In recent months, various critics of the late Milton Friedman have argued that Friedman dominated economic policy for a large part of the last half century. And yet they don’t typically mean that in a complimentary way. In an August 24 New York Times article, for example, editorial board member Binyamin Appelbaum writes that the “most important figure” in postwar economics was Milton Friedman, “an elfin libertarian who refused to take a job in Washington, but whose writings and exhortations seized the imagination of policymakers.” Tellingly, Appelbaum’s article is titled “Blame Economists for the Mess We’re In.” I have been a fan of Friedman since, at age 17, I read a 1968 column he wrote in Newsweek. I have read much of his academic work and nearly all of his popular writing. And I certainly think Friedman was the most important and influential economist of the last half the 20th century.
Friedman certainly had some major policy successes. Two stand out. The first was his role, from the late 1960s to the early 1970s, in helping end military conscription. The second was his and co-author Anna J. Schwartz’s revival of the idea that the growth rate of the money supply has an important effect on the inflation rate. I’ll review some of those accomplishments in more detail. But did Friedman dominate economic policy? If he had, we would be much better off. Unfortunately, he did not. And, contrary to the made-up stories about Friedman, the evolution of his thinking is much more interesting than some of his critics think. Early in his time in the economics profession, Friedman was, like the other young economists of his day, a Keynesian. But he was also an empiricist who carefully studied data. He was that rarest of human beings: a smart man who, well after age 30, changed his mind based on the evidence he studied.
This is from my latest Hoover article, “Milton Friedman, an ‘Elfin Libertarian’ Giant,” Defining Ideas, February 6. (The February 6 date is a little confusing: It actually was published today.)
What motivated me to write it was an excellent, but lengthier piece, written by EconTalk host and fellow Hoover Institution economist Russ Roberts. I reference the piece in my article.
I took a different but overlapping tack, going into the details of who Friedman was, and showing that he was much more interesting a person than the caricature laid out by former Stanford Law School dean Larry Kramer. I suspect that Kramer did not know Friedman well and I’m virtually positive that he couldn’t have written what he did and have read Milton’s and Rose’s autobiography, Two Lucky People.
Here’s the bio of Friedman in The Concise Encyclopedia of Economics.
READER COMMENTS
Mark Z
Feb 13 2020 at 6:52pm
I’m not sure if Russ Roberts mentioned this (I read his piece and don’t recall it) but what struck me as particularly absurd about Appelbaum‘a thesis: he seems to attribute the decline in economic growth and wage stagnation that started in the late 1960s/early 1970s to Friedman / neoliberalism. Hence why he marks the beginning of Friedman’s ‘reign’ at 1969. And yet, no one who actually knows anything about American economic history could seriously argue that the ‘neoliberal era’ began before the late 1970s – either in the US or UK. The Nixon administration was likely the least ‘neoliberal’ administration in modern American history. It strikes me as indisputable that the rise of neoliberalism – whether one thinks it succeeded or failed – was a response to the decline in growth and stagnation in wages that started under the prior (Keynesian, more pro-government intervention) policy regime of Johnson and Nixon. Again, regardless of whether one thinks the Keynesian/‘Great Society’ approach was to blame, it was during its dominance that these trends began.
This has been enough to deter me this far from reading Applebaum’s whole book. Maybe he offers some explanation or clarification, but that his central thesis seems to be that Friedman and neoliberalism caused a phenomenon that clearly started before neoliberalism was even really a thing is a serious enough flaw to not bother spending the $25.
That rant aside, very much agree about Friedman. One of the most under-appreciated economists (perhaps not among free marketeers, but I feel he deserves a place of respect in the ‘bipartisan consensus’ like Keynes that he’ll never get). It is indeed ironic that he was most influential where he is now least controversial: monetary policy and the draft. Even from a left of center standpoint he thus probably had a net positive effect on public policy.
Alan Goldhammer
Feb 14 2020 at 8:00am
This has been enough to deter me this far from reading Applebaum’s whole book. Maybe he offers some explanation or clarification, but that his central thesis seems to be that Friedman and neoliberalism caused a phenomenon that clearly started before neoliberalism was even really a thing is a serious enough flaw to not bother spending the $25.
What a strange response. If you are Kindle reader the book is only $16. I read Applebaum’s book when it came out and it’s more nuanced than David has portrayed. The comments to this post also reflect a general bias against anyone who might write critically about Friedman. Relying on second hand quotes and interviews is no substitute for a complete reading of the book (which aside from Russ Roberts nobody who has posted here has). That being said, I do think Roberts did identify some of the weaknesses in the Applebaum book.
David Henderson
Feb 14 2020 at 2:26pm
You write:
I portrayed absolutely zero about Appelbaum’s book. I referenced only his article. It’s possible that your claim also applies to my references to his article. But if so, I think you should back up your claim.
Mark Z
Feb 15 2020 at 8:30pm
It was $25 on Amazon last I checked; I still read hard copies. I think the paragraph where he suggested the causal connection with ‘the great stagnation’ and with 1969 as the delineation may have been from his article in the NYT, and I may be conflating with his book (alas, both the NYT and the Medium article where I first saw the paragraph are behind paywalls, so I can’t be sure).
And if it’s any consolation, to be honest, it takes very little for me to not bother reading a popular economics book. I haven’t bought McCloskey’s new book even though (or maybe because) I expect I’d agree with pretty much everything in it. I’ve never read Capitalism and Freedom in its entirety either for that matter. I prefer articles, since they’re less likely to be outdated by the time you get them, and they’re shorter (Friedman’s Monetary History of the US, long as it was, was a genuine feat for me). One thing going through a PhD does to some of us is inculcates a strong bias against books (and against the popular press generally). I categorically refuse to read pop science articles in my own field. I suspect many economists feel the same way about popular econ books.
andy weintraub
Feb 13 2020 at 8:33pm
I’m in the process of reading THE ESSENTIAL MILTON FRIEDMAN, by Steven Landsburg, published by the Fraser Institute. It is essential reading for anyone wanting to know and understand Friedman’s contributions to the field of economics. Having also read most of Friedman’s original writing, Landsburg brings it all back in concise language that even a non-economist can understand.
David Henderson
Feb 14 2020 at 2:28pm
I like the book also. Steve gets the context for Friedman’s argument with Westmoreland wrong, but other than that, it’s a very good book. I was impressed with how concise Steve was able to be without distorting the argument.
Nick Ronalds
Feb 13 2020 at 8:53pm
I’m in my sixties, read Friedman’s popular works in the 80s and though I worked in the financial industry, am not a professional economist. I found his writings and his public utterances consistently, and amazingly courteous, logical, and persuasive. To me, that’s enough to explain his success. He never engaged in intellectual bullying, never belittled his interlocutors, was never never mean-spirited in tone, style, or substance. I suppose one can find instances where he might have seemed a bit impatient, but I could be projecting. In the Youtube age I also watched a few clips of him, and again, have never seen him argue by belittling his counterparty. His effectiveness came from the simple and concise ways he made his points, and the obvious passion he had for making economies work better, especially for the least advantaged. He is such a contrast to some public economists today who don’t hesitate to heap vituperation on those they disagree with.
David Seltzer
Feb 15 2020 at 12:44pm
Nick, you are right. Friedman was courteous to those with whom he disagreed. Especially in class at Chicago. When a student proffered an incorrect answer to a question, Milton smiled and said, “I beg your pardon?” It became such a standard, when other students in class heard it, a slightly humorous groan could be heard.
Thaomas
Feb 14 2020 at 5:34am
Slightly off topic, but can someone write about or link to a study of what went “wrong” with targeting the money supply when it was “tried.” I get the meta issue that targeting instruments rather than outcomes is a mistake (is anyone SURE the Fed doesn’t still hanker for a a “normal” ST interest rate?) but specifically how did it go “wrong?” My recollection is that time between “experiment” and “failure” was pretty short.
David Henderson
Feb 14 2020 at 2:33pm
It’s a good question and a good observation. I can’t link to a study offhand because it has been over 30 years since I’ve read them. But I think you’re on to something.
If I recall correctly, the problem came about, ironically, because of Friedman’s success on one particular price control. One of his most hated price controls from about the mid-1960s to the late 1970s was Regulation Q, a regulation that forbade banks from paying interest on checking accounts. In the mid to late 1970s, in fact, NOW accounts were a way around this.
Regulation Q was eliminated about the same time that Friedman started to dominate the debate on monetary policy. With banks being able to pay interest on checking accounts, money sloshed back and forth between checking accounts and savings accounts. That made it harder than otherwise to target M1 or M2.
Nick Ronalds
Feb 14 2020 at 5:35pm
Yes, put another way, velocity became more unstable than it had been historically. For that reason it seems to me NGDP targeting, as Scott Sumner so convincingly has advocated, is an update to targeting the money supply that would “look through” any instability in velocity. Hence it’s an improvement and should be adopted. Why it’s considered a fringe approach (though perhaps that’s changing) by financial elites is a mystery. Perhaps, to borrow Max Planck’s metaphor, it will take more funerals to clear out the rigid thinkers who still dominate policy.
MG
Feb 14 2020 at 7:42am
On-Off Topic, it looks like Milton Friedman is not the only target, and Mr Appelbaum is not the only prosecutor, in the impeachment and removal of some economists. In a recent post from Robin Hanson’s blog, the remarkably reserved and intellectually rigorous Mr Hanson suggests that Paul Romer, no less, is interested in “purging” the economics profession along — arguably — ideological lines
http://www.overcomingbias.com/2020/02/defrock-deregulation-economists.html
It is telling, to me, that economists like Russ Roberts (and in this camp I also include the author of this blog) see disagreements as an opportunity to invite people like Messrs. Appelbaum and Romer to his show to discuss their recent work and have civilized disagreements.
Mark Z
Feb 15 2020 at 8:00pm
He seems to be assuming a default position of ‘stringent regulation,’ and economists who favor less regulation are going beyond ‘the limits of their knowledge,’ but I see no reason why that should be considered the default “humble” position. I don’t find his examples compelling either. I’m quite glad private companies can mass-produce pain killers, and – maybe this is a value judgment – but nothing that’s happening now, or has happened in the past 60 years, regarding opioids, strikes me as making it worth going back to the 1950s in terms of pain medication quality and availability.
His whole piece seems to come from a position of: my preferred level of stringent regulation is the obvious default position, and should be assumed to be morally optimal, and deviation from that suggests a lack of humility. But why? What’s the optimal safety floor for automobiles? Why is allowing them to be less safe immoral, but allowing them to be only as safe as they are now (when they could be safer still if we would tolerate making them much more expensive) not immoral? Outside of consumer preferences, there is no superior default level of regulation. Romer is tacitly making as bold a value judgment as anyone in demanding a return to some status quo ante (which I’m not sure ever really existed; were the 1950s really safer and better regulated?), he just doesn’t realize it.
Mark Brady
Feb 16 2020 at 12:09am
In his latest Hoover article, David writes, “But it might surprise Kramer to know that Friedman cared deeply about income inequality also. Indeed, in a famous 1946 critique of rent control, Friedman and co-author George Stigler wrote that they ‘would like even more equality than there is at present, not alone for housing but for all products.'”
This piqued my interest so I went to the original paper to find the source.
“The fact that, under free market conditions, better quarters go to those who have larger incomes or more wealth is, if anything, simply a reason for taking long-term measures to reduce the inequality of income and wealth. For those, like us, who would like even more equality than there is at present, not alone for housing but for all products, it is surely better to attack directly existing inequalities in income and wealth at their source than to ration each of the hundreds of commodities and services that compose our standard of living. It is the height of folly to permit individuals to receive unequal money incomes and then to take elaborate and costly measures to prevent them from using their incomes.”
The editor attached a footnote that read, “Editor’s Note: The authors fail to state whether the “long-term measures” which they would adopt go beyond elimination of special privilege, such as monopoly now protected by government. In any case, however, the significance of their argument at this point deserves special notice. It means that, even from the standpoint of those who put equality above justice and liberty, rent controls are ‘the height of folly.'”
And Friedman and Stigler conclude their paper with these words: “A final note to the reader—we should like to emphasize as strongly as we can that our objectives are the same as yours: the most equitable possible distribution of the available supply of housing and the speediest possible resumption of new construction. The rise in rents that would follow the removal of rent control is not a virtue in itself. We have no desire to pay higher rents, to see others forced to pay them, or to see landlords reap windfall profits. Yet we urge the removal of rent ceilings because, in our view, any other solution of the housing problem involves still worse evils.”
https://fee.org/resources/roofs-or-ceilings-the-current-housing-problem/
Evidently the editorial footnote was not sufficient to mollify Rose Wilder Lane who eviscerated the paper as “the most damnable piece of communist propaganda I have ever seen done.” (And neither did Ayn Rand approve of the paper. See Jennifer Burns, Goddess of the Market: Ayn Rand and the American Right (2009), pp. 116-18.)
http://www.irwincollier.com/wing-nuts-rose-wilder-lane-on-stigler-and-friedman-1946/
I leave this question for readers. Do we know whether or not Milton Friedman (and George Stigler) modified their seeming egalitarianism in succeeding decades?
Thomas Hutcheson
Feb 16 2020 at 8:01am
I think Applebaum is misled by non-economists saying things like this:
https://www.cnn.com/2020/01/23/politics/steven-mnuchin-greta-thunberg-davos-trnd/index.html
Mnuchin at Davos: “Is [Ms Thunberg] the chief economist, or who is she? I’m confused. It’s a joke. After she goes and studies economics in college she can come back and explain that to us.”
Jon Murphy
Feb 16 2020 at 3:22pm
Whose the non-economist saying things? I don’t understand.
Mark Brady
Feb 16 2020 at 1:57pm
In his latest Hoover article, David writes, “But it might surprise Kramer to know that Friedman cared deeply about income inequality also. Indeed, in a famous 1946 critique of rent control, Friedman and co-author George Stigler wrote that they ‘would like even more equality than there is at present, not alone for housing but for all products.’”
This piqued my interest so I went to the original paper to find the source.
“The fact that, under free market conditions, better quarters go to those who have larger incomes or more wealth is, if anything, simply a reason for taking long-term measures to reduce the inequality of income and wealth. For those, like us, who would like even more equality than there is at present, not alone for housing but for all products, it is surely better to attack directly existing inequalities in income and wealth at their source than to ration each of the hundreds of commodities and services that compose our standard of living. It is the height of folly to permit individuals to receive unequal money incomes and then to take elaborate and costly measures to prevent them from using their incomes.”
The editor attached a footnote that read, “Editor’s Note: The authors fail to state whether the ‘long-term measures’ which they would adopt go beyond elimination of special privilege, such as monopoly now protected by government. In any case, however, the significance of their argument at this point deserves special notice. It means that, even from the standpoint of those who put equality above justice and liberty, rent controls are ‘the height of folly.’”
And Friedman and Stigler conclude their paper with these words: “A final note to the reader—we should like to emphasize as strongly as we can that our objectives are the same as yours: the most equitable possible distribution of the available supply of housing and the speediest possible resumption of new construction. The rise in rents that would follow the removal of rent control is not a virtue in itself. We have no desire to pay higher rents, to see others forced to pay them, or to see landlords reap windfall profits. Yet we urge the removal of rent ceilings because, in our view, any other solution of the housing problem involves still worse evils.”
https://fee.org/resources/roofs-or-ceilings-the-current-housing-problem/
Evidently the editorial footnote was not sufficient to mollify Rose Wilder Lane who eviscerated the paper as “the most damnable piece of communist propaganda I have ever seen done.” (And neither did Ayn Rand approve of the paper. See Jennifer Burns, Goddess of the Market: Ayn Rand and the American Right (2009), pp. 116-18.)
http://www.irwincollier.com/wing-nuts-rose-wilder-lane-on-stigler-and-friedman-1946/
I leave this question for readers. Do we know whether or not Milton Friedman (and George Stigler) modified their seeming egalitarianism in succeeding decades?
Comments are closed.