Archive for August 16th, 2010

When Keynes rejected Friedman’s paper

August 16, 2010

Again going back to the PBS sourcepointed earlier on this blog.

Ok now here is a must read interview of Milton Friedman. It talks about Friedman’s views of markets, quantity theory of money, Friedman’s rejection of Keynes theory of great depression, though he had great respect for Keynes the economist, on Nixon, on Ronald Reagan, his role in Pinochet’s Chile etc etc.

First the topic of the post:

INTERVIEWER: On a personal level, what contact did you have with him?

MILTON FRIEDMAN: With Keynes? The only contact I had with him was to submit an article to theEconomic Journal, which he was editor of, which he refused and rejected. I had no  personal contact with him other than that.

INTERVIEWER: What did the rejection say?


MILTON FRIEDMAN: Well, it was an article that was critical of something that A.C. Pigou, a professor in London and at Cambridge, had written. And Keynes wrote back that he had shown my article to Pigou. Pigou did not agree with the criticism, and so he had decided to reject it. The article was subsequently published by the  Quarterly Journal of Economics, and Pigou wrote a rejoinder to it.

🙂 So there was just one piece of talk between the two great great economists!!



WPI Inflation – July 2010 update

August 16, 2010

WPI index increased from 259.8 in Jun-10 to 262.5 in Jul-10. This implied inflation for Jul -10 at 9.97% (YoY), lower than market expectations of 10.39-10.43%% (as per several newswire polls). Inflation was also lower than expectations in June.

Inflation was lower as market participants expected a higher figure for the manufactured products sub-sector. In a previous post, we had shown that to forecast monthly inflation, we need to understand trends in manufacturing products as it is an unknown number. The numbers in other 2 sub-groups are known in advance. So, for July-2010 markets forecasted the index to increase from 219.5 in Jun-10 to 220.9 in Jul-10. Thos would have led overall inflation to 10.42% levels. However, the index declined to 219.6 levels leading to overall inflation of 9.97%. Again the numbers were widely different from market expecations.

For May-10, inflation was revised upwards from 9.59% to 11.23%.  Once again inflation has been revised upwards significantly. May 2010 numbers were revised upwards from 10.16% to 11.14%. 


Can the Nation Stimulate Its Way to Prosperity?

August 16, 2010

This is the title of this interesting short paper written by Jason Saving of Dallas Fed. It is also a much discussed paper in the blog world (see this, this).Somehow Paul Krugman has not noticed the paper 🙂

The summary is:

While the overall weight of the evidence suggests the stimulus plan has provided a short-term boost, it’s unclear exactly how large this boost has been. What is clear is that stimulus funds have exacerbated near-term fiscal imbalances.


Assorted Links

August 16, 2010

%d bloggers like this: