"Is Milton Friedman a Keynesian?" (1992)
Roger W. Garrison, "Is Milton Friedman a Keynesian?," in Mark Skousen, ed., [https://mises.org/library/dissent-keynes-critical-appraisal-keynesian-economics Dissent on Keynes: A Critical Appraisal of Keynesian Economics] (New York, N. Y.: Praeger Publishers, 1992).
- While many of the conflicting claims can be reconciled in terms of the short-run and long-run orientation of Keynesians and monetarists, respectively, and in terms of their contrasting philosophical orientations, neither vision takes into account the workings or failings of the market mechanisms within the investment aggregate.
Austrian macroeconomics is set apart from both Keynesianism and monetarism by its attention to the differential effects of interest rate changes within the investment sector, or—using the Austrian terminology—within the economy's structure of production.
- Page 136.
- Accounting for the artificial boom and the consequent bust is not part of Keynesian income-expenditure analysis, nor is it an integral part of monetarist analysis. The absence of any significant relationship between boom and bust is an inevitable result of dealing with the investment sector in aggregate terms. The analytical oversight derives from theoretical formulation in Keynesian analysis and from empirical observation in monetarist analysis. But from an Austrian perspective, the differences in method and substance are outweighed by the common implication of Keynesianism and monetarism, namely, that there is no boom-bust cycle of any macroeconomic significance.
- Pages 136–137.
"New Classical and Old Austrian Economics", 1991
Roger W. Garrison, "New Classical and Old Austrian Economics: Equilibrium Business Cycle Theory in Perspective," The Review of Austrian Economics 5, no. 1 (1991).
- The recent flourishing of New Classical economics, and especially its Equilibrium Business Cycle Theory (EBCT), has given a fresh hearing to the Old—but still developing—Austrian Business Cycle Theory (ABCT). While the New and the Old differ radically in both substance and methods, they exhibit a certain formal congruency that has captured the attention of both schools. The formal similarities between EBCT and ABCT invites a point-by-point comparison, but the comparison itself dramatizes differences between the two views in a way that adds to the integrity and plausibility of the Austrian theory.
- Page 91.
- The all-inclusiveness of the equilibrium concept in New Classicism warns against comparisons of EBCT and ABCT that ignore the radically different methodological contexts. For instance, the inevitable bust that figures importantly in ABCT cannot easily be translated into the language of EBCT. For the Austrians, "equilibrium bust" is a term at war with itself; for the New Classicists, "disequilibrium bust" can only mean an unexplainable downturn (cf. Lucas 1981, pp. 225 and 231).
- Page 95.
- Except for Marxian theories, nearly all modern theories of the business cycle have essential elements that trace back to Knut Wicksell's turn-of-the-century writings on interest and prices. Austrians, New Classicists, Monetarists, and even Keynesians can legitimately claim a kinship on this basis. Accordingly, the recognition, that both the Austrians and the New Classicists have a Swedish ancestry does not translate into a meaningful claim that the two schools are essentially similar. To the contrary, identifying their particular relationships to Wicksellian ideas, like comparing the two formally similar business-cycle theories themselves, reveals more differences than similarities. … [T]o establish the essential difference between the Austrians and the New Classicists, it needs to be added that the focus of the Austrian theory is on the actual market process that translates the monetary cause into the real phenomena and hence on the institutional setting in which this process plays itself out.
The New Classicists deliberately abstract from institutional considerations and specifically deny, on the basis of empirical evidence, that the interest rate plays a significant role in cyclical fluctuations (Lucas 1981, p. 237 151–1). Thus, Wicksell's Interest and Prices is at best only half relevant to EBCT. … Taking the Wicksellian metaphor as their cue, the New Classicists are led away from the pre-eminent Austrian concern about the actual market process that transforms cause into effect and towards the belief that a full specification of the economy's structure, which is possible only in the context of an artificial economy, can shed light on an effect whose nature is fundamentally independent of the cause.
- Pages 98–99.