M Friedman What A Difference A Decade Makes

To begin with, we might wonder at the earnestness of M Friedman’s opening lines which in 1952 must have rung so true but which barely a decade later world begin to lose resonance. Why would wartime production, consumption, and investment have to  be so different from their peacetime counterparts; but also, why might these differences already have begun to recede from view?

One of the leading contributing factors is undoubtedly the size of military (i.e., defense) outlays both as a percentage of GDP and relative to total public expenditures. In 1952 these must already had seemed exceptionally out of balance whether when compared to 1918 to 1940 or when compared to pre-1914 values.

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Whether measured in inflation-adjusted dollars or as a percentage of GDP, the volatility of the 1916-1918 period or the 1940-1947 period most, when viewed from their tails have seemed incalculable. Which is why the 1950-Present period looks, relatively speaking, quite calm and, well, easy to calculate and surely not very volatile.

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