Goodbye, Uncle Miltie

by Kieran Healy on November 16, 2006

Milton Friedman has died at the ripe old age of ninety four. Alex Tabarrok at Marginal Revolution writes a brief appreciation from the point of view of a fan. As Harry said around here only the other day, everyone should read Capitalism and Freedom at least once.

Update: The Milton Friedman Choir sings about corporations, markets and social responsibility. (Hat tip: CB.)

{ 48 comments }

1

bob 11.16.06 at 5:40 pm

you linked to the BBC twice, not to Tabarrok

2

John 11.16.06 at 5:44 pm

now just Pinochet and Thatcher to go…

3

Delicious Pundit 11.16.06 at 6:32 pm

As Harry said around here only the other day, everyone should read Capitalism and Freedom at least once.

And when it’s annotated with cartoons, I surely will.

4

Kieran Healy 11.16.06 at 6:33 pm

1: fixed.

5

Jordan 11.16.06 at 7:01 pm

I think john and delicious pundit would be wise to temper their cynicism of Milton Friedman’s work with the knowledge that good ideas are often used for less than noble ends. He did, after all, advocate giving money to the poor. Both Nietzsche and Plato are as responsible as anyone for the rise of Nazism. Should we rejoice in their deaths and wait for their works to be annotated with cartoons before we admire them?

6

novakant 11.16.06 at 7:04 pm

To be honest, I was a bit astounded that everybody’s hailing Friedman, from Gordon Brown to the liberal blogs. I’m no economist, but as a social democrat, Friedman’s policy advice stood for everything I always despised and I don’t think the majority of his ideas have lead to the greater good of all. Have I missed a convergence towards some undisputed consensus as far as modern economics are concerned? Are e.g. Keynsian economics hopelessly outmoded? I ask in good faith.

7

novakant 11.16.06 at 7:05 pm

oops “Keynesian”

I always liked “in the long run we’re all dead”

8

Christmas 11.16.06 at 7:55 pm

Both Nietzsche and Plato are as responsible as anyone for the rise of Nazism.

As responsible as, say, Hitler? I smell a bit of an overstatement.

9

Neel Krishnaswami 11.16.06 at 8:03 pm

novakant: Friedman was one of the key figures in ending the military draft in the US, argued forcefully for legalization of drugs, and was one of the first American economists to propose a basic income. Liberals and social democrats reliably disagree on many issues, but we also have significant common ground where we disagree with communitarians and authoritarians.

Keynsian economics as Keynes himself practiced it is outdated, but “New Keynesianism” (which takes rational expectations and microfoundations into acount) is alive and well.

10

r4d20 11.16.06 at 8:18 pm

Keynsian economics as Keynes himself practiced it is outdated, but “New Keynesianism” (which takes rational expectations and microfoundations into acount) is alive and well.

And one day it too will be slain…until neo-neo-Keynesianism is born. And so forth. Keynes is going to be around for a while, because even though he wasn’t ‘right’ he had key insights that are going to be relevent to future work for a long time to come.

11

thetruth 11.16.06 at 9:22 pm

He did, after all, advocate giving money to the poor.

This is enough, in your opinion, to mitigate his pilgrimage to sit at the feet of Pinochet? His talk of the “Miracle of Chile”, in which the number of people living in poverty increased to 40 percent from 20 during the reign of the dictator who implemented his policies? How cheap you must consider life to be.

12

Delicious Pundit 11.16.06 at 9:59 pm

Jordan: I don’t really have a dog in this fight, I just prefer my tbooks read to me while I look at cartoons.

13

Colin Danby 11.16.06 at 10:20 pm

“Keynsian economics as Keynes himself practiced it is outdated,”

Nope.
http://cepa.newschool.edu/het/schools/cambridge.htm
http://cepa.newschool.edu/het/schools/postk.htm
http://www.mesharpe.com/mall/results1.asp?ACR=PKE
http://www.e-elgar-economics.com/Bookentry_Main.lasso?id=2135
http://www.e-elgar-economics.com/Bookentry_Main.lasso?id=2353

“but “New Keynesianism” (which takes rational expectations and microfoundations into acount) is alive and well.”

True. But as Bruce McFarling once explained on the old PKT list, the “new” in “new classical,” “new Keynesian,” and “new institutionalist” should be read as an acronym for “no effing way.”

14

Time Spot Check 11.16.06 at 10:34 pm

Just need the time zone for posts…Thanks!

15

PoliticalCritic 11.16.06 at 11:09 pm

Milton Friedman was a great man. The Democrats would do well to read his thinking.

16

trueliberal 11.17.06 at 12:14 am

thetruth,

You fail to mention that the poverty rate of free-market Chile has plummeted to 18%.

You also fail to even consider the fact that before the coup, Allende had commandeered much of Chile’s economy, had engaged in Zimbabwe-like land seizures, had frozen prices, and induced runaway inflation of 140%. Do you think such economically suicidal idiocy would only have short-term effects?

Pinochet was a wicked man. But that doesn’t make Milton Friedman’s economic liberalism any less sensible, or dirigisme any less baleful.

17

thetruth 11.17.06 at 12:16 am

The Democrats would do well to read his thinking.

They already read it. Here’s what he advocated:

“the abolition of the minimum wage, the suspension of labor union rights, the privatization of the state pension system”

We already know the results. Here’s what happened:

“the national debt soared, income disparities widened, industrial growth slowed to a crawl, and unemployment reached as high as 43%. Meantime, spending on health care crumbled, as cases of hepatitis, diabetes and typhus rippled across the country”

Democrats assuredly do not need to “read his thinking” any longer. Democrats need to fight tooth and nail so the policies that he advocated, and that proved to be so murderous in other countries, are never adopted here.

Peoples’ lives depend on it. For many, those consequences pale in comparison to the benefits of adopting an ideology profitable to, oh, let’s say well-credentialed economics professors.

But that isn’t the Democrats’ constituency.

18

d 11.17.06 at 1:03 am

Zimbabwe-like land seizures

Oh, please. I know invoking Mugabe makes the claim sound more dramatic, but Latin American land reforms hardly resembled the overt corruption that characterized Zimbabwe’s expropriations.

19

Martin James 11.17.06 at 1:44 am

I was assigned Friedman’s book as a freshman in a cross-discipline humanities class.

I showed my mom the book. She was pretty disgusted and said why don’t they assign a real book like Wealth of Nations?

Gotta luv her.

20

adam 11.17.06 at 2:29 am

thetruth: Please provide some kind of source or at least name a country and a time period, because I don’t believe it.

21

Greg 11.17.06 at 2:45 am

Both Nietzsche and Plato are as responsible as anyone for the rise of Nazism.

This is off topic for this thread, but I can’t let this slide. Nietzsche was very much an opponent of German nationalism and would have had nothing to do with Hitler and his Nazi party. Please don’t throw around such tripe as though it’s recieved wisdom.

Kieran,

might the intellects vast and cool and unsympathetic tag be appropriate here?

22

thetruth 11.17.06 at 3:00 am

Please provide some kind of source or at least name a country and a time period, because I don’t believe it.

God damn. OK, try Google. Or Wikipedia. The local library would work as well.

What do you say to the people who excuse their inaction by their willful ignorance?

No, you are not excused.

23

~~~~ 11.17.06 at 3:37 am

“Pinochet was a wicked man. But that doesn’t make Milton Friedman’s economic liberalism any less sensible, or dirigisme any less baleful.”

Interestingly, Pinochet never undid Allende’s nationalization of the copper mines, and copper remained Chile’s primary export all through the miracle.

24

trueliberal 11.17.06 at 3:47 am

thetruth? 18% poverty? Chile, today? Hello?

Look at what Friedman’s kind of “murderous policies” have done for the infant mortality rate in pro-market China, the economic growth of post-Soviet Estonia, the standard of living in post-Thatcher Britain, and the ascent out of squalor of post-reform India.

Compare that with the achievements of the economic left’s “humanitarian policies” in Great Leap Forward China, the post-Bolshevik Revolution famine in Russia, the economic standstill of Marx-enamored post-war Britain, and the wretched poverty of License Raj India.

25

abb1 11.17.06 at 4:38 am

I see full analogy between the Friedman/Pinochet phenomenon and the marxist idea of dictatorship of the proletariat: authoritarianism is reqired to establish The Ideal Economic System in it’s pure form, because people are too stupid to know what’s good for them. Or, as Kissinger said: “I don’t see why we have to let a country go Marxist just because its people are irresponsible.”

26

Matt 11.17.06 at 4:41 am

Thankfully, ‘trueliberal’, the choice isn’t between Friedman’s views on the one hand and Mao’s and/or Stalin’s on the other. Should we consider, say, the massive famines in Norway? I guess there wern’t any, and they didn’t follow Friedman at all. No one here favors any of the views you put up as alternatives. That would strongly suggest that you’re presenting a strawman argument.

27

dsquared 11.17.06 at 4:54 am

Look at what Friedman’s kind of “murderous policies” have done for the infant mortality rate in pro-market China

The People’s Republic of Pro-Market China, that would be?

28

Chris Williams 11.17.06 at 5:16 am

I know I was just a kid at the time, but I seem to remember that the Tories quietly dropped the basic tenets of monetarism some time in the early 1980s. Cos they didn’t work when applied to the real world.

29

adam 11.17.06 at 9:03 am

thetruth: You’re the one who made the counterintuitive claim. I asked for information, which you refuse to provide, so I’m not willfully ignorant.

30

raj 11.17.06 at 9:15 am

A contrarian view of Friedman and his legacy/impact

http://commentisfree.guardian.co.uk/richard_adams/2006/11/post_650.html.printer.friendly

Note particularly the last three paragraphs.

31

Neel Krishnaswami 11.17.06 at 11:45 am

Colin: what’s the PKT list, and can you give a quick gloss on McFaling’s argument?

My own opinion is that the New Keynesians had the right idea when they suggested looking for non-clearing markets at the micro level. However, their particular suggestion of menu costs (ie, the costs of updating prices) seems very improbable to me. Instead, I think there are particular sectors (in particular, real estate) where prices trends over time really do exhibit significant momentum. (c.f. Robert Shiller’s time series for the US real estate market.)

32

Jordan 11.17.06 at 11:46 am

Greg,
Do you think that the Ubermensch had no influence at all on Nazi ideology? I know that the Nazis totally misinterpreted Nietzsche’s ideas, but that’s the point: good ideas can be hijacked and twisted. Same thing with Friedman.

As for ‘thetruth’, all I have is the anecdotal evidence of my family. When Salvadore Allende was in power, my mother and aunt waited in line for hours to get a loaf of bread to eat and saw people starve to death. After Salvadore Allende, this didn’t seem to be a problem.

33

Cory Mason 11.17.06 at 11:47 am

I too read Friedman and found, on the whole, his legacy to be wanting. However, I find it astonishing that politicans, educators, economists, and philosophers are debating the validity of just one of Friedman’s ideas: school vouchers. I strongly disagree with Friedman’s view of vouchers, but how many economists can claim their ideas have had such wide impact?

As someone interested in philosophy and the application of ideas in the political arena, you have to take your hat off to what Friedman for what he was able to accomplish in practical terms.
This little man and his ideas are credited with actual policies ranging from school vouchers, ending the draft, and the earned income tax credit, just to name a few. While the above critique on Friedman in relation to labor rights, minimum wages, and any social safety net are certainly justified, you have to respect his effectiveness.

I do think every Democrat and other thinking people should read Capitalism and Freedom at least once, if for no other reason than to understand how a view of freedom, misguided as I think it may be, is used as a trump card for justice and equality.

But on the day after his death, let’s give the man his due as an economist with a legacy (both intellectually and practically) that will be here long after he’s gone.

34

illiberal 11.17.06 at 11:51 am

For trueliberal:

“In 1973, the year the General seized the government, Chile’s unemployment rate was 4.3%. In 1983, after ten years of free-market modernisation, unemployment reached 22%. Real wages declined by 40% under military rule.

In 1970, 20% of Chile’s population lived in poverty. By 1990, the year “President” Pinochet left office, the number of destitute had doubled to 40%. Quite a miracle.

Pinochet did not destroy Chile’s economy all alone. It took nine years of hard work by the most brilliant minds in world academia, a gaggle of Milton Friedman’s trainees, the Chicago Boys. Under the spell of their theories, the General abolished the minimum wage, outlawed trade union bargaining rights, privatised the pension system, abolished all taxes on wealth and on business profits, slashed public employment, privatised 212 state industries and 66 banks and ran a fiscal surplus.

Freed of the dead hand of bureaucracy, taxes and union rules, the country took a giant leap forward … into bankruptcy and depression. After nine years of economics Chicago style, Chile’s industry keeled over and died. In 1982 and 1983, GDP dropped 19%. The free-market experiment was kaput, the test tubes shattered. Blood and glass littered the laboratory floor. Yet, with remarkable chutzpa, the mad scientists of Chicago declared success. In the US, President Ronald Reagan’s State Department issued a report concluding, “Chile is a casebook study in sound economic management.” Milton Friedman himself coined the phrase, “The Miracle of Chile.” Friedman’s sidekick, economist Art Laffer, preened that Pinochet’s Chile was, “a showcase of what supply-side economics can do.”

It certainly was. More exactly, Chile was a showcase of de-regulation gone berserk.

The Chicago Boys persuaded the junta that removing restrictions on the nation’s banks would free them to attract foreign capital to fund industrial expansion.

Pinochet sold off the state banks – at a 40% discount from book value – and they quickly fell into the hands of two conglomerate empires controlled by speculators Javier Vial and Manuel Cruzat. From their captive banks, Vial and Cruzat siphoned cash to buy up manufacturers – then leveraged these assets with loans from foreign investors panting to get their piece of the state giveaways.

The bank’s reserves filled with hollow securities from connected enterprises. Pinochet let the good times roll for the speculators. He was persuaded, as Tony Blair said this month in another context, “Governments should not hinder the logic of the market.”

By 1982, the pyramid finance game was up. The Vial and Cruzat “Grupos” defaulted. Industry shut down, private pensions were worthless, the currency swooned. Riots and strikes by a population too hungry and desperate to fear bullets forced Pinochet to reverse course. He booted his beloved Chicago experimentalists. Reluctantly, the General restored the minimum wage and unions’ collective bargaining rights. Pinochet, who had previously decimated government ranks, authorized a program to create 500,000 jobs. The equivalent in Britain would be a government program for 4 million workers.

In other words, Chile was pulled from depression by dull old Keynesian remedies, all Franklin Roosevelt, zero Margaret Thatcher. (The junta even instituted what remains today as South America’s only law restricting the flow of foreigncapital.)”

http://www.gregpalast.com/tinker-bell-pinochet-and-the-fairy-tale-miracle-of-chile

35

abb1 11.17.06 at 1:17 pm

I do think every Democrat and other thinking people should read Capitalism and Freedom at least once, if for no other reason than to understand how a view of freedom, misguided as I think it may be, is used as a trump card for justice and equality.

I think it’s a bit unfair. The guy did allow for something called “neighborhood effect” – a loophole similar to “general welfare” clause in the US constitution. Theoretically, pretty much any government regulation and social program can be justified under this rubric. So, I don’t think Capitalism and Freedom is an extremist book.

His love for Pinochet’s junta is a different matter.

36

Colin Danby 11.17.06 at 4:45 pm

Neel: PKT is the legendary Post Keynesian Thought e-list, now defunct. I was just passing on Bruce’s little joke. As I’m sure he would agree there’s smart and interesting work going on under the “New Keynesian” banner. It’s just not clear what makes it particularly Keynesian.

My main point was that there is flourishing scholarship around Keynes and Post Keynesian thought, work which should be distinguished from the “hydraulic” Keynesianism of the textbooks as well as from “New Keynesianism.” Hyman Minsky’s work is one introduction to it.

Along the lines of our main thread I can recommend _Milton Friedman’s Monetary Framework: A Debate with His Critics_ (Chicago 1975) one of whom is prominent Post Keynesian theorist Paul Davidson.

37

trotsky 11.17.06 at 5:14 pm

Hey, “Understand Marx” by the Economics Rock & Roll Band is also pretty catchy: tinyurl.com/yz5556.

38

radek 11.17.06 at 6:49 pm

This is from Makiw’s essay:

he wrote, “I do not regard it evil for an economist to render technical economic advice to the Chilean government to help end the plague of inflation, any more than I would regard it as evil for a physician to give technical medical advice to the Chilean government to end a medical plague.” He also notes that years later, when he offered similar economic advice to China, there were no similar protests, even though the left-wing Chinese dictators were no less oppressive than Pinochet.

39

Andrew Reynolds 11.17.06 at 8:20 pm

radek,
Certainly the “…Chinese dictators were no less oppressive than Pinochet.” They probably have more deaths on their hands in a quiet year than Pinochet and most other tinpot dictators do in their entire careers.

40

trueliberal 11.17.06 at 9:00 pm

illiberal,
Giant sudden reforms create economic shocks. And in the short term, markets hate shocks. But despite the back-pedaling you cite, Chile remained largely a liberalised economy. The privatised industries stayed privatised, the abolished price controls stayed abolished. That remains true today. Chile is at the same time the most liberalised and the most successful economy in Latin America today. I cannot believe that that is just a coincidence.

41

Greg 11.18.06 at 12:06 am

Jordan,

To answer that we would first have to agree on what to take as an authoritative account of what Nazi ideology actually was. If we say that it comes solely from Hitler, then no, I don’t think Nietzschean philosophy would have been important in the forming of his ideology. First, they disagreed on some crucial points. Nietzsche was not an anti-semite and certainly not a German nationalist. Further, Hitler was a Christian and would have been deeply offended by some of N’s more vitriolic attacks on that religion.

It’s a little crass (though not uncommon) to pick a single point that seems similar and to declare one’s influence on the other. I’ve simply seen no convincing evidence that Hitler read much if any of N’s work (WP doesn’t count – it was too much of a hackjob by his sister.)

42

neil 11.18.06 at 9:07 pm

To me, the most repugnant and clearly anti-freedom aspect of Friedman’s attitude towards Chile is that attitude, reflected by trueliberal, that the dictatorship is solely responsible for the good things that are happening now. Friedman even had the incredible gall to say that Pinochet’s economic reforms provided the impetus for democracy in Chile, when in fact Pinochet was responsible for the longest break in democratic rule in Chile since it was owned by Spanish kings.

43

radek 11.18.06 at 11:51 pm

Here’s Bryan Caplan quoting Ben Bernanke on Milton Friedman and the Great Depression:

Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.

Yes, a legacy.

44

the truth 11.19.06 at 2:18 am

With respect to the nonsensical Nietzsche comment:

If i am an advocate of misogyny and sexism and enjoy raping women and i said that i received such extraordinary insights about the opposite sex from Shakespeare what might be your response?

Can you conclude that Shakespeare is just as guilty as anyone of providing the fuel for my fire?

Such nonsense is not worth the 0s and 1s.

45

Dr. Weevil 11.19.06 at 5:47 pm

‘illiberal’ (comment 34):

“In 1970, 20% of Chile’s population lived in poverty. By 1990, the year ‘President’ Pinochet left office, the number of destitute had doubled to 40%. Quite a miracle.”

Quite a dishonest quotation, too. Pinochet didn’t seize power until late in 1973. From 1970 to 1973, Allende was in charge. Given the disastrous effects of his economic policies (e.g. triple-digit inflation), it seems likely that the poverty rate went up in those years. How much of the increase in poverty can be attributed to Allende and how much to Pinochet? I don’t know: perhaps ‘illiberal’ can tell us.

46

Kristjan Wager 11.20.06 at 2:33 pm

Here is a good overall summary of the effect on Chile. As the numbers on that page shows, the wages went down during Pinochet, so it would seem likely that poverty rates would increase at the same time.

47

engels 11.21.06 at 12:47 pm

I don’t know: perhaps ‘illiberal’ can tell us.

Perhaps Weevil can tell us how many people Allende “disappeared”.

48

Dr. Weevil 11.21.06 at 1:09 pm

Perhaps ‘engels’ can tell us why he uses the name of a man whose intellectual heirs ‘disappeared’ 10,000 times more people than Pinochet did. Or perhaps he could just try not to change the subject, which was not Pinochet’s brutality (unquestioned by anyone on this thread, or anyone I know, for that matter) but his economic policies.

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