THE GREAT DIVIDE? KEYNES AND FRIEDMAN ON EMPLOYMENT POLICY

This paper considers the economic policy advocated by Keynes and Friedman in relation to their particular theoretical framework. They have in common an opposition to fine-tuning of the economy. With regard to the contrasting strategies of rules versus discretion, both would be advocates of rules; they would both oppose short-term devices. There are nonetheless significant divergences over which rules are to be implemented. They also part company on the theoretical justification for these rules. Finally, their contrasting views on monetary and fiscal policies are explained by their respective conceptions of the running of a monetary economy.