Friedman and Samuelson on the Business Cycle.

Chicago School economists have come in for criticism since the financial crisis and so-called Great Recession began in 2007. Commentators have blamed recent problems on a laissez-faire faith in the efficacy of markets and simple rules for business-cycle policy--ideas associated with economics as taught and practiced at the University of Chicago. Events over the past four years, we are told, demonstrate the need for a restoration of Keynesian thinking about business cycles and activist government policies to keep markets from failing, However, there is another aspect of Chicago School economics that is commonly overlooked. This is the conviction that economists' understanding of the business cycle is meager in light of the knowledge necessary for activist countercyclical policy to be effective. From this comes the Chicago School concern that economists and policymakers not attempt to do something beyond their capability. Overreaching can make the problems worse. In the public mind, Milton Friedman and Paul Samuelson represent more than any other individuals two competing schools of thought that dominated macroeconomic and business cycle debates over much of the past century. As readers of their Newsweek columns from the late 1960s into the 1980s learned, Friedman was the "conservative" Chicago economist favoring free markets, deregulation, and rules-based monetary policy. Samuelson was the "middle-of-the-road" economist, favoring regulatory oversight of markets and activist monetary and fiscal policy. Friedman was the monetarist and Samuelson the Keynesian. Friedman died in 2006, so we do not have his commentary on the current crisis. Samuelson died in 2009, and before his death spoke with journalist Nathan Gardels of his and Friedman's respective ideas and influence in light of the crisis.