Milton Friedman: The Ambiguous Achievement of a Positive Economist
Ignatius, David
Milton Friedman: The Ambiguous Achievement of a Positive Economist by David Ignatius When art historian Bernard Berenson first brought his wife. to Florence, he led her blindfolded past the...
...Friedman explains...
...This evidence (supported by a Friedman paper published the same year) seemed to validate Friedman’s basic theoretical argument that the money supply is a more reliable determinant of GNP than Keynes’ key variables, investment and government spending...
...Most important, she shared her husband’s political views, and helped sustain him in the years when Friedman was considered something of a pariah in the profession...
...By contrast, Milton Friedman spent the 1930s scrambling to win scholarships and later trying, without success, to win a teaching job...
...There is a slow pace of life...
...Galbraith, for example, is highly literate and skilled at self-promotion, and as a result he has a wide public following...
...This would leave him unencumbered in later years, when the lessons became codified...
...The next year, he returned to teach at Chicago and began in earnest his drive for recognition as a theorist...
...Science Y. Influence What has troubled economists most about the rise of monetarism in the last decade is the discrepancy they note between Friedman’s careful, journal-article-monetarism and the diluted, popularized version which has been so influential...
...At about the same time, he began his statistical investigations of the cyclical behavior of the money supply-which would later yield his most important work...
...The Democrats could be blamed for causing the mess, he told Nixon...
...The book is best understood as an attempt to debunk what Friedman viewed as the myth of the Great Depression...
...There seems to be a failure of imagination in Friedman, an inability to hear the screams of the victims and to realize that there are times when one must scream in protest...
...He worked hard in school and won a $300-a-year scholarship to Rutgers University...
...But at a certain point in his career, he recognized that in the enterprise of theory-making, clever promotion is essential...
...Louis Federal Reserve Bank and helped make it a bastion of his former student’s monetarist analysis...
...Moreover, the apparent effforts of the monetary authorities to restore prosperity had no effect on the capricious market...
...Similarly, Paul Samuelson argues that “a key reason for the growing acceptance of monetarism is Milton Friedman himself...
...Even the notion that God worked His will through the price mechanism would not have seemed far-fetched 200 years ago...
...But I think her husband was probably right...
...When Friedman was safely out of Cambridge, Mrs...
...After 20 years of Friedman attacks on the irrationality of fixed rates, most of the industrial countries have adopted a flexible rate scheme...
...We can even see Friedman’s ideas at work in the current debate over New York City’s fiscal crisis...
...Had Friedman joined the Nixon Administration, the economic history of the last seven years might look very different...
...He traveled the lecture circuit, presenting the public with a highly simplified version of his theory...
...Technismo’ In his early published work, Friedman groped for a response to Keynesian policies and towards a formulation of his own monetary theory...
...In response to demands from Friedman’s supporters, the Federal Reserve now publishes regular reports on the growth of the money supply, and implicitly measures its performance by Friedmanite criteria...
...But when you draw up a list of exciting economic ideas in the last two decades, it’s hard to think of one that isn’t Friedman’s...
...Samuelson has been quoted as saying some rather nasty things about Friedman: that in his desire to be a “big swinger” in economics, he engages in “intellectual tightrope walking...
...Serious” historians, for example, distain the work of a popular historian like Arthur Schlesinger in favor of studies of intergenerational mobility in English villages of the 17th century...
...Only the sick ones turn this early,” he said...
...The Age of Friedman Friedman’s attack has been successful enough that even his enemies grant that the Age of Keynes is over...
...David Ignatius is an editor of The Washington Monthly...
...When Friedman visited Cambridge for a year in the 1 9 5 0 ~he~ m ade a point of attending Robinson’s courses, interrupting often to ask pointed questions about Keynesian theory...
...I find myself happiest in the company of others, and long for the day when public institutions-and the collective life they make possible-earn back our respect...
...Some argue that they were attributed to him by his interpreters...
...Friedman is a brilliant economist, perhaps the cleverest theorist working in America today...
...Another prominent economist predicts that “when Milton dies, the crowd will turn with knives on many of his theories...
...But to the general public, Friedman is one of the few economists who talks in a language that can be understood...
...One of his teachers at Rutgers was Homer Jones, who later became research director of the St...
...More important, he forgets that his story does not prove that everyone can “make it...
...Like machismo, it breeds a destructive sort of competition...
...When a Friedman, a Ford, or even a Jerry Brown of California, attacks the folly of government spending, one senses an underlying argument that collective institutions like government can never make a positive difference in the lives of individuals...
...The anxieties of competition, the bitterness it induces between individuals, the sense of purposelessness working at a job which the market selects as “rewarding,” the self-disgust often felt by those who have succeeded in climbing over their fellows to the top and find, suddenly, at 45, that they have lost their spouse’s love and children’s respectall these widely held feelings should caution us against ratifying selfishness as the pervasive principle of our economic life...
...This may sound like sour grapes, but it points up a serious dilemma in economics...
...But he is “innumerate,” and shies away from “technismo” combats...
...Two Cheers for Friedman With Gerald Ford trumpeting the free market from the Oval Office, Friedman disciple Alan Greenspan heading the Council of Economic Advisers, and Treasury Secretary William Simon warning at every opportunity that government spending is taking us down the road to socialism, footfalls of the Age of Friedman will be with us at least until January 1977...
...The enlightened reason of public officials should be imposed upon the anarchy of unregulated commerce...
...When the private market is sluggish, the government should increase its deficit spending...
...In this perfect world, each disturbance of equilibrium would set in motion a search for a new set of market-clearing prices, and a new equilibrium...
...Leon Walras, the French economist whc developed the mathematical techniques to represent the operation of a market economy, liked to think of the price system as an “auctioneer”-a supernal individual hovering over a great trading floor, shouting out quotations by the millisecond, urging buyers and sellers of every commodity toward agreement...
...In 1945, Friedman finally landed a full-time academic post, at the University of Minnesota...
...He is an admirable man...
...Economists tend to feel the same romantic devotion to the price system, and if the analogy seems trivial, consider the following problem: A hypothetical economy contains an infinite number of producers, producing an infinity of goods, likewise an infinite number of consumers, each with a unique set of consumption preferences...
...A Devout Capitalist More than most economists, Milton Friedman believes in the price system...
...But the real point is not an historical, or even an intellectual one...
...Many prominent economists would agree with him that existing economic policies are bankrupt...
...Friedman wasn’t interested...
...Arthur Bums is now Chairman of the Board of Governors of the Federal Reserve, and according to an aide, “much too busy” to reminisce about the 1930s...
...Keynes spent his mornings in bed during the 1930s, scanning the stock market pages for the investments which made him and King’s College, Cambridge, of which he was Bursar, very rich...
...Friedman made these comments on a brisk September afternoon at the house in Vermont where he spends half the year...
...Friedman’s overstrong formulations slowed me down in the work of discussing money,” he says...
...when the private market is booming, then government spending should be lowered or taxes increased...
...The young Friedman believed that he was embarked on a scientific investigation of economic behavior...
...For Friedman it was merely an empirical observation, one of thousands which help him make sense of the way the world works...
...It was Rose who urged Friedman to write his popular statement of “classical liberalism,” Capitalism and Freedom...
...The rest of us are not so gifted and are likely to see the lack of political realism in Friedman’s work as an important flaw...
...Like Keynes at Cambridge, he gathered together at Chicago a group of aggressive disciples and encouraged them to proselytize the new theories...
...He’s been there ever since...
...How strange it is that the modern exponent of the economic theology of these dour Anglo-Saxon merchants is a small, bumptious Jewish man by the name of Milton Friedman...
...He was approached about the possibility of heading up the Nixon Administration’s Council of Economic Advisers...
...In the years after 1963, Friedman followed Keynes along the road to celebrity...
...I wonder, too, after spending some time with the man and his works, whether Friedman correctly interprets some of the lessons of his own life...
...Most academic disciplines have something similar...
...I wish I could conclude with a ringing affirmation of Milton Friedman and everything he stands for...
...Tobin, for example, believes that “aggressive promotion of theory has been important in influencing policy makers...
...His proposed reforms of subsidized educationthe voucher plan for primary and secondary schools and the education loan bank for colleges and universitieshave irked the education lobby...
...His Monetary History of the United States (co-authored with Dr...
...that his monetarist assault on the Keyensians is “like a man with a foil attacking a battleship...
...These early capitalists inhabited a new universe, without the soft Mediterranean curves of an earlier age, and they created a system of commerce as orderly and unsentimental as the God they worshipped...
...He believes that the public is best served by the diligent efforts of individuals to make as much money as they can in the private market-and by the refusal of men like Milton Friedman to put their talents at the disposal of the government monolith...
...It’s had its day and is no longer working...
...For 30 years he has preached the gospel: only an unregulated market, with an unhindered price mechanism, can discipline us to produce and distribute goods efficiently without depriving us of our freedom...
...He advised an immediate end to goldconvertibility of the dollar and the institution of floating exchange rates...
...Instead, liberals are hearkening back to Friedman’s “classical liberalism” and its emphatic contrast of the creative power of a free market with the clumsy inefficiency of “Welfare State” government intervention...
...Reading his recent Newsweek exhortations to unleash the oil industry from government price controls, you begin to think that there are thousands of small oil producers out there, stifled by bureaucratic regulation...
...Something went very wrong during the Depression...
...Where monetarism differs from postKeynesian economics, it is usually wrong,” he observes...
...One might expect that such a dramatic personal experience of the private market’s irrational discrimination would have tempered Friedman’s political philosophy...
...Journalists, congressmen and academics can score easy points by kicking the nearest government bureaucrat...
...This failure of imagination is especially unfortunate in someone with so many good ideas...
...Louis model was the only one in the country putting out reliable forecasts-giving the rest of the profession a terrible scare...
...2. Government intervention can counteract the instability of the market...
...But when carried to the length Friedman does, the critique of big government becomes an attack on society itself-on the possibility and desirability of maintaining the collective institutions which make harmonious social life possible...
...But Milton Friedman has remained a devout capitalist...
...Robinson offered to split her lecture time with Friedman and let students ask questions of both at the end...
...The Monetary History also distilled Friedman’s theoretical critique of Keynes...
...All converge simultaneously on the marketplace, wares and shopping lists in hand...
...In a 1948 article in the American Economic Review, he called for the abolition of the Federal Reserve, arguing that its discretionary power over the money supply inevitably reflected errors of human judgment and thus created instability...
...He took a temporary teaching post for a year, then went to work at the Treasury, where he helped develop tax schemes to finance defense spending...
...Friedman turned to his old friend and teacher, Arthur Burns, who helped him find a job at the National Bureau of Economic Research, partly funded with government money...
...The road to celebrity was littered with discarded abstractions...
...Even Samuelson, whose textbook Economics has made him something of an arbiter of doctrinal debate, began to revise his evaluation of Friedman...
...Anna J. Schwartz) brought a new level of sophistication to the analysis of business cycles, and helped to revitalize the study of economic history...
...Its clockwork price mechanism is prey to the whims of investors and consumers, who have uncertain knowledge of the future and thus inadequate information to trade rationally in the marketplace...
...It was a sensible decision, for the work allowed Friedman to develop his technical skills as a statistician, and to increase his reputation...
...To an astonishing degree, Friedman’s political views animate the political life of the mid-1970s...
...If Friedman was right, the lesson of the 1930s was not the unreliability of the market, but the folly of government intervention...
...that the simultaneous incidence of inflation and recession requires that we rethink many of our economic ideas...
...In 1966 he began writing a regular Newsweek column, in which he tirelessly propounded a bare-bones monetarism...
...It predicted the future growth of GNP on the basis of changes in the money supply...
...Social responsibility’ is impossible in a competitive economy...
...Rarely, however, do they consider the possibility that the Age of Friedman is upon us...
...It didn’t...
...The Lessons of the 1930s The Friedmanite resurgence of confidence in the efficacy of the free market is remarkable...
...His cynicism toward big government has become infectious...
...For the student of economics, the first encounter with the Walrasian general equilibrium equations is a sublime experience: the thick scribble of algebra unfolds a calculation of that ideal moment in which all goods are sold and all desires satisfied...
...His colleagues may fault him for diluting his ideas and cheapening debate...
...Although there ,were a number of weak links in the argument, it was not greeted with a convincing refutation, but a stony silence from the Academy...
...Critics have spoken in emotional terms about the junta’s use of torture and the suffering of its victims, and they have asked how a decent man like Friedman could lend his efforts to such a regime...
...Such a tendency to ignore the real world often characterizes the theorist, whose genius allows him to rise above the mundane affairs of men to the level of god-like synthesis and abstraction...
...Do fixed exchange rates really stimulate trade...
...Friedman repeatedly warned against the erratic monetary course pursued by the Fed under Nixon...
...Friedman doesn’t seem to see that in reality there are a few gigantic oil companies-highly bureaucratic themselves-and that a loosening of government regulation would simply allow them to make more monopoly profit and wield political power with greater arrogance...
...Its principle achievement has not been the prevention of inflation and recession, but the encouragement of a disastrous combination of both...
...For although this sort of thinking dominated preKeynesian economics, the Age of Keynes was supposed to have rendered it obsolete...
...He also increased his attacks on intellectual opponents and his manipulation of the popular press...
...Another of his teachers at Rutgers was Arthur Burns...
...Had he been listened to, the recession of 1970-71, the inflation of 1973-74 and the current recession might all have been avoided...
...Does government regulation really protect the consumer...
...Robinson archly observed that, while an uncommonly clever fellow, the Chicago economist must be “insincere...
...Friedman was waiting in the wings with monetarism, and its forceful proposition that government can never ‘fine tune.’ ” John Kenneth Galbraith believes that Friedmanism has suffered from its success...
...During this time growing numbers of businessmen have found it convenient to accept government handouts and the rhetoric of public responsibility...
...Since it was cheaper to live at home, he commuted to the campus every day on the Pennsylvania Railroad...
...Two economists under Jones, Leonall Andersen and Jerry Jordan, meanwhile developed a full monetarist econometric model for the St...
...The comment might have seemed menacing from someone else-laden with overtones of Social Darwinism...
...This disdain for government is a prominent theme in our political life at present...
...This sounds supremely realistic, until you consider the society which selfishness has already created...
...Keynes’ own reputation as a theorist was not complete until he had become a media celebrity, capable of intimidating his critics...
...Indeed, that was the lesson of the entire economic history of the United States from 1867 to 1960...
...His Theory of the Consumption Function, an elegant piece of statistical research which solved a conceptual problem in the interpretation of consumption data, is now used in many econometric forecasting models...
...Economic theory tells us that there is only one major condition necessary to achieve this felicitous outcome: the pervasive and unhindered operation of the price mechanism...
...Insulated in a more important way than he had been at Rutgers, Friedman was encouraged not to learn the lessons of the Depression...
...This was the view of Joan Robinson, Keynes’ cup-bearer during the 1930s...
...Walras saw the entire system constantly “groping” toward a set of equilibrium prices which would clear the market in all goods...
...A partial list will suggest his impact...
...Friedman gave it a new name-the “Great Contraction” -and a radically new interpretation...
...By 1969, the St...
...The implication of this argument was staggering...
...But Friedman, like Keynes before him, is able to do both things well...
...Friedman is a very intelligent economist who has ‘fought for decades, against the arrogance of his colleagues, for what he believes in, without losing his kindness or his sense of humor...
...Most economists are forced to choose either a professional or lay audience...
...But that’s not all they’re doing...
...By maintaining steady growth of the money supply, the government could insure steady, non-inflationary economic growth...
...Asked to recall Friedman’s political views at the time, Jones-a laconic Midwesternerponders for a moment...
...In short, positive economics is, or can be, an ‘objective’ science, in precisely the same sense as any of the physical sciences...
...Friedman is not rueful about his decision to stay out of government...
...It was thought too dense., Keynes condensed and simplified his ideas in the General Theory...
...When Keynes reflected’on the causes of the world slump, he did so with a similar disregard for other people’s opinions...
...Again, one might think that personal success with the implementation of fiscal policy would have led Friedman to be sparing in his criticism of fiscal policy in later years...
...I’m not the competitive type, which is good, because I’d hate to compete with him,” she says...
...Friedman explains his decision in much the same terms...
...Government manager s-wi thou t the disciplines and incentives of the market-have been wasting our money and most of all, our idealism, on programs which don’t make our lives any better...
...Scholarships didn’t grow on trees...
...In 1964 he signed on as an adviser with Presidential candidate Barry Goldwater...
...Dominated by a group of brainy, eccentric conservative economists, Chicago passed through the Depression years almost untouched by the “Keynesian” view of market imperfection and the need for government intervention...
...Outside technical economics, Friedman’s work has been more polemical but just as influential...
...Friedman gave up her own economics career for a career as Mrs...
...Take, for example, Friedman’s response to criticism of his service as an economic adviser to the Chilean junta...
...Friedman would probably not be a Friedmanite if he had done his graduate work somewhere else...
...Even his seemingly outrageous proposal to abolish social security begins to make sense when you realize that if present demographic trends continue, the government (meaning future taxpayers) won’t possibly be able to pay back today’s working people what they have been putting in...
...Technismo requires him to construct imposing, highly complex economic models which will impress his colleagues...
...Do subsidies for education, welfare, health, and transportation really improve the quality or equity of our society...
...A current preoccupation is the “Red Bus/Blue Bus” problem, in which a number of people have sealed their reputations with extremely complicated mathematical explorations of how an individual will choose between a red bus and a blue bus, when both are following identical routes at identical times...
...One bit of Friedman advice is of special interest, for it has never been publicized...
...Galbraith says simply that Friedman “has a papal power over his followers...
...With his own training as a statistician, he could safely chide his colleagues for inattention to scientific method...
...His plan to replace welfare services with cash grants through a negative income tax was the inspiration for the Nixon Administration’s Family Assistance Plan...
...Friends say that she is contemplating writing a biography of her husband...
...After Rutgers, Friedman wanted to go to graduate school...
...It turns my stomach,” he said recently, “to see some of these Exxon ads which try to make you think that Exxon is in business to save the Santa Barbara channel from oil spills...
...Are interest rates really the best target for monetary policy...
...So what...
...Samuelson is also buoyant these days...
...He points to the subtle ways in which people are compromised inside the government as bureaucratic loyalties begin to displace private convictions...
...His only regret is that he missed the chance to resign angrily when Nixon announced in 1971 that he was a Keynesian and imposed wage and price controls...
...The acquisitive spirit Milton Friedman would have us prize may have been necessary to lift our country out of backwardness to wealth, but it is not clear that it is needed in the same way any longer...
...The cause of economic collapse and unemployment was not the inherent instability of the private market, but specific mistakes of the monetary authorities, who allowed the money supply to contract rapidly at the very time it should have been expanded...
...The pressure of competition requires the businessman to think only of maximum profit for his shareholders...
...Those were rough days,’’ Jones notes...
...In many specific instances, his criticism is justified...
...psychoanalysts, for example, can quarrel endlessly about whether Freud was bastardized by his disciples) misses the real point: the lessons of “Keynesian” economics weren’t “taught” by Keynes or anyone else...
...After leaving Chicago with an M. A., the young champion of the free market found himself unable to get a teaching job...
...Friedman’s misfortune is that monetarism has now been tried...
...We are happiest when left alone, they seem to say...
...The budding economic theorist thus finds himself in an awkward double-bind...
...In a confidential October 1968 memorandum to Nixon, Friedman correctly warned that the world monetary system was nearing a crisis...
...to Florence, he led her blindfolded past the lesser paintings of the Uffizi Gallery to Botticelli’s “Primavera,” where he opened her eyes upon the image of perfection...
...Because of “technismo,” an economist who has contributed nothing of practical value may still be held in awe by colleagues who are intimidated by displays of numeracy...
...Friedman remarked on the changing demography of the region, and how that has fostered its isolation and tranquility...
...But they intrigue parents who are worried about the rising cost and declining quality of American education...
...In 1969 Friedman had a chance to extend his influence even farther...
...In professional debates, Friedman is the exemplary scientist, carefully phrasing each of his arguments, moderate in his claims to originality...
...Meanwhile, his old friend and teacher, Homer Jones, was using the St...
...Friedman stayed at the National Bureau of Economic Research until 1940...
...In the past few years, Friedman has been fighting, almost alone, for a cost-of-living adjustment (“indexation”) of taxes, bonds, and other contracts-to cushion the effects of inflation...
...On the hillside below his house, Friedman pointed out the first trees turning color...
...All of us feel a yearning to escape the market for a life which is more satisfying, and I think our desire stems from dislike of its reliance on base emotions, Friedman’s free market doctrines are grounded in a view that selfishness and greed, expressed in the ceaseless struggle of the marketplace, must be the basiqof any rational society...
...To the Protestant traders of early capitalism, the austerity of the market, its unyielding test of value and competence, its cruel rebuke to the inefficient sinner and generous reward for the profitable saint all had obvious theological parallels...
...For this reason, Galbraith’s views are not threatening to his colleagues, who can always dismiss him as an economist who doesn’t use numbers...
...Keynes’ 1930 Treatise on Money, which he hoped would be received as a masterwork, had instead provoked a big yawn from the reigning economic mandarinate...
...He had formulated a hypothesis, tested it empirically, and found it correct...
...According to a profile by Milton Viorst, he was refused partly because of academic anti-Semitism...
...An aging clerk at King’s College recalls that when one of Keynes’ investments in the commodity market went sour because of a sudden decline in price, Keynes imperiously directed that the entire purchase be stored in the gothic nave of King’s College chapel until the price rose sufficiently...
...Louis Federal Reserve Bank to popularize monetarism in the banking and business communities...
...Jones advised him to apply to the University of Chicago-not out of any prescience that it would shape Friedman into a monetarist, but because Chicago was a place where Jones’ recommendation would make a difference...
...Thus, he considered his major 1956 essay, “The Quantity Theory of Money-A Restatement,” as no more than a hypothesis...
...Friedman hastily added that they enjoy very much the company of a man down the road who manages a farm, an insurance company and a funeral parlor out of his small clapboard house...
...Economists wedded to the prevailing orthodoxy, the Quantity Theory of Money, had been impotent...
...In a 1953 essay, “The Methodology of Positive Economics,” Friedman boldly wrote: “Positive economics is in principle independent of any particular ethical position or normative judgments . . . it deals with ‘what is,’ not with ‘what ought to be’ . . . . Its task is to provide a system of generalizations that can be used to make correct predictions about the consequences of any change in circumstances...
...I was D and he was F, so we sat next to each other,’’ Mrs...
...The widespread sentiment that New York City should pay the price for its fiscal sins suggests a more general Friedmanite view that the free market must be allowed to squeeze the fat out of an inflationary, featherbedded American economy...
...The historical precedents for this last argument are dubious: economic systems of every description seem to coexist remarkably easily with brutal political methods...
...But in his insistence on rigor, Friedman helped foster a phenomenon which might be called “technismo...
...Characteristically, the only barb in Friedman’s reminiscence is the observation that if well-meaning liberals had managed to pass a minimumwage law in those days, his parents might never have found work in the United States...
...the non-economist rightly inquires...
...Paul Samuelson, the most influential of the Keynesians, now grants that the theoretical argument was “very close to the traditional Keynesian view...
...In the depth of the Depression, Henry Simons, one of the professors who most influenced Friedman, would write an essay entitled “A Positive Program for Laissez Faire...
...What contrivance of man or God could allocate resources in this riotous market so that every producer managed to employ every available worker in the most efficient manner...
...In the same way, “serious” economists disdain the non-ma the ma t ician . This has unfortunate effects...
...Even when his own ideas were uncertain, Friedman was combative...
...But this debate (there are similar ones in most disciplines...
...The word “might” is crucial here, for some, like Galbraith, believe that Friedman’s basic views helped shape the disastrous economic record of the period...
...He is also controversial...
...Oblivious to the revolution in thought taking place around them, the Chicago economists continued to work with the Quantity Theory of Money (which described nominal GNP growth as a simple function of changes in the money supply) and other preKeynesian concepts...
...Friedman’s own Theory of the Consumption Function, published in 1957, is an example of the best and most helpful application of “positive method...
...But in Friedman’s case, the biographical facts do tell us a great deal about the difficulties of “making it” in the economics profession...
...James Tobin, a Yale monetary economist and former member of the Council of Economic Advisers, notes another factor which may explain the sudden interest in monetarism at the ‘end of the 1960s: “There was a popular perception that the New Economics [Keynesianism] had failed to deliver what it was supposed to in terms of stabilizing the economy...
...Two years later, Nixon had to take the steps Friedman advised, but by that time, enormous damage had been done to America’s international economic position...
...Mrs...
...He had an aristocrat’s disdain for petty rules of behavior and morality...
...People are beginning to see that at its very heart, the do-gooder principle is destructive...
...All the entrepreneurs left long ago,” he explained...
...Small, balding and bespectacled, terrier-like in argument, 62year-old Milton Friedman does not look like the sort of man after whom eras get named...
...Weeks can pass in Washington these days without a kind word being spoken for welfare spending, subsidy programs, federal regulation and central planning-the consensus liberal goals of a decade ago...
...Finally, what troubles me most is Friedman’s scorn for anything public...
...Indeed, according to Jones and others, Friedman knew very little about the University of Chicago when he enrolled there in 1932...
...Any businessman who says he’s acting out of social responsibility should be subject to antitrust prosecution, because he’s announced that he’s got monopoly power...
...The quiet scientist is unlikely to become influential, regardless of the merits of his argument...
...1. The private market is unstable...
...His case for flexible exchange rates was first made in 1950, when it was popular to extol the Bretton Woods fixed-rate system...
...But if the theory is to make any impact on the real world, it must be simplified, attractively packaged, and tirelessly promoted...
...But other times, Friedman seems to miss the point entirely, dispensing the same tired line about the need to foster free enterprise, without taking into account what “free enterprise” stands for these days...
...the data seemed, incredibly, to show that economic fluctuations had been more severe after the creation of the Federal Reserve in 1907 (supposedly to bring order to the unstable market) than before...
...While Friedman was still young, his parents moved to Rahway, New Jersey...
...The real marketplace, with its raucous transactions, gives way to the purity of the aggregate, as perfect as the ticking of a Patek Philippe watch or the harmony of voices in a Bach cantata...
...The automatic regulators of the price system clearly failed to work...
...As Friedman puts it, “The New Deal philosophy is exhausted...
...Nobody works very hard...
...Although that proposal was defeated, the negative income tax is coming to be viewed as the most sensible reform of welfare by liberals and conservatives alike...
...Keynes would have understood Friedman’s dilemma...
...The period of Keynes’ greatest influence, from the late 1930s to the late 1960s (some day we may refer to it as the preFriedmanite period) was distinguished by two anti-market precepts...
...He forgets that there was a time when the irrational discrimination of the market forced him to turn to a governmentsupported research organization for work...
...The Road to Celebritv Friedman’s theoretical edifice was thus complete in 1963...
...As so often happens in our culture, at the very time the leisured aristocrats were turning left, Friedman-the harried young man struggling to earn a livingturned right...
...Independent of his urgings, mathematics came to dominate (and, according to critics, sterilize) economics during the 1950s and 1960s...
...In particular, a government must use fiscal policy to stabilize the economy by “leaning against the wind...
...Friedman needn’t have worried about the scientific rigor of economics...
...The monetarist forecasts soon went awry, but not before many Keynesians had jumped ship...
...Using the most sophisticated statistical techniques, he has attacked the technical presumptions of Keynesian orthodoxy...
...Friedman, too, lived through the Great Depression...
...For this reason he is influential, and threatening to the profession...
...But since 1968, editions of his text have carried a more sympathetic treatment of monetarist ideas...
...Making It’ in Economics Life history never explains the sources of intellectual inspiration very well...
...Rather than insuring efficient use of resources, a free market might promote a socially inefficient pattern of waste-with men and machines standing idle...
...Many ambitious academics find that their home lives collapse under this sort of pressure...
...I don’t know that he had any in particular,” Jones says...
...And we’re likely to get angry when Friedman disowns one of his ideas the moment it becomes subject to political bargaining-as Friedman did with the negative income tax scheme...
...Keynesian economists seemed to temper their ardor for the price system...
...Even Friedman savors the opportunity to flee the world the market has created...
...In certain passages, he even seemed to be defending the operation of a free market in economic consultants, arguing that if the consultants are allowed to strengthen Chilean capitalism, then the irrational, inefficient use of torture will disappear...
...A Theory is Born Technismo required Friedman to submit his own developing monetary ideas to empirical test...
...In a statement printed in The Wall Street Journal, Friedman responded calmly to what he called “hysterical” criticism...
...James Tobin, who served on the Council during the Kennedy Administration, suggests that Friedman may have a general disinclination to government service: “He has stayed out because he’s too doctrinaire to do the kinds of pragmatic things a policy-maker must do...
...There is considerable disagreement in the economics profession about whether Keynes actually held these views...
...Peculiarly (for the essay took a line quite similar to Keynes’ own in the General Theory) it attracted enormous criticism from the Keynesian establishment...
...He notes that the Fed “is scared of the kind of flak it will get from monetarists...
...To some extent, he seems to be mesmerized by the price system-that pure elegant gift of God we encountered at the beginning of this piece-into forgetting some inelegant but important things about economics and about life...
...Perusing his Newsweek columns, one is often struck by the boldness of thought, the creative application of systematic reasoning to a problem...
...Its performance is to be judged by the precision, scope and conformity of the predictions it yields...
...His plan for a volunteer army is now law...
...Right now, they’re afraid to...
...Soon enough, he was Lord Keynes, an economic superstar...
...He had met his wife, Rose Director, when the two were studying economics at Chicago...
...In fact, he experienced it far more directly than the old Etonian, Maynard Keynes...
...The best I can do is endorse the picture of him that emerges from his biography...
...Because he believes that the popularized monetarism often leads to incorrect policies, he finds its influence “unfortunate...
...For my part, I don’t think we are happiest when left alone, and I don’t even think we are happiest when pursuing our self interest as reporters, businessmen or what have you...
...Like many self-made men, he tends to dramatize the benefits of a system which allowed him to rise from sweatshop Brooklyn to wealth and academic prominence...
...Friedman was born in Brooklyn, that thorny cradle of so much of modern American intellectual life...
...Milton Friedman has suggested many times that he has anarchist sympathies, and I think it may be his anarchism that makes him seem so attractive today, when there is an illdefined anarchism loose in the culture...
...At the same time he has attempted to develop a base of popular support for his “monetarist” alternative through public speeches, congressional testimony and a regular column in Newsweek...
...Finally an exasperated Mrs...
...His questions to the Keynesian elders have a disarming simplicity : Does fiscal “fine tuning’’ really stabilize the economy...
...But I don’t think he’s right about the free market...
...He succeeded, against enormous odds, because of unusual gifts...
...Samuelson told me that it was Friedman’s fault if his contribution wasn’t recognized sooner...
...He’s a strong, intelligent, polemical exponent of a particular point of view...
...The data showed very close correlations between changes in the rate of growth of the money supply and changes in GNP...
...Friedman’s prospered...
...Profit, in their eyes, was the measure of God’s grace...
...There is a delicate irony in Friedman’s early career...
...Her eyebrows arch high on the forehead at the first suggestion of un-classical liberalism from a guest...
...The pragmatic test of prediction seemed to support the monetarists,” remembers Paul Samuelson, a Keynesian...
...Louis Fed...
...so that every consumer filled his basket with the selection of goods he wanted, in the amounts he wanted, and thereby attained the highest possible level of sa tisfact ion...
...In 1963 Friedman (with the help of Anna Schwartz, a National Bureau of Economic Research statistician) published the work on which he believes his professional reputation will stand: The Monetary History of the United States...
...They were burned into a generation of economists by the experience of the Great Depression...
...He set forth a predictable and entirely logical justification: if he gives good economic advice to the regime, then the lives of its people will get better, not worse...
...Mrs...
...Jones remembers Friedman as a “very brilliant, precocious fellow” who dominated his fellow students, in the classroom at least...
...Both his parents worked in sweatshops, and Friedman grew up in the same harsh environment that led many of his contemporaries to become socialists...
...Since the Republicans came in, we’ve had seven years of mostly Friedman policy...
...The lesson of the Great Depression was clear: if left to itself, a market economy could diverge from full employment to chronic disorder...
...The Age of Friedman is passing...
...Despite withering criticism from other economists, Friedman’s Monetarism (emphasizing the money supply as the key to management of the economy) is now dominant in Congress, the Administration and the business community...
...Quite the opposite...
...Until then, Milton Friedman will serve as the hammer of our discontent...
...Keynes’ economic analysis became associated with this consensus view of the Depression, and soon the two were indistinguishable as “Keynesian” doctrine...
...Moreover, he does in fact find the notion of public service something of a sham...
...I recall him gazing out from the dining-room window of his Vermont retreat, looking over the rolling hills toward the Connecticut River...
...But for every Milton Friedman, there are scores of others who live out their lives in the bowels of the free enterprise system...
...Some were not even willing to believe that Friedman was in earnest...
...Similarly, when newspaper reporters scramble to publish whatever “privileged” documents they get their hands on, and dismiss as absurd the notion that they might have a. “civic” responsibility to protect their country’s diplomacy, one senses (regardless of the merits of disclosing the information) a contempt for the collective authority embodied in government...
...There is a peculiar lapse in Friedman’s powers of insight when it comes to the market...
...She is still devoted to the cause...
...But they are wary of Friedman’s tendency to propose benign neglect of the private sector-believing that it may only intensify the problems created by the monopoly power of large corporations and labor unions...
...In retrospect it seems clear that Friedman was being chastised for suggesting policies at odds with the lessons of the Great Depression, rather than specific points of difference with Keynes...
...From the University of Chicago, where he spends the other half of the year as Paul Snowden Russell Distinguished Service Professor, Friedman has been leading a war for the hearts and minds of the economics profession...
Vol. 7 • December 1975 • No. 10
