Milton Friedman is Responsible for Scarcity

by on August 19, 2008 at 12:28 pm in Current Affairs, Economics | Permalink

Should we be surprised that the Milton Friedman Institute at the University of Chicago is opposed by the likes of Marshall Sahlins?  I happily farm it out to Brad DeLong:

Sahlins’s claims that it was "the market-industrial system [which]
institutes scarcity"… seemed to indicate a total,
willful, and culpable ignorance of practically all of the non-market
settled agricultural societies of the past ten thousand years.

By the way, guess where these institutes are located?

Hannah August 19, 2008 at 12:36 pm

Sahlins’ essay is ludicrous. But over one hundred U of C professors have completely legitimate concerns about the current set up of the proposed Friedman Institute, unrelated to their level of agreement with Friedman’s scholarship. The facility makes promises of special “access” to donors of 1 million dollars or more, and says that “The intellectual focus of the institute would reflect the traditions of the Chicago School and typify some of Milton Friedman’s most interesting academic work.” It does not strike me as academically free and open to explicitly connect all the scholarship of a $200 million institute to one school of thought, no matter how influential the school. The following site contains a link to the current petition signed by many faculty members, which does not call for a closing of the MFI but simply an important re-thinking of its mission statement and funding practices in order to assure academic freedom and integrity.

http://www.stat.uchicago.edu/~amit/MFI/

Bernard Yomtov August 19, 2008 at 12:49 pm

FWIW, which isn’t much I guess, I think theer are reasonable objections to the MFI based on what seems to be a clear ideological predisposition. The issue is not the name. It’s the question of whether a research institute intended to explore “economics and society” is intended to look for answers to problems or to find justifications for preconceived favored answers.

What the fact that there are other institutes at U of C named for individuals has to do with this is unclear.

anon August 19, 2008 at 1:01 pm

what does Sahlins propose the donors do with their money instead? not contribute to academics? give their money to him so he can decide what is best for everyone?

and the conflation of friedman with pinochet is hilarious

happyjuggler0 August 19, 2008 at 1:25 pm

Judging by the ineptitude, on so many levels, of the letter signed by one hundred faculty members, as well the better written but still highly ignorant, wrong, and biased article written by Sahlins, I’d say that it is the economics department that has legitimate claim to be embarrassed by its humanities counterparts, not the other way around.

Hopefully Sahlins does better (some?) research in anthropology and in writing his book than he did while composing his left-of-America rant against Friedman and Friedman’s massive contributions to economics.

dWj August 19, 2008 at 2:21 pm

Incidentally, that Enrico Fermi Institute was originally called the Institute for Nuclear Studies. After Fermi died it was the Enrico Fermi Institute for Nuclear Studies, but the bit about Nuclear Studies was dropped in the sixties when it proved too un-PC to study anything that your average plastic garden gnome might associate with nuclear weapons. That might not bode well for the future of the Friedman Institute; I do hope the administration cares less about the feelings of garden gnomes than it did two generations ago.

Anon August 19, 2008 at 2:41 pm

None of you have mentioned the real scandal. U. Chicago doesn’t have many free market economists left. The name is to trick donors while conducting business as usual and cross-subsidizing the rest of the university, including Marshall Sahlins.

Bernard Yomtov August 19, 2008 at 2:49 pm

Isn’t it likely that that the Fermi, Franke, Kavli and Franck institutes are pushing particular approaches within their respective disciplines? Pushing those approaches at the expense of other approaches?

Is it likely? Why?

Are there multi-millionaires fiercely devoted to certain approaches to physics or chemistry, convinced that the ideas they hold about the subject should be given priority over others, and thus generously funded? Is there lots of murky ground where policy debates and academic debates overlap, and policies must be chosen in part on the basis of subjective preferences and values rather than just academic ideas?

I think Delong is right that this is all about the ideas being promoted, not the principle that idea promotion is bad.

There is nothing wrong with idea promotion. But people who promote ideas because they are paid to do so are in the advertising business, not the research business.

q August 19, 2008 at 3:20 pm

“Producers in a free market will never produce enough of an item for everybody because if they did there would cease to be a market for it.”

Huh? The software markets seem to be doing fine.

liberty August 19, 2008 at 3:31 pm

“The sacrificial reduction of social values to monetary calculations is the essence of Friedman economics, and helps explain its historic taint as the complement of state terror.”

Wow. See, here I was thinking that Marxist economics was the most common complement to state terror. But apparently it is the economics of small government, and non-interventionist government that gives the state the most power. Interesting.

assman August 19, 2008 at 3:37 pm

“Producers in a free market will never produce enough of an item for everybody because if they did there would cease to be a market for it.

This is why a true free market doesn’t work and never has.”

Bullshit. I think everybody in the United States can afford toilet paper and there is enough toilet paper for everybody. I have never heard of a toilet paper shortage and yet last time I checked it was being sold in stores.

Dan Tarrant August 19, 2008 at 3:49 pm

Bullshit. I think everybody in the United States can afford toilet paper and there is enough toilet paper for everybody. I have never heard of a toilet paper shortage and yet last time I checked it was being sold in stores.

That’s because we don’t have a free market in the United States. We redistribute wealth via taxes so essentially people with money buy toliet paper for people who can’t afford it.

Steve August 19, 2008 at 4:12 pm

Dan, I don’t understand your logic. Are you anti-freemarket and anti-redistributionist? Isn’t a socialist economy my nature redistributionist?

Do you feel exploited by the producer every time you purchase an item? If so, I presume that you only buy staple goods.

Andrew August 19, 2008 at 4:41 pm

“using actual capital to dictate research is stupid, and you know it”

Is that what’s happening?

Will a Milton Friedman Institute be able to slip one past all the critics? More likely, if any “manipulations” happens at all, it will be to dictate the questions asked.

And I’m not so sure that using capital to dictate research in economics (of all things) would be all that stupid. What the world needs more than anything right now is improved return on capital.

Someone always decides what questions get funded. Yes, there are differences between methods of deciding. Is government funding perfect? And is there a relative shortage of government-decided questions? Are we achieving a good return on capital of our current research portfolio? I think these are good questions. But, not really what this is about.

Here’s what they donors get
http://mfi.uchicago.edu/society.shtml

If they are thinking that it is worth the money on a quid pro quo basis, then they really do need some insights into return on capital. It’s not, of course. It’s exactly the same as almost any other donor situation. The institute gets the money, the school probably collects rent, and the donors provide contacts. So, this can’t really be the problem either.

liberty August 19, 2008 at 4:58 pm

“In socialism, scarcity is a problem to be overcome. In capitalism, it’s an opportunity to be exploited. ”

This is exactly right. Scarcity, under capitalism, provides an opportunity for competitors to exploit the profit which a firm makes when a good is scare, hence increasing the supply (either of the same good, or if this is not possible, of a substitute good).

Under socialism, scarcity is simply a problem to be overcome. Unfortunately, it isn’t a problem which can be overcome. The market doesn’t really overcome it, but exploits it – and socialism can’t do that.

Andrew August 19, 2008 at 5:42 pm

I guess no one is dogmatic past Miller time. :(

Pastaneta August 19, 2008 at 6:27 pm

Sahlins theories are ludicrous AND already shown to be false… On the other hand Milton Friedman was absolutely right…

As an aside as a proud graduate from the department of economics, I have withheld my contribution to Chicago this year because of these 100 nitwits… I hope more will follow suite.

jn August 19, 2008 at 7:56 pm

“If everybody can buy your product, you need to produce less which will raise the price so that fewer people can buy it (but will pay a higher price). As a producer, you’ll bring in more money, spend less and thus make more profit. Hence the instituted scarcity that Sahlins is talking about.”

Dan, it depends on the elasticity of demand for the good. If demand is inelastic, a decrease in supply will increase total revenue for the suppliers. On the other hand, if demand is elastic, if supply drops, total revenue for the producers will actually fall. Furthermore, in a competitive market, suppliers would not reduce their output for this reason, as they would be leaving money on the table (since an individual producer does not have any effect on the overall market, specifically the supply curve). In a noncompetitive market, this has some credence because, but in general its not something to cry yourself to sleep over.

More to the point, scarcity is an always and forever concept. If hunter-gatherers had actually been living in the land of milk and honey, with plenty of food for all, human population would have increased much faster than it did in its early stages, and agrarian and industrial societies would never have developed. As a previous commenter pointed out, inferior systems are replaced.

matts August 19, 2008 at 7:59 pm

The one thing that nobody mentioned is the fact that the U of C, as well as most other universities, have faculties that are on the far left of the political spectrum.

Jason Armstrong August 20, 2008 at 1:51 am

“Neither, really. I just like to argue with people who are dogmatic about things, and libertarians tend to be that way.”

Man, that’s cold!

indiana jim August 20, 2008 at 8:07 am

Sahlins writes: “It will make the university party to an extremist version of liberal capitalism that has proven to serve the welfare of the ruling elite in a number of countries at the cost of whom it may concern — notably the society in general and the poor in particular.”

Q.E.D., Sahlins is simply one of the economic illiteratti. Knowledge, as Thomas Sowell say, is a scarce resource, and insight combined with knowledge is rarer yet. Why should we be surprised when the workings and benevolence of the the invisible hand are not seen by someone? Correct answer (for all the other illiteratti out there): We shouldn’t.

Andrew August 20, 2008 at 8:57 am

Mr. Econotarian,

But, they like grant money that they get to study stuff they like! Duh! ;)

Krishna Neupane August 20, 2008 at 10:59 am

Guys, here is what I have to say how many of you debating here actually lived in a developing countries?…For people in developing countries we need thousands of Friedman, okay if you properly understand what is poverty….

Michael Blowhard August 20, 2008 at 4:07 pm

FWIW, a million years ago I enjoyed reading Sahlins’ “Stone Age Economics.” I don’t doubt that he can get silly, especially where current eventsy topics are concerned — are there many academics who don’t? But a few commenters might want to consider having a wrestle with Sahlins’ actual work before dismissing him too abruptly.

happyjuggler0 August 20, 2008 at 11:30 pm

Personally I think “invisible hand” is probably not the best framing, it makes markets sound like voodoo to some.

The way I think of it is that assuming government has done its limited job well and accounted for nasty externalities in its playing field rules making, as well as diligently punishing theft and fraud, then making money is synonymous with providing goods and services to people that are better in some manner than they can easily get elsewhere.

If under the above prequalifications you make a fabulous amount of money, then that means that you did a fabulous job of filling people’s needs or desires.

Note that doing good deeds won’t necessarily make you money. Charity is one example, not controlling costs is another, while working to improve society as a university (or other nonprofit institute) scientist is another. The second example (in this paragraph) destroys societal value, while the first and third also depend on efficiency and insight, which are hardly universal.

indiana jim August 21, 2008 at 8:37 am

in the above, please excuse my use of “sited” rather than “cited”

:)

Mr. Econotarian August 22, 2008 at 4:08 am

“His 1972 book “Stone Age Economics” compares primitive societies favorably to civilized and modern, industrial societies. He is very clear that that the last 10,000 years were a big mistake. ”

I’d love to read his book, but he refuses to carve a set of stone tablets and have them dragged to my city by yoked oxen. Plus I don’t have any money, and he refuses to accept my honey and gathered nuts in trade as he has collected plenty of honey and nuts. That and I just died of a simple bacterial infection.

Matt August 22, 2008 at 11:06 pm

Oh dear. I ambled into the fray on Delong’s site on substance, because I think Sahlins is wrong and wronger on so much, got a series of counters, and it turns out it’s a political hit. Far out. Let them set it up, enforce standards and peer review. Fine. Isn’t that what the academic praxis of the first amendment is?

I think the scrap above is data-poor. I haven’t seen any empirics (po-mo’s please sit down) on the causal chain of donation origin and research bias. If it exists, for left or right, cite and claim right. Else it’s shite. Simple.

As a foreign national I think all border control officials should have a welcome pack for legal aliens which includes: the complete works of Rod Serling, Twilight Zone, Twin Peaks and the X Files, with a standard additional greeting “welcome to the United States, choose your neighborhood carefully and may your stay in the US not resemble anything in our welcome pack. Good day, and welcome to America. And approach The Blogs and other crazy people with your eyes open…”.

Of course certain parties would outsource it to an airport kiosk, but the result might be the same.

That is, this awareness for a new arrival might become apparent once you got online, negotiated with your housing, insurance, utilities, phone, tv, Social, banking, car, childcare, new boss and misc other cost centers. Which would be about four months.

But surely this doesn’t explain Rogoff and Stiglitz coming out on the scale of the credit crisis about 5 months after many credible live-action commentators did??? So what does?

M

M

Eiji Wolf August 27, 2008 at 1:16 am

“But we do have scarcity of toilet paper in the socialist republic of Venezuela”
..yes, we had that during socialism in Czechoslovakia too.

Don’t believe anybody when they tell you that wealth and development can be achieved via central/governmental meddling in the process.
It cannot.
All it will achieve is, first, slowdown, then stagnation, and finally, destruction of the standard of living, traditional values, and, most importantly, human liberty and dignity.

aion kina March 17, 2009 at 11:20 pm
jim May 13, 2009 at 4:40 am

Every success is based on continuous efforts. It is not possible be done over nigh.

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