Monday, 17 October 2005

Helen Clark & Michael Cullen might like it!

Now here's irony for you. Rodney has blogged again on an 'Article that Helen Clark, Michael Cullen et al. should read,' this time with a 1946 article 'Roofs or Ceilings?'

Written by a very young Milton Friedman and George Stigler immediately after World War II and published by Leonard Read's Foundation for Economic Education (FEE), it points out the bad economics of price controls -- but as Ayn Rand pointed out at the time it would give politicians like Helen Clark and Michael Cullen much to crow about, as it asserts that the free market is just another form of rationing.

Those wondering why Rand fell out with the conservative movement can look to this very article for what represented the final straw for Rand.

Rand had great hopes for Read's FEE when it was set up (Henry Hazlitt outlines its beginnings here). Read had told Rand he "considered [her] one of the best and most strict authorities on the proper philosophy on our side, since he admired [her] ability to see when our cause had been given away by implication." Rand was equally laudatory of Read, considering him her "one last hope of a conservative who would act on the proper principles." Rand had allowed FEE to publish her 'Textbook of Americanism,' and agreed to act as the Foundation's 'ghost' to ensure that the cause wasn't 'given away by implication'; Read however never sent this piece to Rand to check, and as she said so vehememently when it came out, it does give the game away completely. "Collectivist propaganda," she called it. "The most pernicious thing ever issued by an avowedly conservative organization,” she continued.

She 'raised hell' with Read over the article. In a 1947 letter summarising why (there is a longer letter of September 1946 discussing it in much more detail), she said,
I raised hell with him for publishing that whole pamphlet (Roofs or Ceilings?) --- because it advocates collectivism in its premises and implications; because it hints that the nationalization of private homes might be the proper solution for the housing shortage; and because there is no excuse for anyone in his right mind to call the free-market, free-enterprise system a 'system of rationing'!
After much analysis of the blunders made by Friedman and Stigler that 'give the game away,' she concludes her longer letter by referring to the "disgraceful performance on page 10" (that's page 8 of the PDF by the way):
Without any of my analysis, the last paragraph on that page prove that the authors are Collectivists. The Editor's Note proves that the publishers [ie., Read and his colleagues at FEE] know it... If the publishers classify their own authors as "those who put equality above justice and liberty," this means -- in plain language -- an admission they are publishing the work of Collectivists.
As David R. Henderson points out, the older Friedman did get much better in his defence of capitalism -- Free to Choose was surely his high point -- but his manner of argument here in 'Roofs or Ceilings?' was surely a low, and it proved as she was often wont to say, that you can't divorce economcs and ethics as conservatives so frequently attempt to do.
* The text of that letter can be found in the book 'The Letters of Ayn Rand,' from where all the quotes above come.


  1. I think there is some truth the the comment that the free market is a system of rationing. People ration off the money from their earnings when they buy things. The rations are given to you by your employer based on your perceived worth to them.

    It might very unlike traditional practices known as "rationing", because the share is not equal and the basic commodity is money, and not food or cigarettes. The system of price-on-demand is the method that this is extended to balance the "rationing" of individual items.

    But in a sense, it is still a form of rationing to stop one person from, for instance, taking all of the food from a supermarket in one visit.

    Is this too liberal a view of the word "ration" for a rational thinker?

  2. Friedman here was in the process of developing and articulating his views. One should she it as one step along the journey. Her analysis of this article wasn't very fair.


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