Friedman converted to floating rates from the gold standard position

Evidence

In the following years, Friedman, supported by the German economists and former gold standard advocates Friedrich Lutz and Albert Hahn, developed his argument for floating exchange rates, which was discussed at various MPS conferences. In particular, he argued that while the gold standard would function fully automatically in principle and would guarantee “freedom of political control” under the prevalent social and political circumstances, it was questionable whether governments would stick to the rules. He defended the stability of flexible exchange rates through a twofold argument. On the one hand, he reinterpreted the historical experiences of the 1920s by focusing on the “underlying instability of economic conditions.” On the other hand, he criticized the idea of destabilizing currency speculations theoretically, arguing that profitable speculations could actually stabilize the system. — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 429

Categorization

• XREF: Friedman’s case for floating rates foreshadows the later Washington Consensus and currency-crisis debates—maps onto the broader intellectual history. — connects to: Austrian school economists converted from gold standard to floating rates — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 431; Friedman’s floating rate doctrine was partly a polemic against Keynesian flexible rate proposals — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 430; Early neoliberals favored the gold standard and opposed floating rates — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 428
• QUESTION: His argument that ‘profitable speculations could actually stabilize the system’—how did this become the efficient-markets orthodoxy, and where did it fail?

Broader Connections

• Austrian school economists converted from gold standard to floating rates #corroborates (0.85) — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 431
• Early neoliberals favored the gold standard and opposed floating rates #qualifies (0.80) — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 428
• Friedman’s floating rate doctrine was partly a polemic against Keynesian flexible rate proposals #expands (0.75) — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 430