Egill Helgason’s interview with economist Gunnar Tomasson in English at Mises.org. Very insightful and educational.
Egill:
Does this mean that generations of students have been brought up on nonsense ideology? For this is ideology, of course.
Gunnar:
Yes, nonsensical ideology. The root of the problem goes back to a point made in the mid-19th century by John Stuart Mill, one of the sharpest minds of all time, in an overview article on unresolved methodological aspects of economics. Mill viewed economics as a branch of logic and noted that the least error in the premises of any logical argument would infect with like error the whole superstructure built thereon. A seemingly small error is embedded in the premises of modern monetary economics. Paul Samuelson noted it very briefly in his Ph.D. thesis in 1942 and said it didn’t matter. Today, this small error is destroying the world’s monetary system.
Egill:
I remember that you have mentioned in your writings both leverage and currency speculation, the lack of supervision and other things in that connection.
Gunnar:
The things we are now witnessing in world financial markets have in fact been ongoing and evolving ever since the fall in the early 1970s of the Bretton Woods system, which was established by the victors at the end of World War II to prevent recurrence of monetary problems associated with the Great Depression. The fall of the Bretton Woods system ushered in anarchy in the international monetary system. At the time both Paul Samuelson and Milton Friedman were columnists for Newsweek and both applauded the new world monetary order. I wrote to both of them at the time and expressed a different view. But there is no point taking on founding fathers of so-called schools where people simply take it on faith that their gurus know what they are talking about. Paul Samuelson is the one who laid the theoretical foundation for this systemic anarchy. Milton Friedman then provided the emperor’s new clothes, dressing it in the garb of neoliberalism. That is how these two leading figures in American economic thought were united in unleashing on the world community the system that has now collapsed.
