Monday, 1 August 2016

Milton Friedman: Great advocate, bad economist


Today is the birthday of the late Nobel Pize-winning economist Milton Friedman. Born in the same year as Ludwig Von Mises’s great analysis of monies both hard and soft,The Theory of Money and Credit, Friedman would have been 104. And while he’s best known as a free-market economist, he was a much better public advocate of markets than he was an economist.

As that articulate public advocate, he was immense. This is the person people call Uncle Milt. Many a person was swayed to freer markets by Milton’s articulate arguments – and even one president was sufficiently swayed by his arguments against the military draft to end it.

But as an economist, he was mostly awful. He was a lifelong advocate of soft money, believing a little inflation would do you good. As presidential adviser, he did more to finally sever any connection between money and gold than anyone. Removing this discipline on private spending, he advocated for floating paper currencies that would remove any discipline on government spending. He wrongly diagnosed the Great Depression, suggesting to Federal Reserve chairman Ben Bernanke the wrong cure (gobs of counterfeit capital) for this one. He embraced Keynesianism (“We’re all Keynesians now”!), arguing only on the directions Keynesians should take (inflation, not unemployment). His work would have been much improved by a thorough understanding of that book with which he shared his birth year. Yet instead he spent a lifetime advocating against everything it stood for.



And this is not to even mention his advocacy of the universal welfare benefit, his studied exclusion of Friedrich Hayek from a place at the Chicago Uni economics department he controlled (not a real economist, Friedman sniffed) or the damage caused by his most cited economic paper, arguing that economics is only about what can be measured – about everything else economists should  remain silent.

Thank goodness then that in his very public advocacy for markets, he wasn’t. Then, when he wasn’t talking his book, was when he was at his persuasive best. And still relevant.








Perhaps the worst outcome is that because he is such a great public advocate for capitalism, everyone and his dog takes is economics to be pro-capitalist. But that would be a mistake.



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