Milton Friedman: "I Think the Austrian Business-Cycle Theory Has Done the World a Great Deal of Harm"
This is from a 1998 interview with Milton Friedman:
EPSTEIN You were acquainted with the Austrian economist Friedrich Hayek and also are familiar with the work of Ludwig von Mises and his American disciple, Murray Rothbard. When you were talking about bad investments, you were alluding to Austrian business-cycle theory. A certain concept that has pretty much gone into our parlance and understanding fits in with what you said about what happened in Asia. There can be times and conditions in which the stage can be set for malinvestment that leads to recession.
FRIEDMAN That is a very general statement that has very little content. I think the Austrian business-cycle theory has done the world a great deal of harm. If you go back to the 1930s, which is a key point, here you had the Austrians sitting in London, Hayek and Lionel Robbins, and saying you just have to let the bottom drop out of the world. You’ve just got to let it cure itself. You can’t do anything about it. You will only make it worse. You have Rothbard saying it was a great mistake not to let the whole banking system collapse. I think by encouraging that kind of do-nothing policy both in Britain and in the United States, they did harm.
Milton Friedman explains role of gold in Great Depression.
http://youtu.be/O7pnjzCuSv8

In contrast, Murray Rothbard (who Ron Paul parrots when discussing economics) believes the great depression was caused by excessive money printing during the 20s.
Ron Paul on Rothbard and the Great Depression
http://youtu.be/l_Cdu0D9h0g
Murray Rothbard on Milton Friedman
http://www.youtube.com/watch?v=AenYS193 ... 03D113E3BC
Milton Friedman Unraveled
by Murray N. Rothbard
http://www.lewrockwell.com/rothbard/rothbard43.html
