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March 12, 2002
By PAUL KRUGMAN
"James Tobin — Yale professor, Nobel laureate and adviser to John F. Kennedy — died yesterday. . . . for a time the most prominent advocate of an ideology we might call free-market Keynesianism — a belief that markets are fine things, but that they work best if the government stands ready to limit their excesses."
"John Maynard Keynes . . . with judicious use of monetary and fiscal policy . . . a free-market system could avoid future depressions. What did James Tobin add? Basically, he took the crude, mechanistic Keynesianism prevalent in the 1940's and transformed it into a far more sophisticated doctrine, one that focused on the tradeoffs investors make as they balance risk, return and liquidity. . . . Mr. Tobin's focus on asset prices as the driving force behind economic fluctuations has never looked better.
"Mr. Tobin['s] . . . "faith in the power of ideas." That's a faith that grows ever harder to maintain, as bad ideas with powerful political backing dominate our discourse. ... [more]
A Dismaying Morass of Confusion, Insult, and Disinformation
[Krugman uses Tobin's life to attack monetarist economic policies . . . and Nobel laureate Milton Friedman in particular. In the following letter, author, game show host, and law teacher Ben Stein responds to Krugman's allegations.]
"In all of my life, I have never seen a more confused column than the one that appeared on March 12, 2002 on the Op-Ed page of the New York Times about the death of the esteemed economist, policy expert, teacher, and public servant, James Tobin, on the sad occasion of Professor Tobin's death. I was honored to be a student and lifelong admirer of Dr. Tobin, and you do him and many others wrong, and display frightening misunderstanding of the field."
"Just to start, you say the great depression was 'widely blamed' on laissez faire policies. By whom? It has been blamed on many things, but no serious scholar has blamed it on free market economics. In fact, just the opposite-many blame it on price fixing and restraint of trade encouraged by the New Deal."
"Second, your calling a true scholar and genius like Friedman 'naïve' is simply astonishing especially in context. Again, I was a student of Tobin at Yale. He had great respect for monetarism, for its central text, The Monetary History of the United States by Friedman and Anna Jacobson Schwartz, and would have been scandalized by someone at your level daring to call Milton Friedman or his ideas and thorough research naïve."
"For you to further assert that Friedman's monetarism has not stood the test of time is almost unbelievable. What theory do you think governs current Fed policy if not monetarism?"
"Finally, for you to assert, on zero evidence, that Tobin's time as a member of the Council of Economic Advisers was unique and that since the early sixties, all other Council members have had to hew to a political line and sacrifice honesty and objectivity is insanely insulting to all other members of the Council and their staffs."
"It really is shocking that someone of your limited background in economics presumes to judge a great man like Tobin or in eulogizing him to so pervert his opinions and work…and to heap scorn on one of the great minds of all time in economics, Milton Friedman. In short, your piece is a dismaying morass of confusion, insult, and disinformation." ... [more]
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