John McCarron writes in today’s Chicago Tribune that “Milton Friedman was a great thinker…but the Chicago school of economics he made famous applies mainly to a world that does not exist. Worse, it has given intellectual cover to lesser, self-serving men who have inflicted considerable harm to those of us who do live in the real world.” McCarron’s thesis for the piece is essentially structured around two broad points - that the acolytes of Friedman have attempted to make his theories describe and govern human behavior in ways never intended by the author, and that the world improved by Friedman’s capitalism is not the one we live in today, and is in fact a world that is harmed by our hewing to his ideals. It is an appallingly shallow and ignorant piece that shows its author has paid little attention to what Milton Friedman actually wrote and believed, and demonstrates his ignorance of the current restrictions incumbent on the free market.
On the first point, McCarron acknowledges that free-market capitalism was aided by the force of Friedman’s research and rhetoric as he “literally turned the world on to the enormous power of free markets, the power to deliver what government-controlled economies rarely have: widespread improvement in a peoples’ standard of living.” He goes on to describe how the the technological innovations and agility allowed by the free market has been a considerable benefit to Western economies. But he believes Friedman’s ideology is ignorant of non-economic motivation - that individuals might be motivated “not by economic maximization but by religious fervor or ethnic tribalism, by whimsy or ignorance.” A selection from Free To Choose, written by Friedman and his wife Rose in 1980, will rapidly show that to be untrue:
Narrow preoccupation with the economic market has led to a narrow interpretation of self-interest as myopic selfishness, as exclusive concern with immediate material rewards. Economics has been berated for allegedly drawing far-reaching conclusions from a wholly unrealistic “economic man” who is little more than a calculating machine, responding only to monetary stimuli. That is a great mistake. Self-interest is not myopic selfishness. It is whatever it is that interests the participants, whatever they value, whatever goals they pursue. The scientist seeking to advance the frontiers of his discipline, the missionary seeking to convert infidels to the true faith, the philanthropist seeking to bring comfort to the needy - all are pursuing their interests, as they see them, as they judge them by their own values. (Free to Choose, “The Power of the Market”, p. 27)
As Friedman points out, McCarron’s complaints about free-market capitalism have less to do with a disagreement on philosophy than they do a misunderstanding of terms. Even highly quantitative economics measures utility, not money specifically when it speaks of the effects of price change on human behavior. Utility, simply put, is human happiness and the pursuit of our untrammeled self interest. That freedom is never unlimited but does describe human motivation far beyond the profit motive, and economists from all walks of the profession right of Marxism recognize that fact.
McCarron has another complaint about the limits of Friedman’s market philosophy - he believes that “the Friedmanites never comprehended that perfect markets, in which free men and women make well-informed decisions that benefit everyone over time, never existed and never will. Some have much better information than others. Some are more shrewd. Some are crooks and swindlers.” In response, let us again let Friedman speak for himself:
Just as no society operates entirely on the command principle, so none operates entirely through voluntary cooperation. Each society has some command elements…they may be as straightforward as military conscription or forbidding the purchase and sale of heroin or cyclamates or court orders to named defendants to desist from or perform specified actions. Or, at the other extreme, they may be as subtle as imposing a heavy tax on cigarettes to discourage smoking - a hint, if not a command, by some of us to others of us…we hasten to add that voluntary exchange is not a sufficient condition for prosperity and freedom. That, at least, is the lesson of history to date…but voluntary exchange is a necessary condition for both prosperity and freedom. (Free to Choose, “The Power of the Market”, p. 11)
Again we see McCarron’s dependence on the strawman argument of the “economic man,” who is dismissed in a peremptory fashion within the first chapter of Friedman’s book and cleared away thereafter to make room for a subtle and truthful treatment of human motivations. Just as Friedman (and Friedrich Hayek, and Adam Smith) were aware that the pursuit of utility without restraints is not necessarily the best form of economic organization, every modern economist (left of David Friedman and the anarcho-libertarians) agrees.
I could spend more time demonstrating (with copious quotations from Friedman’s works) why McCarron is misinformed on the limits of free-market capitalism and its ability to describe human behavior. I am, however limited by my inability to find my copy of Capitalism and Freedom which is his masterwork on the intersection between economic theories, human behavior and government. I suppose I could have worse problems though - I could have no copies of Friedman’s works whatsoever, and be in McCarron’s shoes. I do at least feel compelled to address his assertion that “the Chicago school of economics he [Friedman] made famous applies mainly to a world that does not exist.” I find this statement rather surprising considering the numerous parallels between our current time and the latter years of the Carter administration when Milton and Rose Friedman first made their entry into the vocabulary of the common man with their Free to Choose PBS series and the accompanying book. A drastic rise in oil prices spurred on by a cut in production and a drop in the buying power of the U.S. dollar produced rampant inflation and crippled industries that had depended on the supply of cheap power, and we see this pattern repeating again today along with the calls by major politicians to nationalize oil producers and enact price controls on gasoline. These instincts towards protectionism and central control are a direct analogue of the authoritarian sentiment Friedman saw in his time, and we ignore his plain and compelling lessons at our peril.