Milton Friedman: Entrepreneurial Economist

by on November 16, 2006 at 3:31 pm in Economics | Permalink

Great economist by day and crusading public intellectual by night, Milton Friedman was my hero.  Friedman’s contributions to economics are profound, the permanent income hypothesis, the resurrection of the quantity theory of money, and his magnum opus with Anna Schwartz, A Monetary History of the United States, 1867-1960, all stand as great achievements.

But Friedman did not restrict his genius to the academy, he used economics to forcefully argue for a better world.  Friedman was a key player in ending the draft, he championed school choice and drug legalization.  He not only wrote about floating exchange rates he helped to bring them into being.  The end of welfare as we know it?  Friedman’s negative income tax was an inspiration.

Milton Friedman loved liberty.  Even today, chills run down my spine whenever I read the slashing opening to Capitalism and Freedom

President Kennedy said, "Ask not what your country can do for you – ask what you can do for your country."… Neither half of that statement expresses a relation between the citizen and his government that is worthy of the ideals of free men in a free society.

Damn right.

On a personal note, Friedman inspired my book, Entrepreneurial Economics: Bright Ideas from the Dismal Science, in which I said Milton Friedman was the greatest entrepreneurial economist of the twentieth century.  It was thus a real thrill for me and a bringing around of the circle when I sent him a draft and he wrote back praising the book (see the back cover!).

He will be missed.

1 Jason Voorhees November 16, 2006 at 3:49 pm

Great entry, Alex. I would be interested in stories about his warmth as a person. He had so many friends of different political persuasions, and I am regularly told that he was very generous with his time.

2 Bernard Guerrero November 16, 2006 at 4:00 pm

Gerard, what exactly are you talking about? He called for an all-volunteer army and that’s precisely what we have. Insofar as said army is concerned, he did not believe that those troops were serving some amorphous greater good but rather enlightened self-interest, and that anybody who couldn’t see such enlightened self-interest shouldn’t serve. In this, BTW, his views matched Robert Heinlein’s.

3 josh November 16, 2006 at 5:00 pm

Gerard, the meaning of the quote depends on the definition of the word country. Milton did not mean it to refer to his fellow citizens, but to the state.

4 Sean November 16, 2006 at 5:40 pm

The first story I saw on this on Google News was from NPR. They included a short interview with Friedman from several years ago. The key point:

STAMBERG: Professor Friedman, let’s talk some, though, about the human cost of the free market, because we all know that everything free comes with a price, and very often the price has been tremendous hardships and insecurities. I wonder what it would take to make the free-market system work and not take too heavy a toll on the extremely poor, the people at the very bottom rungs?

FRIEDMAN: Well, I can’t agree with the assertions you’re making. You have to compare one system with another. There’s no point in comparing an actual, operating system with an ideal system that doesn’t exist. I would say that, in contrary to your generalization, the free market has involved less hardship, has imposed far less of a cost than almost any alternative system. Can you compare any of the costs of the free market with the costs that were imposed by, let’s say, either the Soviet Union or China?

full article

5 BillWallace November 16, 2006 at 6:33 pm

Actually Sean, I liked the end of that interview even better.

Guy: Russian Taxi Drivers say it’s better there than here
MF: Why don’t they go back?
Guy: ummmmm
MF: Thought so

6 Patrick R. Sullivan November 16, 2006 at 6:41 pm

‘I wonder if Friedman would describe our soldiers as mercenaries.’

That was what General Westmoreland called them to Friedman’s face, saying he wouldn’t want to command an army of mercenaries. Friedman responded with: ‘General, would you rather command an army of slaves?’

Westmoreland: ‘I don’t like to hear our patriotic draftees referred to as slaves.’

Friedman: ‘And I don’t like to hear our patriotic volunteers referred to as mercenaries’

7 James November 16, 2006 at 7:02 pm

Jason Voorhees,

Walter Block has a very endearing and personal article detailing his remembrances of Dr. Friedman:

http://www.mises.org/story/2393

8 jim November 16, 2006 at 8:59 pm

Alex,

“Damn right”?

What about “damn left”?

9 Michael Sullivan November 16, 2006 at 11:55 pm

FRIEDMAN: Well, I can’t agree with the assertions you’re making. You have to compare one system with another. There’s no point in comparing an actual, operating system with an ideal system that doesn’t exist. I would say that, in contrary to your generalization, the free market has involved less hardship, has imposed far less of a cost than almost any alternative system. Can you compare any of the costs of the free market with the costs that were imposed by, let’s say, either the Soviet Union or China?

I have a problem with this, because this argument is often used to justify changes that would make the market more laissez-faire than it is *now* — to get rid of bits of social democratic compromise that exist in nearly all the richest and most free countries.

If you’re being asked “Why don’t you support thus and so extra regulation to end this problem we’re seeing now”, then “look at what happened when the chinese tried that” is a pretty reasonable answer.

When you’re asked about a putative laissez-faire program that doesn’t actually exist anywhere in practice, it’s an entirely different matter. Many freer market reform suggestions are justified primarily by theory.

I don’t get the sense that Friedman espoused ripping up the welfare state and eliminating progressive income tax before dismantling trade barriers and the nanny state, but there are many who use his arguments to justify starting with reforms which are on the dicey side for long-run effects on the population as a whole, while very obviously good for the rich.

It’s not clear from the piece ripped from context, just what he was asked about there, thus whether that was actually a fair response.

10 David Andersen November 17, 2006 at 12:05 am

Bill Stepp – I was actually referring to defending myself, family (and property) from military aggression. I can envision a day, however, when the state crosses a line such that taking up arms against it is required. Hopefully it won’t come to that in the US.

11 happyjuggler0 November 17, 2006 at 3:42 am

Actually jake you pay your taxes because if you don’t then thugs with badges and guns show up at your door, shoot your dog, and lock you up. It is not altruism that motivates people to pay their taxes.

There is a world of difference between seeing a problem and donating your own money to alleviate it, or using your money to give someone a positive sum job, and having government legally steal your money and give it to someone on the condition that they don’t work.

12 Jake November 17, 2006 at 10:15 am

Josh:

Jake, I guess it is the difference between doing something for the population living in your country and doing something for the glory of your “country.” I think many people join the military with both motives in mind. I think the second one is not so good.

Also, why did JFK not say “your fellow man”? There is a reason he said country.

He essentially did:

In your hands, my fellow citizens, more than mine, will rest the final success or failure of our course. Since this country was founded, each generation of Americans has been summoned to give testimony to its national loyalty. The graves of young Americans who answered the call to service surround the globe.

Now the trumpet summons us again–not as a call to bear arms, though arms we need–not as a call to battle, though embattled we are– but a call to bear the burden of a long twilight struggle, year in and year out, “rejoicing in hope, patient in tribulation”–a struggle against the common enemies of man: tyranny, poverty, disease and war itself.

Can we forge against these enemies a grand and global alliance, North and South, East and West, that can assure a more fruitful life for all mankind? Will you join in that historic effort?

JFK called people to serve their fellow man.
—-

Actually jake you pay your taxes because if you don’t then thugs with badges and guns show up at your door, shoot your dog, and lock you up. It is not altruism that motivates people to pay their taxes.

There is a world of difference between seeing a problem and donating your own money to alleviate it, or using your money to give someone a positive sum job, and having government legally steal your money and give it to someone on the condition that they don’t work.

How decidedly un-American. Here I thought that the Founding Fathers constructed a democratic republic involving specific rights so that thugs with guns don’t show up at your door and shoot you and your dog.

The unmitigated gall to ask each citizen to contribute proportionately to their prosperity or even, as Adam Smith endorsed, in greater proportions proportionate to their prosperity. To think such a system requires that laws passed by representatives of the people, restricted by a recognized human rights, be adhered to! And just imagine, this system is so flawed that it actually requires people to pay their taxes in order to live in and benefit from the society this government makes possible through its efforts to “establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty”.

Anarchy is the natural conclusion of the blind – and frankly petulant – claims of libertarianism that rejects all government, including taxation, at some how tyrannical. Its an empty and fruitless philosophy.

13 Contribution November 18, 2006 at 8:12 pm

Milton Friedman’s contribution should be seen in the light of his contribution to Chile under a military dictatorship. How did the economy in that country fare? Were people better off when the Government adopted his policies?

When Kennedy said ‘..but what you can do for your country’. Well what did Kennedy do for the US? He set up a form CIA assassination squad. It was already in the process of evolution under Eisenhower but Kennedy managed to kick it into proper shape with the help of the Chicago mafia mob and thug Giancana. Then there was the Cuban Missile Crisis. This is not entirely irrelevant to the assassination team because the Kennedy’s were obsessed with killing Castro. Castro turns to the Soviet Union for help when America invades Cuba at the Bay of Pigs and learns of the undying obsession of the mafia-manned CIA to kill him.

Friedman and Kennedy had a lot in common. They were intelligent and able to spin as much bullshit as was required to serve their purposes. They had powerful thuggish friends in key positions of national power.

Long live free man. Friedman is dead.

14 Johnny Debacle November 19, 2006 at 4:37 pm

“The myth of the free market god, the neo-liberal ideolgues in powerful positions and all of his former student spouting “scientific” economics are going punish us and my grandchildren.”

How?

And if you really believe this, why are you reading this blog, Marginal Revolution, of all things?

15 James Waterton November 20, 2006 at 4:37 am

“Contribution”, Roger and Jacob B: care to expand your witless comments further? They’re heavy on the pejorative, but substance-free.

16 jim November 22, 2006 at 11:36 am

Jacob B. wrote

“Milton Friedman pushed and pushed the idea that individuals (and corporations) should self-maximise. Act purely in their own self-interest with one qualification. That was that what they do shouldn’t negatively impact others.”

and Jacob B. also wrote

“Just ignore the power and wealth differentials and spin ‘free to choose’ bullshit.”

Well, let me begin with my general reaction to this: What utter nonesense!

Now to some specifics:

What Friedman actually wrote about corporations was this:

“. . . there is one and only one social responsibility of business- to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition, without deception or fraud.” (this is from his book “Capitalism and Freedom” published in 1962, page 133)

Although there have been many calls for “corporate social responsibility” over the last 100 years, Friedman’s ethos (above) remains the only intellecutally and ethically defensible approach.

Any objective view of history indicates that free market capitalism has done more to reduce human misery than any other way of organizing resources.

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