Economists have gotten a lot wrong over the course of this pandemic, and long before that, but there is one whose ideas have never looked better: Milton Friedman, the Nobel laureate who died in 2006.
Friedman’s reputation suffered after the Great Recession, as the market forces he so believed in were at fault. Worse yet, after the financial crisis, the U.S. Federal Reserve expanded the money supply dramatically, but the rate of price inflation remained stubbornly low. Monetarism, the theory he is best known for, appeared irrelevant.
Yet it isn’t, as the current debate over inflation attests. People might disagree over what is causing a 6.2% inflation rate, but there is consensus on the solution: It will be up to the Fed — and monetary policy — to get rates of price inflation back down. Furthermore, as Friedman would predict, this disinflation process will be painful and may cause a recession.