Milton Friedman, R.I.P.
Milton Friedman, who died Thursday at age 94, might be called a "Renaissance" economist: his skill and renown cast a wide berth. For instance, if you give a free-association exercise and say "monetarism", economists will likely return "Milton Friedman". His final article on how the money supply impacts the economy was published on the Op-Ed page of yesterday's Wall Street Journal. In a second role, he also helped to bring to the fore the role of expectations: if you try to reduce unemployment by stimulating the economy through more inflation, workers will catch on that prices are rising more and expect higher wages. Businesses will then need to raise prices more to pay the higher wages. So instead of faster growth and more jobs, you'll get a wage/price spiral. There is no trade-off then between unemployment and inflation, Friedman taught, negating popular ideas espoused by devotees of John Maynard Keynes. Thirdly, among other public policy issues, he devised a scheme for helping low-income wage-earners through a "negative income tax"; this was implemented and remains today in the "earned-income tax credit".
Fourth and perhaps most fundamentally, Milton Friedman was a champion of freedom. As our expression of respect for him, we copy here three quotes from a compilation posted Thursday on the Wall Street Journal's website*. The first is a statement of his vision of the role of government in society, the second a definition of "self-interest" not exactly like the conventional wisdom on that concept, and the third is an expression of philosophy that some might find surprising for an economist.
From a well-known book, Capitalism and Freedom (1962):
[A free economy] gives people what they want instead of what a particular group thinks they ought to want. . . .
The existence of a free market does not of course eliminate the need for government. On the contrary, government is essential both as a forum for determining the "rules of the game" and as an umpire to interpret and enforce the rules decided on. What the market does is to reduce greatly the range of issues that must be decided through political means, and thereby to minimize the extent to which government need participate directly in the game. The characteristic feature of action through political channels is that it tends to require or enforce substantial conformity. The great advantage of the market, on the other hand, is that it permits wide diversity. It is, in political terms, a system of proportional representation. Each man can vote, as it were, for the color of tie he wants and get it; he does not have to see what color the majority wants and then, if he is in the minority, submit.
It is this feature of the market that we refer to when we say that the market provides economic freedom. But this characteristic also has implications that go far beyond the narrowly economic. Political freedom means the absence of coercion of a man by his fellow men. The fundamental threat to freedom is power to coerce, be it in the hands of a monarch, a dictator, an oligarchy, or a momentary majority. The preservation of freedom requires the elimination of such concentration of power to the fullest possible extent and the dispersal and distribution of whatever power cannot be eliminated -- a system of checks and balances. By removing the organization of economic activity from the control of political authority, the market eliminates this source of coercive power. It enables economic strength to be a check to political power rather than a reinforcement.
From Free to Choose, book and PBS series, co-hosted with his wife Rose:
Self-interest is not myopic selfishness. It is whatever it is that interests the participants, whatever they value, whatever goals they pursue. The scientist seeking to advance the frontiers of his discipline, the missionary seeking to convert infidels to the true faith, the philanthropist seeking to bring comfort to the needy -- all are pursuing their interests, as they see them, as they judge them by their own values.
From a speech in Washington in 1993
I have sometimes been associated with the aphorism "There's no such thing as a free lunch," which I did not invent. I wish more attention were paid to one that I did invent, and that I think is particularly appropriate in this city [Washington], "Nobody spends somebody else's money as carefully as he spends his own." But all aphorisms are half-truths. One of our favorite family pursuits on long drives is to try to find the opposite of aphorisms. For example, "History never repeats itself," but "There's nothing new under the sun." Or "look before you leap," but "He who hesitates is lost." The opposite of "There's no such thing as a free lunch" is clearly "The best things in life are free."
*These selections are taken from the Journal's main site, www.wsj.com, which is a subscription service. Other statements by Friedman are available on its Op-Ed site, www.opinionjournal.com, which is free to the public.
Fourth and perhaps most fundamentally, Milton Friedman was a champion of freedom. As our expression of respect for him, we copy here three quotes from a compilation posted Thursday on the Wall Street Journal's website*. The first is a statement of his vision of the role of government in society, the second a definition of "self-interest" not exactly like the conventional wisdom on that concept, and the third is an expression of philosophy that some might find surprising for an economist.
From a well-known book, Capitalism and Freedom (1962):
[A free economy] gives people what they want instead of what a particular group thinks they ought to want. . . .
The existence of a free market does not of course eliminate the need for government. On the contrary, government is essential both as a forum for determining the "rules of the game" and as an umpire to interpret and enforce the rules decided on. What the market does is to reduce greatly the range of issues that must be decided through political means, and thereby to minimize the extent to which government need participate directly in the game. The characteristic feature of action through political channels is that it tends to require or enforce substantial conformity. The great advantage of the market, on the other hand, is that it permits wide diversity. It is, in political terms, a system of proportional representation. Each man can vote, as it were, for the color of tie he wants and get it; he does not have to see what color the majority wants and then, if he is in the minority, submit.
It is this feature of the market that we refer to when we say that the market provides economic freedom. But this characteristic also has implications that go far beyond the narrowly economic. Political freedom means the absence of coercion of a man by his fellow men. The fundamental threat to freedom is power to coerce, be it in the hands of a monarch, a dictator, an oligarchy, or a momentary majority. The preservation of freedom requires the elimination of such concentration of power to the fullest possible extent and the dispersal and distribution of whatever power cannot be eliminated -- a system of checks and balances. By removing the organization of economic activity from the control of political authority, the market eliminates this source of coercive power. It enables economic strength to be a check to political power rather than a reinforcement.
From Free to Choose, book and PBS series, co-hosted with his wife Rose:
Self-interest is not myopic selfishness. It is whatever it is that interests the participants, whatever they value, whatever goals they pursue. The scientist seeking to advance the frontiers of his discipline, the missionary seeking to convert infidels to the true faith, the philanthropist seeking to bring comfort to the needy -- all are pursuing their interests, as they see them, as they judge them by their own values.
From a speech in Washington in 1993
I have sometimes been associated with the aphorism "There's no such thing as a free lunch," which I did not invent. I wish more attention were paid to one that I did invent, and that I think is particularly appropriate in this city [Washington], "Nobody spends somebody else's money as carefully as he spends his own." But all aphorisms are half-truths. One of our favorite family pursuits on long drives is to try to find the opposite of aphorisms. For example, "History never repeats itself," but "There's nothing new under the sun." Or "look before you leap," but "He who hesitates is lost." The opposite of "There's no such thing as a free lunch" is clearly "The best things in life are free."
*These selections are taken from the Journal's main site, www.wsj.com, which is a subscription service. Other statements by Friedman are available on its Op-Ed site, www.opinionjournal.com, which is free to the public.
posted by Carol S. | 11/18/2006 09:58:00 PM
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