The debate over Milton Friedman’s theoretical framework: An economist’s view

The failure to communicate could be explained in terms of the participants having long-established, entrenched positions that they were committed to defending. The failure to influence the profession at large could be explained by the rise of the New Classical Macroeconomics which changed the questions to which economists wanted answers in such a way that interest in the issues raised in this debate was reduced. The defence of the quantity theory with which Milton Friedman starts his paper will have been well known to his audience. His exposition of the quantity theory stresses the demand for money, his exposition of this being very conventional, having much in common with his famous restatement of the quantity theory. Friedman then argues that the simple quantity theory completes the model by taking real output as given, and that the simple income-expenditure theory does so by assuming the price level to be an institutional datum.