'That Devil from the West'!

This is an interesting interview of Milton Friedman:

The Romance of Economics, by Tunku Varadarajan, Commentary, WSJ: One doesn't interview a man like Milton Friedman -- the Nobel laureate in economics in 1976 and among the five or six most consequential thinkers of the 20th century -- without doing some assiduous homework.

So I gathered his books -- reading some, re-reading others -- and made pages and pages of notes. I also emailed several intellectual heavyweights, asking them what they might enquire of Mr. Friedman -- now 94 years of age -- if they had him cornered at a cocktail party. Replies flooded back. "Inflation targeting," wrote a (marginally) younger Nobel economist. "Education," said another Nobel laureate. "Does the recent record of spending with a Republican president and Congress make him reconsider his support for the party?" wrote a man who, until a while ago, worked on economic policy in the White House. "Is there something distinctly difficult for capitalism in the Islamic world?" wondered a Middle East scholar. "What music does he listen to?" a Democratic political economist mused, unpredictably. More predictably, a big-cheese blogger was "dying" to know whether "Milton reads blogs -- and will he ever write one?"

Everyone had a question -- and many had more than one (an economist in Chicago had 10). For Milton Friedman is everyone's idea of an American oracle, an American sage.

Sages, of course, have their oddities, and the interview last week -- at Mr. Friedman's surprisingly petite office at the Hoover Institution, on the campus of Stanford University -- got off to a surreal beginning. By his desk hangs a map of Belize -- one of those stylized souvenirs made of cloth, embroidered to catch the eye. Why, I asked him, did he have a map of Belize on his wall? Mr. Friedman turned, looked at the object, and said: "I don't know. I really don't know." Not a good start to the interview, some might say; so I asked, by way of ice-breaker, whether he was keeping well. "Oh, yes!" was the spirited reply...

[W]e moved to economics, and here I made a reflexive apology for not being an economist myself. "You mean you're not a trained economist," was Mr. Friedman's comeback. "I have found, over a long time, that some people are natural economists. They don't take a course, but they understand -- the principles seem obvious to them. Other people may have Ph.D.s in economics, but they're not economists. They don't think like an economist. Strange, but true."

Was Keynes a "natural economist"? "Oh, yes, sure! Keynes was a great economist. In every discipline, progress comes from people who make hypotheses, most of which turn out to be wrong, but all of which ultimately point to the right answer. Now Keynes, in 'The General Theory of Employment, Interest and Money,' set forth a hypothesis which was a beautiful one, and it really altered the shape of economics. But it turned out that it was a wrong hypothesis. That doesn't mean that he wasn't a great man!"

It cannot be said of too many economists that they "altered the shape of economics." Would Mr. Friedman say -- modesty aside -- that he was one of them? A long silence ensued -- modesty, clearly, was hard to put aside -- before he mumbled, as if squeezing words out of himself, "Er . . . very hard to say . . ." And then he was saved by the belle: The door opened, and in walked Rose, his wife, bringing a waft of panache into the drab office...

Mrs. Friedman settled herself in a chair, her eyes twinkling, and my questioning resumed. If they were to throw a small dinner party ... for Mr. Friedman's favorite economists (dead or alive), who'd be invited? Gone was his tonguetied-ness of a moment ago, as he reeled off this answer: "Dead or alive, it's clear that Adam Smith would be No. 1. Alfred Marshall would be No. 2. John Maynard Keynes would be No. 3. And George Stigler would be No. 4. George was one of our closest friends." ...

The spark between the Friedmans is clear, and rather touching. So I'm tempted to ask whether there is a romantic side to economics, in the way there is to history, or to philosophy. "Is there a romantic side to economics?" Mr. Friedman repeats after me, sounding incredulous, and then chuckling. "No, I don't think so. There's a romantic side to economics in the same way there's a romantic side to physics. Fundamentally, economics is a science, like physics, like chemistry . . . It's a science about how human beings organize their cooperative activities." Was that his preferred definition of economics? "Well, the standard definition is the study of how a society organizes its resources. In that sense, it's not particularly romantic."

Is immigration, I asked -- especially illegal immigration -- good for the economy, or bad? "It's neither one nor the other," Mr. Friedman replied. "But it's good for freedom. In principle, you ought to have completely open immigration. But with the welfare state it's really not possible to do that. . . . She's an immigrant," he added, pointing to his wife. "She came in just before World War I." (Rose -- smiling gently: "I was two years old.") "If there were no welfare state," he continued, "you could have open immigration, because everybody would be responsible for himself." Was he suggesting that one can't have immigration reform without welfare reform? "No, you can have immigration reform, but you can't have open immigration without largely the elimination of welfare.

"At the moment I oppose unlimited immigration. I think much of the opposition to immigration is of that kind -- because it's a fundamental tenet of the American view that immigration is good, that there would be no United States if there had not been immigration. Of course, there are many things that are easier now for immigrants than there used to be. . . ."

Did he mean there was much less pressure to integrate now than there used to be? Milton: "I'm not sure that's true . . ." Rose (speaking simultaneously): "That's the unfortunate thing . . ." Milton: "But I don't think it's true . . ." Rose: "Oh, I think it is! That's one of the problems, when immigrants come across and want to remain Mexican." Milton: "Oh, but they came in the past and wanted to be Italian, and be Jewish . . ." Rose: "No they didn't. The ones that did went back."

Mrs. Friedman, I was learning, often had the last word.

With Mr. Friedman, personal questions are often inextricable from the currents of history. How did he cope, I ask, with the great opposition to his views in and out of the economics profession during much of his active career? And how does it feel to have gone from being a person reviled in certain quarters as Evil, to one revered across the world?

Milton (suppressing a laugh): "I don't think I was ever regarded as 'evil.'" Rose (alluding to the protests that followed him everywhere, especially after he gave economic advice to the Pinochet regime): "It was very difficult to go to the colleges . . ." Milton: "I remember a fellow who came to see me from Harvard or somewhere . . . he wanted to see 'that devil from the West'!" Rose: "Harvard probably still feels that way!"

Here, Mr. Friedman explains "the story of the postwar period" in the U.S. "In 1945-46, intellectual opinion was almost entirely collectivist. But practice was free market. Government was spending something like 20%-25% of national income. But the ideas of people were all for more government. And so from 1945 to 1980 you had a period of galloping socialism. Government started expanding and expanding and expanding." Mr. Friedman stopped, as if deciding whether to use the word "expanding" a fourth time, before continuing: "And government spending went from 20% to 40% of national income.

"But what was happening in the economy was producing a reverse movement in opinion. Now people could see, as government started to regulate more, the bad effects of government involvement. And intellectual opinion began to move away from socialism toward capitalism. That, in my view, was why Ronald Reagan was able to get elected in 1980." I noted, here, that Mr. Friedman, too, had some role to play in this shift in opinion. He was, characteristically, reluctant to take any credit. "I think we have a tendency to attribute much too much importance to our own words. People saw what was happening. They wouldn't have read my Newsweek columns and books if the facts on the ground hadn't been the way they were." (Rose: "Oh, don't be so modest!")

Does it disappoint Mr. Friedman that the Bush administration hasn't been able to roll back spending? "Yes," he said. "But let's go back a moment. During the 1990s, you had the combination that is best for holding down spending. A Democrat in the White House and Republicans controlling Congress. That's what produced the surpluses at the end of the Clinton era, and during the whole of that era there was a trend for spending to come down. Then the Republicans come in, and they've been in the desert, and so you have a burst of spending in the first Bush term. And he refuses to veto anything, so he doesn't exercise any real influence on cutting down spending. In 2008, you may very well get a Democratic president" -- (Rose, interjecting: "God forbid!") -- "and if you can keep a Republican House and Senate, you'll get back to a combination that will reduce spending."

Mr. Friedman here shifted focus. "What's really killed the Republican Party isn't spending, it's Iraq. As it happens, I was opposed to going into Iraq from the beginning. I think it was a mistake, for the simple reason that I do not believe the United States of America ought to be involved in aggression." Mrs. Friedman -- listening to her husband with an ear cocked -- was now muttering darkly.

Milton: "Huh? What?" Rose: "This was not aggression!" Milton (exasperatedly): "It was aggression. Of course it was!" Rose: "You count it as aggression if it's against the people, not against the monster who's ruling them. We don't agree. This is the first thing to come along in our lives, of the deep things, that we don't agree on. We have disagreed on little things, obviously -- such as, I don't want to go out to dinner, he wants to go out -- but big issues, this is the first one!" Milton: "But, having said that, once we went in to Iraq, it seems to me very important that we make a success of it." Rose: "And we will!"

Mrs. Friedman, you will note, had the last word.

When I was younger, a little before the time I was going up for tenure, Friedman sent me a long, detailed letter about one of my papers (he liked it and his comments were, of course, insightful and helpful). I'm still amazed that he took the time to do that, he surely had plenty of other things he could have done with his time. But receiving that letter pretty much out of the blue provided a motivational boost just when I needed it and I'm grateful to him to this day for doing that. So, while I may not agree with 'that devil from the West' on every issue, I am going to let somone else argue against his point of view.

Update: PGL at Angry Bear follows up.

Comments

[No Name]

Milton did believe in Hayek, so it doesnt surprise me that he would put together free markets with personal freedom. It seems that can be true to a certain degree, but we still have a Fed and that is quite opposite of a free market.

As for Bush, the wars that he has pursued will be successful or not. I think what he counted on were people in Iraq wanting freedom and then things would snowball from there. Of course they want freedom, but it seems sometimes they want freedom for each other, kurds left alone in the north, shitte (2 i's or 2 t's. er) and sunni fighting for control.

And as for spending, he really let the ball down. Of course its always hard to turn the spigot off to people that will ultimately elect you in a year. I think the biggest failing of politics, which has been occuring for years, is the complete and utter lack of a long term perspective. The election process seems to make this worse, along with the risk aversion in Congress (just want to do enough to get elected and no more). I think the ultra short term perspective leads to the problems we have today. Watching the Fed testimony, at least on the Senate side, it was like, "please mr. fed chair dont screw up growth, we need growth, growth growth growth growth!!"

And another big mistake people seem to think, is they dont understand the concept of natural rate of output. Thats its impossible to go above that without negatives. And of course that we will end up right back where we started.

[Peter Bremen]

INDIVIDUAL FREEDOM IS LIMITED BY SOCIAL COOPERATION

Within the article, "The Devil From the West", this portion of an interview with Milton Friedman occurs:

"Is immigration, I asked -- especially illegal immigration -- good for the economy, or bad? "It's neither one nor the other," Mr. Friedman replied. "But it's good for freedom. In principle, you ought to have completely open immigration. But with the welfare state it's really not possible to do that. . . . She's an immigrant," he added, pointing to his wife. "She came in just before World War I." (Rose -- smiling gently: "I was two years old.") "If there were no welfare state," he continued, "you could have open immigration, because everybody would be responsible for himself." Was he suggesting that one can't have immigration reform without welfare reform? "No, you can have immigration reform, but you can't have open immigration without largely the elimination of welfare."

The particular subject is immigration (and welfare), yet the principles involved may be abstracted and applied to anything. Open immigration is destructive to a social group which has contracts, expressed or implied, to give help to any and all members of society. The principle behind this is that freedoms are limited by social cooperation.

The administrator of my high school used to say, "Your freedom to swing your fist stops where my nose begins." And he ought to have known, for he had been a boxer. He graphically illustrated how freedom is limited by social cooperation.

Human social groups have, either expressed or implied, some level of "welfare" for all members. Specifically, the interview brought up the topic of immigration in the USA. In this case, there is the expressed legal system which provides welfare help to all who fall below a certain standard of prosperity. Given that welfare exists, open immigration would be theft of the welfare system unless American society wanted to embrace the whole world and apply its welfare to any and all persons in the world. And why not?

Why not, as a nation, apply our "welfare", which is an expression of our society's willingness to ensure a minimum standard of living to each member of this society, to all persons throughout the world? The reason is that society also has a minimum moral requirement, expressed or implied, for membership. The moral requirement, in the USA, is expressed as a body of law. Any individual citizen, in order to remain a citizen, must keep the law. And the law is a mechanism by which this society attempts to guarantee that each member is contributing to the prosperity of society.

-Peter Bremen

[Bruce Wilder]

My favorite memory of Friedman was of his response to a young reporter, who pointedly asked him a question, an honest answer to which would have required admitting that externalities mattered, and Friedman's ideology was poorly thought out. It was quite a performance.

He was clearly a very smart man, but I never understood the rigid, and often ignorant ideology he embraced with such enthusiasm, until I read this interview.

Pussy-whipped. Clearly.

[hj]

Interesting. A Jewish intellectual couple. The wife obviously a hard line Zionist and warmonger. The husband more nuanced and wiser.

[cm]

Mark: Not to diminish anybody's significance, but the nimbus often attributed to "people of importance" is generally overrated. Why would Friedman have something better to do than reading an interesting (presumably) paper that had come to his attention? Do you have such a low opinion of yourself?

Our president has been known (rightly or wrongly) to eat pretzels (and choking on them) while watching sports on TV in his spare (?) time.

Not to suggest anything about other celebrities by that of course.

says...

hj, your anti-Semitic comments are a constantly insane blight on discussions.

[FR]

Anonymous wrote anonymously -

"hj, your anti-Semitic comments are a constantly insane blight on discussions."

I would call that anti-Zionist - not anti semitic.

says...

"The husband more nuanced and wiser."

Sure, that's really anti-semitic.

[cm]

Guys, save your breath. You are validating substanceless troll remarks by gracing them with a response.

[Christopher]

Very happy to see the interview upon opening the WSJ yesterday.
I commented on it here:
http://amateureconblog.blogspot.com/2006/07/wsj-interview-with-milton-friedman.html

[pgl]

OK, I just argued with one point - Milton's claim that the size of the government has doubled since 1946. See my Angrybear post for why I think he fell victim to rightwing spin.

[Carolyn Kay]

From Orlando Patterson:

"In the 20th century two versions of freedom emerged in America. The modern liberal version emphasizes civil liberties, political participation and social justice...

"But most ordinary Americans view freedom in quite different terms. In their minds, freedom has been radically privatized... Freedom, in this conception, means doing what one wants and getting one's way. It is measured in terms of one's independence and autonomy, on the one hand, and one's influence and power, on the other."
http://www.nytimes.com/2005/01/22/opinion/22patterson.1.html (now behind the pay curtain)

Most ordinary Americans have been brainwashed by more than 30 years of propaganda paid for by rich, right-wing elites.

Carolyn Kay
MakeThemAccountable.com

[MarkC]

"freedom has been radically privatized"

What the...? What kinda of communist propaganda is this?

On second thought. You're right. Private property has proven to be a radical notion (see Kelo). And the notion of privacy in general - phone records, medical records, etc. - has, for the greater good, got to go!

[anne]

Open link to Carolyn's reference of wonderful Orlando Patterson:

http://www.nytimes.com/2005/01/22/opinion/22patterson.1.html?ex=1264136400&en=fb11bd355083d626&ei=5090&partner=rssuserland

January 22, 2005

The Speech Misheard Round the World
By ORLANDO PATTERSON

Cambridge, Mass. — SINCE 9/11, President Bush and his advisers have engaged in a series of arguments concerning the relation between freedom, tyranny and terrorism. The president's inaugural paean to freedom was the culmination of these arguments.

The stratagem began immediately after 9/11 with the president's claims that the terrorist attacks were a deliberate assault on America's freedom. The next stage of the argument came after no weapons of mass destruction were found in Iraq, thus eliminating the reason for the war, and it took the form of a bogus syllogism: all terrorists are tyrants who hate freedom. Saddam Hussein is a tyrant who hates freedom. Therefore Saddam Hussein is a terrorist whose downfall was a victory in the war against terrorism.

When this bogus syllogism began to lose public appeal, it was shored up with another flawed argument that was repeated during the campaign: tyranny breeds terrorism. Freedom is opposed to tyranny. Therefore the promotion of freedom is the best means of fighting terrorism.

Promoting freedom, of course, is a noble and highly desirable pursuit. If America were to make the global diffusion of freedom a central pillar of its foreign policy, it would be cause for joy. The way the present administration has gone about this task, however, is likely to have the opposite effect. Moreover, what the president means by freedom may get lost in translation to the rest of the world.

The administration's notion of freedom has been especially convenient, and its promotion of it especially cynical. In the first place, there is no evidence to support, and no good reason to believe, that Al Qaeda's attack on America was primarily motivated by a hatred of freedom. Osama bin Laden is clearly no lover of freedom, but this is an irrelevance. The attack on America was motivated by religious and cultural fanaticism.

Second, while it may be implicitly true that all terrorists are tyrants, it does not follow that all tyrants are terrorists. The United States, of all nations, should know this. Over the past century it has supported a succession of tyrannical states with murderous records of oppression against their own people, none of which were terrorist states - Argentina and Brazil under military rule, Augusto Pinochet's Chile, South Africa under apartheid, to list but a few. Today, one of America's closest allies in the fight against tyranny is tyrannical Pakistan, and one of its biggest trading partners is the authoritarian Communist regime of China.

Third, while the goal of promoting democracy is laudable, there is no evidence that free states are less likely to breed terrorists. Sadly, the very freedoms guaranteed under the rule of law are likely to shelter terrorists, especially within states making the transition from authoritarian to democratic rule. Transitional democratic states, like Russia today, are more violent than the authoritarian ones they replaced....

[MarkC]

What does "The Speech Misheard Round the World" have to do with Friedman and privatization?

[Gabriel Mihalache]

Oh, I just love it when a distinguished member of the profession, with more technical achievements to his name than most, gets to be criticise by anonymous propagandist leftist trolls. That just makes my day. ;-)

Also, considering his thoughts on political philosophy, externalities may or may not matter. The entire issue is overrated. People don't know with which weird stuff to come up next to justify their pet project socialist interventionism...

[Wow]

Gabriel, you are a genius. Externalities are overrated. So taking resources from the environment at a faster rate than they can grow back (making less resources available for future generations, a cost) doesn't matter. The black sludge now growing on the top of certain California mountains because of Chinese pollution, not to mention the countries closer to China, is virtually nothing. Global warning is overrated as well. If you were to internalize the costs of entire cities under water, it wouldn't destroy any free market theoretical model. No, they'd be a blip on the screen. Or the effects of the financial markets, people making money by manipulating currencies, have on entire countries and democracies. Just amazing. Faceless posters who sweep aside entire arguments with platitudes.

[bzqed9r]

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