Abstract
There is no more damaging academic in the 20th century than Milton Friedman. His philosophies caused widespread economic problems and inequality not only in his home country but internationally as well.
Milton Friedman is considered a giant of 20th century economics, and is probably the most influential economist of the past 100 years. The question is rarely asked why Milton Friedman, over so many economists, was so highly quoted and regarded. This drives directly to the heart of who uses and pays for economics writing. According to the standard view, Milton Friedman’s success and influence was simply based upon his scholarship and the correctness of his ideas. In this article we propose a reality regarding his popularity and status that is more nuanced. We will also give examples of how politicized the vast majority of economics writing is.
Nobel Prize Winner
Milton Friedman did win a Nobel Prize, however this was for his work on interest rates, not for his conservative and extreme views on society and regulation. This Nobel Prize victory has been trotted out as support for his ideas by people who are largely anti-intellectual and do not know how the Nobel Prize is awarded and don’t know why or for what he won the prize. Furthermore, a Nobel Prize is not a guarantee of correctness. The professors behind Long Term Capital Management received Nobel Prizes for their option pricing theory roughly one and a half years before their fund collapsed and had to be bailed out by the government.
This information on the work that had him awarded the prize is available at http://www.nobel.com. It is, like most Nobel Prizes in reward for work in a very narrow area.
Dovetailing with the Interests of Concentrated Power
It is amazing that in all the articles on Milton Friedman we have not once seen an article that points out that the main reason Friedman was so popular was what he said dovetailed perfectly with what concentrated power wanted to hear. He argued that taxation was theft and that corporations had no social responsibility. Friedman loved the market, however paradoxically many companies made monopoly profits off of his ideas such as multinationals that purchased public waterworks and then made water obscenely expensive, or private firms that ripped off charter schools in New Orleans after the area privatized many schools creating a totally unaccountable which allowed huge graft to go unpunished. Friedman was silent on these issues. In general he was not the type of economist who would tolerate questioning, and not the type of economist who was honest enough to admit when he was wrong. Few are.
Corrupt Power Loved Milton, or Uncle Milte as he was called by his adherents.
The Attraction of Milton Friedman
Friedman was a technically good economist. He was also an excellent writer. He wrote in a way that was clearer than truth. In his world markets are perfect, and the only thing that gets in the way of the perfection is the government and other non-market mechanisms like unions (that is monopoly power from the bottom rather than monopoly power from the top). Friedman viewed any restriction on corporate power as an interference in the market. While people are distancing themselves from this type of talk now (post financial crisis) for decades now MBAs and economists have been mindlessly quoting Friedman to promote all manner of deregulation. Now we have the deregulated financial markets that have been so desired by conservatives, and our system is melting down.
While it was apparent that Friedman was talented in many ways, it must be said that he was an extremist. He was more in love with theory than with testing his hypothesis against the real world. He was a good writer, but he was not so good that he would have achieved his notoriety, status and eventual Nobel prize without his bias. For instance, if he wrote about the evils of corporate power, we would unlikely be writing about him now. He essentially provided an academic cloak for whatever large corporations wanted to do. Think Rush Limbaugh with a PhD. His job was to create concepts that can be put into policy to punish the vast majority of Americans (and which ended up affecting many other countries as well), to the benefit of the top income bracket. Friedman liked to frame issues as if he were a white knight fighting for truth, when in fact he was extraordinarily servile to power. For this reason, we question how much actual economics he was working on, and how much was simply doctrinal.
Furthermore, Friedman’s experience generalizes. Economics has become profession that uses doublespeak to high sounding concepts and mathematics to support elite interests. How this is done is explained here http://counterecon.com/2008/01/11/unquestioned-capitalism/
If you want a good career in economics, you do and say as you are told, and this can ensure a comfy living. our favorite economists are Michael Hudson and Dean Baker and it is not surprise that both of them work outside of the system. That is not for a major university and not for a financial institution.(1) Lack of need to publish what concentrated power wants them to publish is probably why (in addition to being fine economists) both were able to predict the housing bust, while the vast majority of economists did not.
Similarities Between Milton Friedman and Corporations
If Friedman were reincarnated, he would be come back as a corporation. His opinions were so in line with corporations that he could have been one himself. Once you get beyond the advertising campaigns which talk about “Building a Better World Together,” corporations are simply extremely self centered institutions. Large corporations are against anything that gets in the way of them maximizing their profits. Environmental laws, labor laws, government rules on competition do this. These checks on corporate power exist because of a long history of abuse on the part of corporations that operate in an unconstrained marketplace. Having to argue that regulation is important, that labor laws are important, that the environment is important should not really be necessary at this late date in human history. However, Milton Friedman used his academic perch and dogmatic writing to argue that these things had not place in a fully functioning economy. Large concentrated power made sure that Friedman’s song was heard far and wide. Whether it was true or not was another matter. We believe Milton Friedman was too smart to have written what he wrote. For this reason we give him the intellectual prostitute award for the century. An economist who knew better, but became addicted to the power and prestige of having the ear of concentrated power.
Naomi Klein on Milton Friedman
Friedman and the Hoover Institute
http://counterecon.com/2009/02/05/stanford-lowers-itself-by-having-the-hoover-institute/
References
http://www.huppi.com/kangaroo/L-chimain.htm
The Poor Record of Milton Friedman by The Guardian
http://www.guardian.co.uk/commentisfree/2006/nov/16/post650
Milton Friedman and Pinochet
http://www.hartford-hwp.com/archives/42a/086.html
Footnote
Michael Hudson is a university professor, but we do not think he performs the typical duties of one. Michael Hudson has made the comment that university economics has become so doctrinal and subordinated to concentrated financial interests that he can no longer teach.
“Because they don’t seem to care about their internal economies, except to go on waging the old class war. That is how mainstream economics is taught these days — and why I stopped teaching academic economics for many years.”
See his interview
http://deconsumption.typepad.com/deconsumption/2008/03/acres-interview.html
In any case, we think he is just as, if not more influential by working outside of academic economics. The present academic economics is simply not working for the general economy. Instead it is promoting a false way of thinking among students who study economics, and go on to become employed by concentrated financial power to write up papers that perpetuate a dysfunctional economic system. We call the work that Michael Hudson and Dollars and Sense and CEPR.net do “real economics.” This is where economic principles are applied evenly and rigorously and the advanced math is left to the physicists. As for what most of the academic economics is doing, we would refer to this is as either pure doctrinal drivel, or escapades into bizarre forms of econometrics that have little if anything to do with the real economy.
He also has a number of associations as with the Study of Long Term Economic Trends group.
Can you point us to some sources? I’m fairly familiar with Friedman’s pop work and even some of his academic articles and don’t recall him ever arguing that there even *could* be such a thing as a market without regulation, let alone that regulation was not important. Nor do I recall him arguing against correction of negative externalities that cause environmental damage.
Thanks for your comment. This blog is still in the early stages and I have yet to move many articles out here, however, I would be happy to provide extra evidence to your points.
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In the excellent documentary ‘The Corporation” Milton Friedman is quite clear in stating his view that regulation eventually results in the regulatory bodies being controlled by the very industries they are setup to regulate (capture theory). This has certainly happened to an unprecedented degree over the past 7 years. His quotations on regulation include:
“Many people want the government to protect the consumer. A much more urgent problem is to protect the consumer from the government.”
In an interview with PBS for the show The Commanding Heights on Nixon Friedman states:
“During his regime the EPA, the Environmental Protection Agency, was established and the OSHA, the Occupational Safety and Health Administration, the OECA [the Office of Enforcement and Compliance Assurance of the EPA] — about a dozen, a half-dozen alphabetic agencies were established so that you had the biggest increase in government regulation and control of industry during the Nixon administration that you had in the whole postwar period.”
On Reagan he states:
“Yes, absolutely. There is no doubt in my mind that that action of Reagan, plus his emphasis on lowering tax rates, plus his emphasis on deregulating … I mentioned that the regulations had doubled, the number of pages in the Federal Register had doubled, during the Nixon regime; they almost halved during the Reagan regime. So those actions of Reagan unleashed the basic constructive forces of the free market and from 1983 on, it’s been almost entirely up.”
Notice, Friedman does not differentiate good from wasteful regulation. OSHA is widely credited with improving worker safety, however he clearly views all regulation as pointless government programs.
In an interview in 1999 he proposes abolishing the FDA as “its in the self interests of pharmaceutical companies not to have these bad things.” http://select.nytimes.com/2007/05/21/opinion/21krugman.html?_r=1&oref=slogin
In his 1970 article in the New York Times Magazine
http://www.cbe.wwu.edu/dunn/rprnts.friedman.dunn.pdf, he proposes that corporations have no social responsibility and that any money spent on socially responsible programs is theft from shareholders. As he was not keen on regulation, government or social responsibility it seems he sees no place for market resticting or even regulating mechanisms.
Friedman has been one of the main proponents of privatization. This naturally takes assets that are under government control (which is unresponsive, but in some measure accountable to the political process) and puts them in the hands of what Chomsky refers to as “private tyrannies.” That is while it is difficult to influence the local waterworks, it is even more difficult to influence General Electric. By doing this, Friedman increases the regulatory load placed on the government. However and this leads to the fourth point…
Friedman is famous for saying
“I am favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it’s possible.”‘
I can only assume that he would mean cutting taxes to cut regulatory programs (as he clearly opposes regulation and may even view it as “theft” from property owners.). Thus in addition to taking assets from governments (schools, public utilities, transportation infrastructure) he would want to hollow out the state so that is also powerless to regulate these corporations.
On The Environment
The way of correcting externalities causing environmental damage is regulation. I am aware that industry funded economists have proposed the idea of pollution credits, however, this is not a genuine offer at a solution but is rather more “self regulation” that results in the same non-results that made Gore’s Inconvenient Truth necessary. That is no “market solution” to environmental damage can be taken seriously as it lacks evidence and is proposed by the very industries (and their paid economists) who would seek to remove themselves from regulation. Thus I think we have good basis to believe that Friedman opposed environmental regulation as he opposed other forms of regulation.
[...] http://counterecon.com/2008/01/10/milton-friedman-economistintellectual-prostitute/ [...]
yes, and Marx is the pure virgin in your eyes.. shame people like you get to live in freedom – I suggest going to Belarus or NKorea, I visited the former a few months ago &suggest you do the same.
I have no exposure to Karl Marx or to Engels. I am aware of them as authors but have never read them.
I don’t know if you have been following current events, but Belarus has not been communist since the early 1990s. They now follow the same corrupt capitalist system that we do. As for N. Korea, I don’t think you can find anywhere in my blog where I recommend adopting the economic principles of N. Korea. Instead I am critical of the corruption and false “free markets” of the US system. It would be nice if you addressed what I actually propose.
I kind of doubt you have read Marx or Engels either as people that write comments like this don’t read much. Next I assume you will praise Adam Smith, someone else you have never read and cannot read?
See this post on poorly educated politicians quoting books they have never read.
http://counterecon.com/2009/03/27/nobody-actually-reads-adam-smith-and-a-wealth-of-nations/
Finally, no one has to leave a country because they disagree with the economic philosophy of the country. That is called fascism. The problem with Eastern Bloc countries is not that they were communist (they really were not, for instance they did not allow labor unions, there was little equality), the problem was that they are fascist. That is they are the type of countries that George W Bush, Dick Cheney and Goldman Sacks would have thrived in. They required little competency and mostly worked off of personal relationships. Your statement about people who disagree with conventional opinion leads me to believe you would be very comfortable in a fascist state. With a few more Republican administrations, you will luckily not even have to leave the US to live in a fascist paradise where everyone has to agree with large banks and politicians.
I accepted you comment, even though it was anonymous, because it gives readers a good idea of the deep ignorance of the population and helps to explain how to counteract statements made by the typically poorly read mutton-head. How is the present corrupt bailout or the fact the Fed refuses to provide an accounting for trillions of dollars of US dollars made ok because N. Korea has a bad economy. That is if I am in favor of corruption can I stay in the country, but if I am against it I should leave? It would be nice if you could leave some more comments. Try listing any argument you can for our current economic system, and I will be happy to refute it.