the world know that someone stood up for liberty.