There is a really interesting Q & A (hat tip, Freakonomics) with Milton Friedman (where Reagan and Thatcher looked for economic policy) at New Perspectives Quarterly. His comments on American monetary policy, the direction that China is headed, and the state of socialism are concise and informative. Read the whole thing, but here are some highlights:
NPQ: Does the large US fiscal deficit worry you?
Friedman: Not at all. It is the spending that got us there that worries me. If the US government spends 40 percent of the nation’s income, as it does through either borrowing or taxes, that income is not available for people to spend. The deficit is an indirect method of taxation. Of course, politicians prefer to borrow instead of tax because then someone down the road has to deal with the consequences. [Emphasis added]
NPQ: In the end, your ideas have triumphed over Marx and Keynes. Is this, then, the end of the road for economic thought? Is there anything more to say than free markets are the most efficient way to organize a society? Is it the “end of history,” as Francis Fukuyama put it?
Friedman: Oh no. “Free markets” is a very general term. There are all sorts of problems that will emerge. Free markets work best when the transaction between two individuals affects only those individuals. But that isn’t the fact. The fact is that, most often, a transaction between you and me affects a third party. That is the source of all problems for government. That is the source of all pollution problems, of the inequality problem. There are some good economists like Gary Becker and Bob Lucas who are working on these issues. This reality ensures that the end of history will never come.
Granted, the questions are obviously biased, (I don't think it is accurate to say that Friedman's theories have won out over Keynes') but Friedman's responses are definitely worth thinking about.