Furthermore, the policy of Quantitative Easing - which takes us beyond the New Keynesian framework - was what Friedman explicitly suggested for Japan. And in New Keynesian models, monetary policy reigns supreme only at the zero lower bound is monetary policy possibly ineffective.

New Keynesian models use consumption smoothing, monetary policy rules, and a NAIRU with a downward-sloping short-run Phillips curve - all Friedman ideas. Friedman's ideas are pretty close to the mainstream New Keynesian idea of the macroeconomy - the kind of thing promoted by Mike Woodford, Smets and Wouters, Greg Mankiw, and Miles Kimball. Noah Smith writes that Friedman hasn't disappeared from policy discourse he's disappeared from right-wing policy discourse. Hayek, for example, argued that “we may perhaps prevent a crisis by checking expansion in time,” but “we can do nothing to get out of it before its natural end, once it has come.” But if markets can go so wrong that they cause Great Depressions, how can you be a free-market true believer on everything except macro? Paul Krugman writes that one way to think about Friedman is that he was the man who tried to save free-market ideology from itself, by offering an answer to the obvious question: “If free markets are so great, how come we have depressions?” Until he came along, the answer of most conservative economists was basically that depressions served a necessary function and should simply be endured.

The disappearance of Friedman’s role in conservative economic discourse Although it quickly appeared that the statement did not apply to Friedman, the economist, but to Friedman, the guiding light for conservative economic policies (see for example his influential Free to Choose TV series), the discussion continued as to whether the Great Recession had given a serious hit to Friedman’s economic analysis. What’s at stake: What started as a series of post by David Glasner on the legacy of Milton Friedman turned into a major dispute after Paul Krugman wrote that “historians of economic thought will regard him as little more than an extended footnote”.

Milton friedman free to choose series