Wednesday, May 29, 2013

Axis of Envy

David Henderson recently linked to a symposium on Milton Friedman that had some very curious contributions.  From Richard Posner;
Friedman’s mature work, which can be said to have begun with his book Capitalism and Freedom (1962), largely overlapped economic and associated political developments that provided support for Friedman’s economic philosophy. His timing was perfect!
Not to mention his predictive accuracy, Dick.
The combination of slow economic growth and high inflation in the 1970s, coupled with growing evidence of excessive regulation of the transportation, telecommunications, broadcasting, electrical power, and other major industries, gave rise both to a deregulation movement at the end of that decade and to increased receptivity to Friedman’s emphasis on the economic virtues of free markets. 
Note the chronology; in 1962 Friedman, in a best selling book, promotes the virtues of free markets and the problems with centralized regulation of industry, as well as military conscription, price controls, fixed exchange rates, anti-trust law, occupational licensure.... In the 1970s, in a happy accident of timing, the nation adopts many of Friedman's prescriptions!
His economic doctrines were eagerly embraced by both President Reagan and Prime Minister Thatcher...
Actually, they were embraced by private citizens Reagan and Thatcher back in the 1960s.  Reagan used to carry a copy of Capitalism and Freedom in his suit pocket, and read from it whenever he had a free moment.
 ... and by the governments of the newly free nations of central and eastern Europe when Soviet control of the region suddenly collapsed at the end of the 1980s. That collapse, moreover, seemed an empirical vindication of free-market
Yet Friedman’s influence on public policy, like that of Hayek in Europe, asdistinct from the celebrity generated by the congeniality of his ideas to government leaders, probably was small. If one asks oneself whether Reagan and Thatcher needed Friedman to see the economic libertarian light, the answer is likely to be no. 
Of course, we don't have to speculate, since both Reagan and Thatcher DID see the light thanks, at least in large part, to Friedman. Posner seems to be in denial.  We can thank Friedman for the end to the military draft--here he influenced Richard Nixon--the replacement of the fixed exchange rates linked to gold of Bretton Woods, the end to the stagflation of the 1970s thanks to Paul Volcker accepting Friedman's dictum that inflation is always and everywhere a monetary phenomenon. And a few minor improvements such as the experiments with school vouchers that have provided some less advantaged kids a chance at an education.

The Age of Friedman really began with Volcker's monetary--followed in 1987 by Alan Greenspan's--reforms that ushered in a quarter century of unprecedented prosperity.  From the end of 1982 through the end of 2007 there were only two--short and mild--recessions.  In the preceding 25 years there were six.

Why do we have the suspicion that had Friedman not died in 2006, the unpleasantness of 2008, might have been moderated by his intellectual firepower?

More to come on this, as there are even worse slanders than Posner's that need mentioning.

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