Friday, August 26, 2011

Why Monetarism?

Although Monetarism, as an interventionist economic policy, clearly isn’t libertarian, people continue to consider it as such. The basic difference between Keynesian Economics and Monetarist Economics is that one favors fiscal policy while the other favors monetary policy as a way for the government to manage the economy through the manipulation of aggregate demand.

And yet many people do consider Monetarism to be more libertarian, to the point where if a spectrum is arranged Monetarism is listed as basically a midpoint between Keynesian and Capitalism.

Considering Keynesian Economics, a reason to consider it as such is because all Keynesians are both Monetarists and Progressives, they believe in both monetary policy and in regulation as ways to manage the economy. A textbook Keynesian is no closer and no farther from libertarian than any Monetarist.

So there is reason to make a spectrum. But why go so far as to insist that instead of being a midpoint between real Keynesian and libertarian Capitalism, Monetarism is so often wrongly lumped with Monetarism?

It would best be described by Rothbard’s Law. "people tend to specialize in what they are worst at. Henry George, for example, is great on everything but land, so therefore he writes about land 90% of the time. Friedman is great except on money, so he concentrates on money." Rothbard went farther to describe Friedman in even harsher terms, saying "And so, as we examine Milton Friedman’s credentials to be the leader of free-market economics, we arrive at the chilling conclusion that it is difficult to consider him a free-market economist at all."

Then perhaps there is one reason left why people would consider Monetarism to be libertarian in any respect. It is because the current center of United States politics is so far devolved towards the regulatory state, with the government enmeshed in so many aspects of the American economy that to embrace textbook Monetarism is to embrace a reduction in the government's role in the economy.

Unfortunately there is a lot of room between slightly decreasing the role of government and actual libertarianism. Being in favor of slightly less regulation, slightly less control, slightly less taxing and spending, does not make one a libertarian.

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