I recall on one particular video regarding inflation vs. deflation that Friedman conducted a study once that showed that a modest 2-3% deflation per year would be more beneficial to businesses, consumers, etc. than a steady 3% inflation per year. That said, Friedman rejected his own study and insisted on 3% inflation per year.
Does anyone know where I can find this study or if it even exists (I realize he may have destroyed it or refused to publish it since it went contrary to his regular theories)?
Milton Friedman and Anna J. Schwartz, in reference to the period
from 1865 to 1879 in the United States, during which practically no
increase in the money supply occurred, conclude that,
56Milton Friedman and Anna J. Schwartz, in reference to the period
from 1865 to 1879 in the United States, during which practically no
increase in the money supply occurred, conclude that,
[T]he price level fell to half its initial level in the course of less than fifteen years and, at the same time, economic growth proceeded at a rapid rate. . . . [T]heir coincidence casts serious doubts on the validity of the now widely held view that secular price deflation and rapid economic growth are incompatible. (Milton Friedman and Anna J. Schwartz, A Monetary History of the United States 1867–1960 [Princeton, N.J.: Princeton University Press, 1971], p. 15, and also the important statistical table on p. 30)
[T]he price level fell to half its initial level in the course of less
than fifteen years and, at the same time, economic growth
proceeded at a rapid rate. . . . [T]heir coincidence casts serious
doubts on the validity of the now widely held view that secular
price deflation and rapid economic growth are incompatible.
(Milton Friedman and Anna J. Schwartz, A Monetary
History of the United States 1867–1960 [Princeton, N.J.: Princeton
University Press, 1971], p. 15, and also the important statistical
table on p. 30)
Hm. I can’t really think of anything I’ve seen where Milton promoted deflation. If I remember correctly, Milton always advertised the idea of steadily increasing the supply of money as the years go by. Are you sure you aren’t thinking of when he talked about deflation and recession as a way of balancing out the market after a long period of deficit spending?
If that study is out there, it would most likely be in reference to the years before the Great Depression because he saw what happened went the Federal Reserve let the money supply decrease too much.