Re-Remembering Milton Friedman And The Choppers

Milton Friedman remains a touchstone in macroeconomics, even for those who disagree with his policy prescriptions.

So it is unfortunate that one of Friedman’s serious stimulus proposals, that of money-financed fiscal programs, is generally recalled in connection with his bantering about “helicopter drops.”

But let’s go back, way back, to the Friedman’s 1948 paper “A Monetary and Fiscal Framework for Economic Stability,” published in the American Economic Review. In his article Friedman argued for a balanced national budget at full employment, but for deficits during recessions, and perhaps surpluses in boom times.  Friedman contended issuing debt to finance government outlays, rather than taxes, would be less deflationary and more stimulative than just raising taxes and outlays together. And importantly, he pointedly added that it is “still less deflationary to issue money,” than to issue debt.

It was only later, in 1969, that Friedman broached the topic of money-financed fiscal programs with the phrase “helicopter money,” perhaps in deference to the doctrinaire and PC-fault lines that were coming to define monetary policy, and which continue to straitjacket thinking to this day.

Modern Contexts

In 2003 Ben Bernanke, former Fed Chief, again raised the topic of money-financed fiscal programs, this time safely pondering Japanese and not American, prospects. Miles from home, the emboldened Bernanke was addressing the Japan Society of Monetary Economics, when he suggested, “Consider for example a tax cut for households and businesses that is explicitly coupled with incremental BOJ purchases of government debt—so that the tax cut is in effect financed by money creation.”

More recently, Adair Turner, former chairman of the United Kingdom’s Financial Services Authority and former member of the UK’s Financial Policy Committee, has proposed the rather mangled analogy of “helicopter drops on a leash.”


More than 15 years after Bernanke addressed Japanese monetary policy thinkers, Japan is still below 1% inflation, though showing some signs of hope under Bank of Japan Governor Haruhiko Kuroda.

Europe’s real GDP is still below 2008 levels, while the United States has made some belated progress in the last 10 years, many citizens have seen a decade of substandard economic growth.  Wages are still in the doghouse.

Yet the conventional macroeconomics profession continues to insist that the “normal” primary tools of interest rates, budget deficits, and possibly quantitative easing are all that is needed, especially if married to consistent and clear PR jobs by central bankers.

The aversion to money-financed fiscal programs reminds me of the baseball manager who kept his .380 hitting clean-up batter benched, for those moments when he was really needed.

PS: Non-baseball fans, apologies. Akin to keeping the star football (soccer) striker on the bench until the fourth quarter.


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