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Thursday, January 25, 2007

Who Was Milton Friedman?

The New York Review of Books has:

Who Was Milton Friedman? by Paul Krugman

If I can find time later, I'll pull some excerpts. For now, here's how Krugman concludes the much longer essay on Friedman's economics and politics:

...In his 1965 review of Friedman and Schwartz's Monetary History, the late Yale economist and Nobel laureate James Tobin gently chided the authors for going too far. "Consider the following three propositions," he wrote. "Money does not matter. It does too matter. Money is all that matters. It is all too easy to slip from the second proposition to the third." And he added that "in their zeal and exuberance" Friedman and his followers had too often done just that.

A similar sequence seems to have happened in Milton Friedman's advocacy of laissez-faire. In the aftermath of the Great Depression, there were many people saying that markets can never work. Friedman had the intellectual courage to say that markets can too work, and his showman's flair combined with his ability to marshal evidence made him the best spokesman for the virtues of free markets since Adam Smith. But he slipped all too easily into claiming both that markets always work and that only markets work. It's extremely hard to find cases in which Friedman acknowledged the possibility that markets could go wrong, or that government intervention could serve a useful purpose.

Friedman's laissez-faire absolutism contributed to an intellectual climate in which faith in markets and disdain for government often trumps the evidence. Developing countries rushed to open up their capital markets, despite warnings that this might expose them to financial crises; then, when the crises duly arrived, many observers blamed the countries' governments, not the instability of international capital flows. Electricity deregulation proceeded despite clear warnings that monopoly power might be a problem; in fact, even as the California electricity crisis was happening, most commentators dismissed concerns about price-rigging as wild conspiracy theories. Conservatives continue to insist that the free market is the answer to the health care crisis, in the teeth of overwhelming evidence to the contrary.

What's odd about Friedman's absolutism on the virtues of markets and the vices of government is that in his work as an economist's economist he was actually a model of restraint. As I pointed out earlier, he made great contributions to economic theory by emphasizing the role of individual rationality—but unlike some of his colleagues, he knew where to stop. Why didn't he exhibit the same restraint in his role as a public intellectual?

The answer, I suspect, is that he got caught up in an essentially political role. Milton Friedman the great economist could and did acknowledge ambiguity. But Milton Friedman the great champion of free markets was expected to preach the true faith, not give voice to doubts. And he ended up playing the role his followers expected. As a result, over time the refreshing iconoclasm of his early career hardened into a rigid defense of what had become the new orthodoxy.

In the long run, great men are remembered for their strengths, not their weaknesses, and Milton Friedman was a very great man indeed—a man of intellectual courage who was one of the most important economic thinkers of all time, and possibly the most brilliant communicator of economic ideas to the general public that ever lived. But there's a good case for arguing that Friedmanism, in the end, went too far, both as a doctrine and in its practical applications. When Friedman was beginning his career as a public intellectual, the times were ripe for a counterreformation against Keynesianism and all that went with it. But what the world needs now, I'd argue, is a counter-counterreformation.

Update: From email, more on Milton Friedman:

Hi Mark,

I am writing to you because I thought you and your blog readers and students might appreciate hearing about this. “Milton Friedman Day” will be celebrated next Monday, January 29 and The Economist will pay tribute to the famous and highly influential economist by hosting an online discussion with prominent economists and officials such as Leo Melamed, Ben Stein and Governor Arnold Schwarzenegger.

Beginning today, members of the public are invited to engage in the spirited discussion by submitting their their questions to Free Exchange, The Economist’s economics blog, moderated by Megan McArdle. To join please visit: http://www.economist.com/debate/freeexchange/.

And, while I'm at it, here's another email:

Dear Mark,

In my efforts to keep you updated, I’m happy to tell you that Governor Schwarzenegger and Mayor Newsome have declared Milton Friedman Day in California and San Francisco.  I’ve included the press release below.

Also, your readers might like to know about the activities going on at Economist.com and the video contest on YouTube, both outlined in the press release...

STATE OF CALIFORNIA AND CITY OF SAN FRANCISCO BOTH DECLARE JANUARY 29, 2007 TO BE MILTON FRIEDMAN DAY

Governor Schwarzenegger and Mayor Newsome Join the City of Chicago and Partners in Honoring The Nobel Prize-Winning Economist and his Work with a Day of Remembrance

Events Include Web-based Discussion Hosted by The Economist, a Day of National Debate at Universities across the Country, You Tube Video Contest, and National PBS Broadcast of “The Power of Choice: The Life and Ideas of Milton Friedman”

Stanford, California – January 23, 2007 – Governor Arnold Schwarzenegger and Mayor Gavin Newsome yesterday announced that they were declaring Monday, January 29th, to be Milton Friedman Day in the State of California and in the City of San Francisco.  In making these proclamations, the Governor and Mayor join the City Council of Chicago, Mayor Richard M. Daley, The University of Chicago, The Chicago Mercantile Exchange, The Economist, Free to Choose Media, and more than two dozen partner organizations in declaring the 29th as a day of remembrance honoring the Nobel-Prize-winning economist.

The announcements were made yesterday afternoon by Governor Schwarzenegger, in person, and by Mayor Newsome, via a letter read by John Raisian, director of the Hoover Institution.  The proclamations were read at the Hoover Institution’s memorial service honoring Dr. Friedman, held at Stanford University’s Memorial Hall.

In his proclamation, Governor Schwarzenegger stated: “Milton Friedman helped restore our faith in the freedom of the individual to choose in every sense of the word – political, economic and social – and was devoted to the simple idea that we are responsible for our own lives, to live them as we see fit as long as it does not violate the liberty of others.”  To see the full text, please visit http://gov.ca.gov/index.php?/proclamation/5205/ .

On Milton Friedman Day, Monday, January 29, 2007, at 10:00 p.m. ET (check local listings), PBS will premiere “The Power of Choice: The Life and Ideas of Milton Friedman,” an exclusive documentary on the remarkable life and visionary ideas of the 1976 Nobel Laureate in economics.  The special, produced for PBS by Free to Choose Media, will give viewers a new understanding of the magnitude of this legendary economist’s influence on the modern world.  More on this PBS program is available at: www.freetochoosemedia.org.

At 2 p.m. on Monday, January 29, The University of Chicago and the Chicago Mercantile Exchange will host a memorial service at the University’s Rockefeller Chapel to honor the Nobel prize-winning economist’s impact on the economy and spread of freedom.  For more on this event visit: http://www-news.uchicago.edu/releases/07/070122.friedman.shtml.

In addition, You Tube will host a “Challenge the Status Quo” video contest in honor of Friedman.  The contest, sponsored by Izzit.org. and the Idea Channel, is open to anyone who is interested in producing a video in the spirit of Dr. Friedman, whose passion in life was challenging the status quo.  Cash prizes will be offered to the first, second and third place winners.  For more information, visit http://www.youtube.com/group/statusquo .

Finally, The Economist’s blog, Free Exchange, will host an online discussion with prominent economists and political leaders from around the world on the legacy of the late Milton Friedman, from January 25 through January 29. Free Exchange visitors will have the opportunity to read postings from these guest bloggers and post their own responses, reactions and questions about the impact of Dr. Friedman’s work.  For more on this online event visit: www.economist.com/debate/freeexchange/index.cfm.

Additional organizations hosting services, special events, and online activities, or promoting “Milton Friedman Day” include: the American Economics Association, the Manhattan Institute, The Heartland Institute, The Milton & Rose D. Friedman Foundation, the Association of Private Enterprise Educators, Cascade Policy Institute, the Fund for American Studies, the Minaret of Freedom Institute, The State Policy Network, Atlas Economic Research Foundation, Acton Institute, Economic Thinking, the Reason Foundation and the Alabama Policy Institute, as well as several universities, including Rutgers, Florida State, San Jose State and Central Tennessee State.  A full schedule of events is posted at www.miltonfriedmanday.org.

    Posted by on Thursday, January 25, 2007 at 10:50 AM in Economics | Permalink  TrackBack (0)  Comments (23)

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