Ideas Matter

Milton Friedman reiterates his own changed view of the Fed -- because it has changed -- because economic thinking has changed -- because Friedman-Schwartz showed the way. All of this from Friedman's Reflections in the recent Cato restrospective, A Monetary History of the US: After 40 Years. From Friedman's brief opening essay:

"In an April 15, 1988 WSJ op-ed, I wrote, 'No major institution in the U.S. has so poor a record of performance over so long a period as the Federal Reserve, yet so high a public recognition.' That conclusion was, I believe, amply justified by our book and experience in the quarter century after its publication. Fortunately, as I wrote in a WSJ op-ed of August 19, 2003 ('The Fed's Thermostat'), it no longer is."

"Since the mid-1980s, central banks around the world have reacted to the mounting evidence of monetary research by accepting the view that their basic responsibility is to produce price stability. More important, they have succeeded to a remarkable extent as they have discovered that far from being a trade-off between price stability and monetary stability, they are mutually supporting. The variability of prices is less by an order of magnitude since the mid-1980s than it was before, not only in the U.S., but also in New Zealand (the first country to adopt an explicit inflation target), Great Britain, Euroland, Japan and elsewhere."

Ideas matter and good ideas have a way of being heard. It may take time but it is powerful.