The wrong track also leads someplace: Milton Friedman’s presidential address at 50

Servaas Storm*

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

1 Citation (Scopus)
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Milton Friedman’s presidential address to the American Economic Association holds a mythical status as the harbinger of the supply-side counter-revolution in macroeconomics – centred on the rejection of the long-run Phillips-curve inflation–unemployment trade-off. Friedman (seconded by Edmund Phelps) argued that the long run is determined by ‘structural’ forces, not demand, and his view swept the profession and dominated academic economics and macro policymaking for four decades. Friedman, tragically, put macroeconomics on the wrong track which led to disaster: secular stagnation, rising inequality, mounting indebtedness, financial fragility, a banking catastrophe and recession – and no free lunches. This is Friedman’s legacy. We have to unlearn the wrong lessons and return macroeconomics to the right track. To do so, this paper shows that Friedman’s (and Phelps’s) conclusions break down in a general model of the long run in which productivity growth is endogenous – aggregate demand is driving everything again, short and long.

Original languageEnglish
Pages (from-to)517-532
Number of pages16
JournalReview of Keynesian Economics
Issue number4
Publication statusPublished - 2018


  • Endogenous technological progress
  • Generalized NAIRU model
  • Monetary policy
  • Natural rate of unemployment


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