Friedman’s monetarism assumes all unemployment is voluntary choice

Evidence

Friedman’s argument was that if the government expanded the money supply to increase employment, employers would initially expand output in response to rising prices. Unemployment would decline, which would in turn boost wages. So far, so Keynesian. This cannot last, however, because Friedman, and this is crucial, assumed that unemployment was voluntary and was not due to a deficiency of demand. People choose labor or leisure at the prevailing wage. There is no demand-deficient unemployment in Milton’s world. In other words, the 25 percent of Spaniards who are presently without work simply don’t (by Milton’s presumption) want to work at the prevailing wage and are on vacation. — Mark Blyth, Austerity, 409

Categorization

• XREF: This is the foundational monetarist premise that underwrites austerity logic; connects to Mattei and the broader austerity critique literature this reader is building toward. — connects to: The natural rate of unemployment assumption survived despite the failure of monetarism itself — Mark Blyth, Austerity: The History of a Dangerous…, 427; Money illusion and natural-rate logic make Keynesian stimulus self-defeating under monetarism — Mark Blyth, Austerity: The History of a Dangerous…, 410; Monetarism blamed the Depression on Fed policy, not underconsumption — Mark Blyth, Austerity: The History of a Dangerous…, 408

Broader Connections

• Money illusion and natural-rate logic make Keynesian stimulus self-defeating under monetarism #expands (0.80) — Mark Blyth, Austerity, 410
• The natural rate of unemployment assumption survived despite the failure of monetarism itself #expands (0.75) — Mark Blyth, Austerity, 427
• Monetarism blamed the Depression on Fed policy, not underconsumption #expands (0.70) — Mark Blyth, Austerity, 408