Monetary vs. Fiscal Policy - St. Louis Fed

Monetary

vs.

Fiscal Policy

Digitized for FRASER Federal Reserve Bank of St. Louis

The Seventh Annual Arthur K. Salomon Lecture

THE GRADUATE SCHOOL OF BUSINESS ADM INISTRATION NEW YORK UNIVERSITY

Digitized for FRASER Federal Reserve Bank of St. Louis

Monetary vs.

Fiscal Policy

Milton Friedman

&

Walter W. Heller

W ?W ?Norton & Company ?Inc ?

NEW YORK

Digitized for FRASER Federal Reserve Bank of St. Louis

Copyright ? 1969 by The Graduate School of Business Administration, New York University

FIRST EDITION

Library of Congress Catalog Card No. 79-80110

ALL RIGHTS RESERVED

Published simultaneously in Canada by George J. McLeod Limited, Toronto

PRINTED IN THE UNITED STATES OF AMERICA

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Digitized for FRASER Federal Reserve Bank of St. Louis

Contents

Foreword

7

Is Monetary Policy Being Oversold? /

13

Walter W. Heller

Has Fiscal Policy Been Oversold? /

43

Milton Friedman

Reply / Walter W. Heller

63

Reply / Milton Friedman

7i

NOTES

8l

GLOSSARY OF TERMS AND REFERENCES

89

Digitized for FRASER Federal Reserve Bank of St. Louis

Digitized for FRASER Federal Reserve Bank of St. Louis

Foreword

The Graduate School of Business Administration of New York University considers that one of its important mis sions is to provide a forum for the exchange of new ideas and knowledge which may affect the community and the country.

As we prepared for the Seventh Annual Arthur K. Salo mon Lecture on November 14, 1968, we decided to vary our format in an election year by having two speakers on the program instead of one as in previous years. In light of the fact that a new administration would be chosen eight days before the lecture, it was our purpose to present a meaningful dialogue on a significant economic issue of the future.

Therefore, we invited two well-known apostles of eco nomics with widely divergent viewpoints to present their opinions on what each considered the most appropriate

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8

Foreword

means to stabilize the economy. Professor Milton Friedman, the leading spokesman for

the monetarist school of thought, was asked to comment on the monetary policy which he considers necessary to accom plish economic stabilization, and Professor Walter W. Hel ler, the nation's foremost advocate of the neo-Keynesian economics, was called upon to discuss the importance of fiscal policy as an approach to this problem.

Since each man could easily be identified with one or the other of the presidential candidates, we hoped that their confrontation would give some indication of the eco nomic philosophy likely to affect, at least to some degree, the monetary and fiscal policies. In addition, the choice of these two outstanding economists to appear for the first time anywhere in a public debate would-- we were confident-- attract nationwide attention in the world of business and finance.

The response exceeded our expectations. Not only was the lecture hall filled to capacity, but an overflow audience had to be served by closed-circuit television installed in several classrooms. Virtually all media gave the lecture extensive coverage and the response by the press, TV, and radio sur passed any that we had received at previous lectures in the series.

Space does not permit us to enumerate at length the ac tivities, honors, and accomplishments of the two men who shared our platform. Each is an authority on economics and related disciplines. Each is active in research agencies and in learned societies. Dr. Milton Friedman is the Paul Snow den Russell Distinguished Service Professor of Economics at the University of Chicago. Dr. Walter W. Heller is Re gents' Professor of Economics at the University of Min nesota.

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