Milton Friedman, fake scientist

Comment on John B. Taylor on ‘Still Learning From Milton Friedman: Version 3.0’*

Blog-Reference

John B. Taylor argues: “In that same year Milton Friedman published Capitalism and Freedom (1962) giving the competing view. He argued that ‘the available evidence . . . casts grave doubt on the possibility of producing any fine adjustments in economic activity by fine adjustments in monetary policy — at least in the present state of knowledge . . . There are thus serious limitations to the possibility of a discretionary monetary policy and much danger that such a policy may make matters worse rather than better’.”

There are TWO economixes: political economics and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.

Political economics has produced NOTHING of scientific value in the last 200+ years. The major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and all got the foundational concept of the subject matter ― profit ― wrong. The pluralism of provably false theories is the very definition of a proto-science or what Feynman called cargo cult science.

The lack of true theory has grave consequences: since Adam Smith, economic policy guidance has had NO sound scientific foundation. The general public always sees and discusses the policy proposals of economists but never the underlying theory, therefore it fails to see that there is a total disconnect between the two. The economists’ proposals do not follow from a valid theory because there is none.

Friedman, clearly, was a lifelong political agenda pusher and utterly incompetent scientist. Monetarism is plain proto-scientific garbage.

“In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)

Friedman never understood how the profit- and price mechanism works. He never rose above the level of soapbox economics. He will never be accepted in the community of scientists. Politicians still appreciate him as a useful idiot.

Egmont Kakarot-Handtke


* Economics One

Related 'Forget Friedman, forget Keynes' and 'Friedman and the cluelessness of fake scientists' and 'Will economics ever become a science?' and 'Economics: 200+ years of scientific incompetence and fraud' and 'Fact of life: your econ prof is scientifically incompetent' and 'Your economics is refuted on all counts: here is the real thing'. For details of the big picture see cross-references Incompetence and cross-references Failed/Fake Scientists and cross-references Political Economics/Stupidity/Corruption.

***

INET Oct 7, 2021, Nancy MacLean, Milton Friedman's Collusion with Segregationists

nsfwcorp Oct 25, 2021,  Mark Ames, When Congress Busted Milton Friedman (and Libertarianism Was Created By Big Business Lobbyists)

Friedman and the cluelessness of fake scientists

Comment on Lars Syll on ‘Milton Friedman’s pet theory finally shown to be wrong’

Blog-Reference

Lars Syll comments on the refutation of the permanent income hypothesis (PIH): “My doubts regarding macro economic modelers’ obsession with Euler equations is basically that, as with so many other assumptions in ‘modern’ macroeconomics, Euler equations, and the PIH that they build on, don’t fit reality. ... But it is still an undeniable fact that theoretical models building on piles of known to be false assumptions — such as PIH and the Euler equations that build on it — in no way even get close to being scientific explanations. On the contrary. They are untestable and hence totally worthless from the point of view of scientific relevance.”

This is true but not new. Economics has been built for 200+ years now on false premises. In other words, economics is what Feynman called a cargo cult science. Friedman is but one fake scientist in the long line that stretches from the storyteller Adam Smith to the loudspeaker Paul Krugman.

It is of utmost importance to distinguish between political and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, and the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics, anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.

Theoretical economics has to be judged according to the criteria true/false and NOTHING else. Scientific truth is well-defined by material and formal consistency. But theoretical economics had been hijacked from the very beginning by the agenda pushers of political economics. Can there be the slightest doubt that Smith, Ricardo, Malthus, Marx, Keynes, Hayek, Friedman, Krugman, Syll, and almost everybody in between fall into the category of a political economist or fake scientist?

Political economics has produced NOTHING of scientific value in the last 200+ years. Since the founding fathers, economists claim to do science, but they have never risen above the level of opinion, belief, wish-wash, storytelling, soapbox propaganda, and sitcom gossip. Milton Friedman produced plain proto-scientific garbage during his lifetime and never realized that his axiomatic foundations were false.

Friedman’s policy prescriptions are regarded as outdated, but the representative economist still applies Friedman’s false premises. Orthodox economics is built since Jevons/Walras/ Menger upon this set of foundational propositions, a.k.a. axioms: “HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states.” (Weintraub)

Methodologically, these premises are forever unacceptable. The microfoundations approach has already been dead in the cradle. The axiom set contains three NONENTITIES: (a) constrained optimization HC2, (b) rational expectations HC4, (c) equilibrium HC5. Every theory/model that contains just one nonentity is a priori false. So, not only Friedmanian economics but orthodox economics from Jevons/Walras/Menger to DSGE/RBC/New Keynesianism is axiomatically false. There is no need to go into the details of the analytical superstructure; axiomatically false is the death sentence for a Paradigm.

There is not much use in criticizing a stupid/corrupt political clown like Friedman for much longer. Getting out of failed economic theory requires nothing less than a full-blown Paradigm Shift from false Walrasian microfoundations and false Keynesian macrofoundations to entirely NEW macrofoundations. Everything else is a continuation of fake science.

Egmont Kakarot-Handtke


Related 'Forget Friedman, forget the Quantity Theory' and  'If it isn’t macro-axiomatized, it isn’t economics' and cross-references Political Economics/Stupidity/Corruption and cross-references Failed/Fake scientists and cross-references Paradigm Shift.

For more about Milton Friedman, see AXECquery.

***

 
Graphic AXEC158a

Occasional Tweets: The futile attempt to recycle Milton Friedman (I)

 

#Economics

Friedman never understood how the profit- and price mechanism works. He never rose above the level of a useful political idiot.

Milton Friedman, fake scientisthttps://t.co/Cd3gu2jTGF

— E.K-H (@AXECorg) November 18, 2021

For more about Milton Friedman see AXECquery.

For details of the big picture see cross-references Political Economics/Stupidity/Corruption.

Occasional X: Economics is scientifically worthless, so are its prizes (II)

#Economics#FailedFakeScience

“Javier Milei receiving the Milton Friedman International Prize in Italy.” (Milton Friedman Quotes)

Milton Friedman never understood profit, and by consequence, how the economic system works. A Friedman Prize has no scientific meaning. It is a… pic.twitter.com/rYJ9wSXfIk

— AXEC (@EgmontHandtke) January 9, 2026

Forget Friedman, forget the Quantity Theory

Comment on David Glasner on ‘Milton Friedman and the Chicago School of Debating’

Blog-Reference

In economics, there are two starting points: microfoundations and macrofoundations. Both are provably false. Orthodoxy went micro: “… most of what I and many others do is sorta-kinda neoclassical because it takes the maximization-and-equilibrium world as a starting point” (Krugman). Keynes went macro: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (GT, p. 63)

Because both the axiomatic foundations of Walrasianism and Keynesianism are provably false, their analytical superstructures are also false. This means inter alia that profit theory, price theory, employment theory, and money theory are false. Friedman never realized the necessity of a Paradigm Shift but remained faithful to a paradigm that had, strictly speaking, already been dead in the cradle 100+ years ago. As a spokesperson for Monetarism, he incarnated the central tenet “that money causes prices”.

Because economics is a failed science, it has to undergo a Paradigm Shift. Economic analysis has to be based on entirely new macrofoundations, and the fundamental questions have to be put again at the top of the agenda.

Economics has to be reconstructed from scratch. As a new analytical starting point, the elementary production-consumption economy is defined with this set of macro axioms: (A0) The objectively given and most elementary configuration of the economy consists of the household and the business sector which in turn consists initially of one giant fully integrated firm. (A1) Y_w=WL wage income Y_w is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X.

Under the conditions of market-clearing X=O and budget-balancing C=Y_w in each period, the price is given by P=W/R, i.e., the market-clearing price is equal to unit wage costs. This is the most elementary form of the macroeconomic Law of Supply and Demand. For the graphical representation, see Figure 1. #1

The price is determined by the wage rate, which takes the role of the nominal numéraire, and the productivity. The quantity of money is NOT among the price determinants. This puts Friedman’s Quantity Theory to rest.

Monetary profit for the economy as a whole is defined as Q_m≡C−Y_w, and monetary saving as S_m≡Y_w−C. It always holds Q_m≡−S_m, in other words, the business sector’s deficit=loss (surplus=profit) equals the household sector’s surplus=saving (deficit=dissaving). This is the most elementary form of the macroeconomic Profit Law. Under the condition of budget-balancing, the total monetary profit is zero.

What is needed for a start is two things: (i) a central bank that creates money on its balance sheet in the form of deposits, and (ii) a legitimate sovereign who declares the central bank’s deposits as legal tender.

Deposit money is needed by the business sector to pay the workers who receive the wage income Y_w per period. The need is only temporary because the business sector gets the money back if the workers fully spend their income, i.e., if C=Y_w.

Overdrafts are needed by the household sector for consumption expenditures if the households want to spend before they get their income. This time sequence is no problem for the central bank because the temporary overdrafts vanish with wage payments.

For the case of a balanced budget C=Y_w, the idealized transaction sequence of deposits/ overdrafts of the household sector at the central bank over the course of one period is shown in Figure 2. #2

The household sector’s deposits/overdrafts are zero at the beginning and end of the period. The business sector’s transaction pattern is the exact mirror image. Money, that is, deposits at the central bank, is continually created and destroyed during the period under consideration. There is NO such thing as a fixed quantity of money. The central bank plays an accommodative role and simply supports the autonomous market transactions between the household and the business sector.

From this follows the average stock of transaction money as M=κY_w, with k determined by the transaction pattern. In other words, the average stock of money M is determined by the autonomous transactions of the household and business sector and created out of nothing by the central bank. As a matter of principle, the production-consumption economy NEVER runs out of money.

The transaction equation reads M=κPX=κRL P in the case of budget-balancing C=Y_w and market-clearing X=O, and this yields the commonplace correlation between the average stock of money M and price P for given employment and productivity level, except for the fact that M is the DEPENDENT variable. If P doubles, M doubles. The commonplace correlation does NOT hold if L doubles and M doubles, and P remains constant.

Inflation ensues under the condition of market-clearing and budget-balancing if the wage rate rises over several periods faster than productivity, and deflation ensues in the opposite case. Under the condition of L, R → const., one always gets the commonplace correlation between the average stock of money M and price P, with the causality running from P to M.

This axiomatically correct kernel of the theory of money #3 ― which immediately makes it clear why the Fed cannot reach the inflation target ― fully replaces Friedman’s proto-scientific garbage.

Egmont Kakarot-Handtke


#1 Graphic AXEC31 Elementary production-consumption economy
#2 Graphic AXEC98 Transaction pattern, household sector, balanced budget
#3 For more details, see Reconstructing the Quantity Theory (I). The New Quantity Theory formula is shown under the label of Graphic AXEC111a.

Related 'Fact of life: your econ prof is scientifically incompetent' and 'Milton Friedman, fake scientist' and 'Forget Friedman, forget Keynes' and 'NAIRU and the scientific incompetence of Orthodoxy and Heterodoxy' and 'Friedman and the cluelessness of fake scientists' and 'Will economics ever become a science?' and 'Common non-sense' and 'How money emerges out of nothing ― the functional account' and 'Indeed, Keynesianism and Monetarism are basically the same proto-scientific rubbish' and 'Clueless about money and profit' and 'Objective determinants of profit and interest' and 'Going beyond Wicksell, Keynes, and MMT' and 'Interest and profit' and 'How MMT got inflation wrong' and 'Inflation: back to basics' and 'Attention: there are THREE types of inflation' and 'Basics of monetary theory: the two monies' and 'Criminals and the Monetary Order'.

***

Graphic AXEC210

Economists’ full-scale retreat

Comment on Lars Syll on ‘How true is Friedman’s permanent income hypothesis?’

Blog-Reference and Blog-Reference and Blog-Reference adapted to context

Economics started as Political Economy. Political Economy is agenda pushing, and economists from Smith, Ricardo, Marx, Keynes, Hayek, Friedman, to the present were agenda pushers first and scientists second. As a matter of fact, they were incompetent scientists because they never figured out how the actual monetary economy works. How do we know this? We know this for sure because the profit theory is provably false (Desai, 2008), and without the correct profit theory, the economist is lost in the woods and only babbles incoherent nonsense. This happened to Friedman. He was a lifetime political economists and ALL political economics from Smith and Marx onward is scientifically worthless.

That the permanent income hypothesis is utter scientific dilettantism ― or what Feynman famously called cargo cult science ― could and should have been obvious from the beginning around 1960. The real question is why it took economists more than 50 years to realize that: “Unfortunately, there’s just one small problem ― it’s almost certainly wrong.”#1 Unfortunately, there is a second small problem: “PIH is so dominant that almost all modern macroeconomic theories are based on it. They enshrine the idea with a formula called a ‘consumption Euler equation,’ which has appeared in the vast majority of academic macro models during the past few decades.” #1 In other words, the economics of the past 50 years have been pure scientific garbage.

The fact that economists are in the process of abandoning one core piece of modern macroeconomic theory after another is a sign of worse things to come. As long as the economy has a reasonably good run, economists are mainly occupied with praising themselves and their relentless championship of markets. Now they distance themselves even from “the great Milton Friedman”#1, renounce mathiness, and readily degrade themselves from upper case Science to lower case science. The greater the economic problems become, the smaller economists make themselves.

But economists have never admitted failure without offering betterment for the future: “Kocherlakota thinks macroeconomists should set aside their big, complex formal models of the economy, since these elaborate constructions are built on a foundation that probably doesn’t describe reality all that well. He recommends that economists go back to the drawing board, and look around for new, more accurate kernels of insight with which to build the theories of tomorrow.”#1

Yes, indeed, Kocherlakota is spot on. The Walrasian microfoundations have been unacceptable for more than 150 years, and the Keynesian macrofoundations have been false for more than 80 years. Kocherlakota should have even gone one step further and explicitly recommend the correct macrofoundations “with which to build the theories of tomorrow”. See for a start:
► Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist
► Economics for Economists

Egmont Kakarot-Handtke


Reference
Desai, M. (2008). Profit and Profit Theory. In S. N. Durlauf, and L. E. Blume (Eds.), The New Palgrave Dictionary of Economics Online, 1–11. Palgrave Macmillan, 2nd edition. URL

#1 See ‘Economists Give Up on Milton Friedman’s Biggest Idea’ on BloombergView

Forget Friedman, forget Keynes

Comment on Bill Mitchell on ‘There is nothing much that Milton Friedman got right!’

Blog-Reference and Blog-Reference and Blog-Reference on Jul 30

There are TWO economixes: political economics and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda; the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics, anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.

Political economics has produced NOTHING of scientific value in the past 200+ years. This is the track record: provably false
• profit theory, for 200+ years,
• Walrasian microfoundations (including equilibrium), for 150+ years,
• Keynesian macrofoundations (including I=S, IS-LM), for 80+ years.

To play Friedman against Keynes, as Bill Mitchell does, is a pointless exercise because BOTH were utterly incompetent scientists and BOTH Monetarism and Keynesianism are plain proto-scientific rubbish. If there ever were political agenda pushers = fake scientists, then Friedman and Keynes and their respective followers.

Walrasianism, Keynesianism, Marxianism, and Austrianism are mutually contradictory, axiomatically false, materially/formally inconsistent, and ALL approaches have gotten profit theory, employment theory, and the theory of money wrong.

Economics is a systems science. Accordingly, the correct approach is not microfoundations but macrofoundations. The elementary version of the correct (objective, systemic, behavior-free, macrofounded) Employment Law is shown on Graphic AXEC62: #1

From this systemic Phillips curve#2 curve follows:
(i) An increase in the expenditure ratio ρ_E leads to higher employment L (the Greek letter ρ stands for ratio).
(ii) Increasing investment expenditures I exert a positive influence on employment.
(iii) An increase in the factor cost ratio ρ_F≡W/PR leads to higher employment.

Items (i) and (ii) cover the familiar Keynesian arguments about aggregate demand. The factor cost ratio ρ_F, as defined in (iii), embodies the price mechanism. The fact is that overall employment L  INCREASES if the AVERAGE wage rate W INCREASES relative to the average price P and productivity R. This is the OPPOSITE of what microfounded economics teaches. From the macroeconomic interdependencies follows that the market economy is an unstable system. And this, in turn, means that there is NO such thing as an equilibrium, NOT in the short run, NOT in the long run, NEVER. Equilibrium is a NONENTITY.

By consequence, there is NO such thing as a NAIRU. #3 The bastard Phillips Curve is misspecified since Samuelson/Solow and has to be replaced by the macrofounded systemic Phillips curve, which is entirely free of the familiar silly behavioral assumptions (constrained optimization, expectations, etc.).

The discussion between Monetarism and Keynesianism is until this day, not more than brain-dead blather of scientifically incompetent agenda pushers. #4 Policy proposals of these two political sects have NO sound scientific foundations. Time to get rid of worthless economics and failed/fake scientists who have gotten nothing right for 200+ years.

Egmont Kakarot-Handtke


#1 Essentials of Constructive Heterodoxy: Employment
#2 Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
#3 NAIRU and the scientific incompetence of Orthodoxy and Heterodoxy
#4 How money emerges out of nothing ― the functional account

Related 'Forget Hayek' and 'The myth of economics knowledge' and 'New Economic Thinking: the 10 crucial points' and 'Milton Friedman, fake scientist' and 'Keynes ― the poster boy for the weakness of the economist’s mind' and 'Keynesians ― terminally stupid or worse?'.

Occasional X: The futile attempt to recycle Milton Friedman (XLIV)

#Economics#AllYouNeedToKnow

“There is no justification for military conscription.” (Milton Friedman)

There is no justification for economists.

Milton Friedman never understood profit and, by consequence, how the economic system works. That's rather bad for an economist.

When…

— AXEC (@EgmontHandtke) November 1, 2025

Occasional X: The futile attempt to recycle Milton Friedman (XLVI)

#Economics#AllYouNeedToKnow

“There's no other industry in the US, except politics, that is so OBSOLETE.” (Milton Friedman Quotes)

“There's no other science in the US, except economics, that is so OBSOLETE.” (AXEC)

Milton Friedman was an economist, so he should have known how…

— AXEC (@EgmontHandtke) November 22, 2025

Occasional X: The futile attempt to recycle Milton Friedman (XLXII)

“The price system works so well, so efficiently, that we are not aware of it most of the time.” (Milton Friedman)

Milton Friedman's hallmark was psychological triviality. He never understood profit and, as a consequence, how the economic system works. That's self-disqualifying.…

— AXEC (@EgmontHandtke) March 23, 2026

Occasional Tweets: The futile attempt to recycle Milton Friedman (II)

 

#Economics#FailedScience#FakeScience#Economists#StupidOrCorruptOrBoth

Milton Friedman never understood how the profit- and price mechanism works. Like most #Economists, he was just a politically #UsefulIdiot.

Milton Friedman, fake scientisthttps://t.co/Cd3gu2jTGF

— E.K-H (@AXECorg) June 8, 2022

Occasional X: The futile attempt to recycle Milton Friedman (XXXVIII)

 

#Economics#AllYouNeedToKnow

“Milton Friedman believed there’s only one way out of the debt spiral: A constitutional amendment that limits government spending.” (Students for Liberty)

Milton Friedman has never understood profit and how the economic system works. That's rather…

— AXEC (@EgmontHandtke) June 11, 2025

Occasional X: The foul spirit of political economics (CCCXLI)

“Milton Friedman gets a lot of cheap shots thrown at him, but he is the best communicator of economic ideas I have ever encountered.” (Peter Boettke)

After a lot of cheap shots, Milton Friedman got the refutation bullet right through his head.

Milton Friedman never understood… pic.twitter.com/pWyRa2BA6a

— AXEC (@EgmontHandtke) August 2, 2026

Occasional X: The futile attempt to recycle Milton Friedman (XLIII)

#Economics#AllYouNeedToKnow

“If you look at the real problems of poverty and denial of freedom to people in this country, almost every single one of them is a result of government action.” (Milton Friedman)

Milton Friedman never understood the profit mechanism, which is the…

— AXEC (@EgmontHandtke) October 25, 2025

Occasional X: The futile attempt to recycle Milton Friedman (XLXI)

 

“Human and political freedom has never existed and cannot exist without a large measure of economic freedom.” (Milton Friedman Quotes)

This may be true or not, but it is not economics.

Worse, Milton Friedman never understood profit and, by consequence, how the economic system…

— AXEC (@EgmontHandtke) February 26, 2026

Occasional X: The futile attempt to recycle Milton Friedman (XLV)

#Economics#AllYouNeedToKnow

“If the federal government spends $450 billion and only raises $400 billion in taxes, who do you suppose pays that other $50 billion? Do you suppose a tooth fairy does?” (Milton Friedman Quotes)

Milton Friedman was an economist, so he should have…

— AXEC (@EgmontHandtke) November 20, 2025

Occasional X: The futile attempt to recycle Milton Friedman (XXIX)

 

“Through Smith’s eyes we see that [the market] is a finely ordered and effectively tuned system, one which arises out of men’s individually motivated actions, yet is not deliberately created by men.” (Milton Friedman)

Friedman has never understood profit and how the economic…

— E.K-H (@AXECorg) November 25, 2024

Occasional Xs: The futile attempt to recycle Milton Friedman (VIII)

 

“Economics is the study of the economy, not the study of economists.” (R. Reis)

Milton Friedman never understood what #Profit is and how the #PriceMechanism works. That's rather bad for an #Economist.

Friedman and the cluelessness of fake scientistshttps://t.co/b3edQjNEXv

— E.K-H (@AXECorg) November 15, 2023

Occasional Xs: The futile attempt to recycle Milton Friedman (XI)

 

#Economics#FailedFakeScience#Economists#StupidOrCorruptOrBoth

Milton Friedman never understood what #Profit is and how the economic #System works. That's rather bad for an #Economist.

Friedman and the cluelessness of fake scientistshttps://t.co/b3edQjNEXv

— E.K-H (@AXECorg) December 29, 2023

For details of the big picture see cross-references Failed/Fake Scientists. 

Occasional Xs: The futile attempt to recycle Milton Friedman (XII)

 

#Economics#FailedFakeScience#Economists#StupidOrCorruptOrBoth

Milton Friedman never understood what #Profit is and how the economic #System works. That's rather bad for an #Economist.

Friedman and the cluelessness of fake scientistshttps://t.co/b3edQjNEXv pic.twitter.com/gJO5qLygR5

— E.K-H (@AXECorg) February 8, 2024