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In a message dated 7/24/2001 5:14:20 PM Pacific Daylight Time, Professor 
Leeson asks 
 
> 2. an investigation of how and why Milton Friedman began, around 1951, to 
> use the quantity theory for explicitly anti-Keynesian purposes 
>  
 
For some reason I find this call for research a bit biased.  My best memory 
is that is was Keynes who found the  venerable quantity theory a target for 
denegration and criticism.  I believe that there is language to this effect 
in the General Theory perhaps mixed with the attack in Say's Law in chapter 
2.   Friedman responded and in many ways responded from a Marshallian 
perspective. 
 
Among orthodox economists (Friedman is an orthodox economist along with 
Viner, Mises, Hayek and others) there is nothing so dangerous as an 
economist advising politicians that increases in the quantity theory of 
money can have beneficial effects in the short run.   It is unreasonable to 
expect an post-World War II economist not to respond sharply to such policy 
advice. 
 
In my view Friedman was making two important doctrinal points and a third 
point about empirical research.  First, the Cambridge equation (Cambridge 
approach) was not at all inconsistent with the long standing orthodox 
quantity theory tradition.  Second, that tradition provided much insight 
into the causes and consequences of monetary disturbances which in fact 
have much to do with economic instability (recessions and depressions).  
The third point is that the quantity approach offered a convenient schema 
within which to conduct empirical research about the historical 
relationships between money, output, prices and institutions affecting 
velocity.   On the last point, Friedman was not alone nor the first to make 
these points.  His influence on economic research in the US (and Europe??) 
was enormous. 
 
In short, I do not see Friedman "begining anything" but rather responding 
in a profoundly responsible way to strong statements that Keynes made for a 
variety of reasons (only some of which were scholarly) in his General 
Theory. If we need to find a polemicist in these debates it is much more 
likely to be Keynes than Friedman.  I use the word "polemicist" not to 
disparage Keynes since much like Madison Avenue advertising, the trick in 
academics as in commercial life, is to catch your target audience's 
attention and Keynes did that well.   
 
As far as inititating a line of research that would ultimately eat away as 
the foundations of at least one version of Keynesianism (the version that 
ended up in some texts).  Friedman consistently and coherently argued that 
consumption was not a function of (current) income and that households were 
more forward looking than as typically modeled by so called Keynesians. 
These arguments also created doubts about the potency of fiscal policy via 
the multiplier.  These lines of  criticism and analysis while not without 
precedents may have been fired up by Friedman and his students as a result 
of the legions of economists emerging and carrying the "Keynesian cross."  
 
In my view, the most interesting contributions of the General Theory are 
really more about the linkages between investment and speculative behavior 
and the real economy and also about the financial/psychological reasons for 
holding money instead of bonds.  These contributions while again not 
without precedent have or will in the future have an important effect on 
enriching the orthodox tradition in economics although the so called 
"institutionalist camp" must get credit with keeping these debates alive. 
 
 
L. Moss 
 
 
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