Thursday, February 16, 2012

Coming This Spring: "Testing Milton Friedman"



Free to Choose Network -- "2012 is the 100th anniversary of Milton Friedman’s birth. His work and ideas continue to make the world a better place. As part of Milton Friedman’s Century, a revival of the ideas featured in the landmark television series Free To Choose are being revisited in a new 3-part PBS broadcast. It will air across the country this spring and summer. Watch a preview above."

23 Comments:

At 2/16/2012 9:44 AM, Blogger Russell said...

i love the FTC videos. for those that haven't seen them:

http://www.freetochoose.tv/

 
At 2/16/2012 9:57 AM, Blogger AIG said...

Milton Friedman did change my life. It was his TV series that first introduced me to free market ideas.

But why invite someone like Matt Yglesias? Was Rachel Maddow busy that day? It lowers the level of the debate to bring political hacks in.

 
At 2/16/2012 10:30 AM, Blogger Jon Murphy said...

Milton Friedman made me the radical I am today :-P

I first picked up "Capitalism and Freedom" the summer between my Sophomore and Junior year of college, and the rest is history.

 
At 2/16/2012 11:03 AM, Blogger Jeffrey Ellis said...

Nobody could argue with Friedman when he was alive. Forgive me for being cynical, but I wonder if this is an attempt by leftist and Keynsians to discredit Friedman's teachings now that he can no longer argue back.

 
At 2/16/2012 2:49 PM, Blogger VangelV said...

I have used Milton's series to teach my kids about some important issues. That said, I have warned them about Milton's really dangerous ideas that make him very similar to most lefties. Like those lefties Friedman thought of the economy as a complex machine that could be controlled by smart people who could pull the right levers and push the right buttons to get an optimum result.

I point those that are bound to attack the comment above to Milton's monetary ideas. They certainly were not those of a free market supporter.

 
At 2/16/2012 3:15 PM, Blogger Jon Murphy said...

I point those that are bound to attack the comment above to Milton's monetary ideas. They certainly were not those of a free market supporter.

Very true. I believe he coined the term "moniterist."

But he did do a lot to advance the cause of freedom in the political and economic spheres.

 
At 2/16/2012 3:25 PM, Blogger Colin said...

Agree with AIG. Great panel, except what are Matt Yglesias and Clarence Page doing there? Everyone else seems to have legit econ credentials.

 
At 2/16/2012 8:41 PM, Blogger AIG said...

" Like those lefties Friedman thought of the economy as a complex machine that could be controlled by smart people who could pull the right levers and push the right buttons to get an optimum result. "

It's too bad that you didn't understand what he was saying, at all. Gold star for trying though. It is better to have tried to understand Milton, and failed, then never to have tried at all.

"They certainly were not those of a free market supporter."

One may argue, more justifiably in my opinion, that your's aren't either.

 
At 2/16/2012 10:01 PM, Blogger William Bruce said...

"I point those that are bound to attack the comment above to Milton's monetary ideas. They certainly were not those of a free market supporter."

Although I can't technically disagree, that is a high bar to set where monetary matters are concerned. Intellectuals, like everyone else, are products of their time; Friedman endorsed fairly radical monetary theory and policy, to the point of even coming around to the advocacy of proposals that free-banking schoolers could endorse.

Perhaps I give the man too much credit, but when considering both the sorry state of monetary in the mid-20th century and Friedman's contributions to its amelioration, I cannot speak ill of him.

 
At 2/16/2012 10:16 PM, Blogger VangelV said...

It's too bad that you didn't understand what he was saying, at all. Gold star for trying though. It is better to have tried to understand Milton, and failed, then never to have tried at all.

I understand hime fine. He wanted state controlled money where central banks would set the inflation rate to provide the economy with just the right amount of money. He did not want the state out of education. He wanted to make the state more efficient in providing education. He still called for the state to provide all kinds of goods and services that could just as easily have been provided by the private sector and was too much of a Knight/Fisher follower to be a true free market guy.

 
At 2/16/2012 10:17 PM, Blogger VangelV said...

Although I can't technically disagree, that is a high bar to set where monetary matters are concerned. Intellectuals, like everyone else, are products of their time; Friedman endorsed fairly radical monetary theory and policy, to the point of even coming around to the advocacy of proposals that free-banking schoolers could endorse.

Friedman opposed the University of Chicago offering Hayek a position. He still supported state control of money, fiat money, and a central bank. That is hardly a free market champion.

 
At 2/16/2012 10:36 PM, Blogger AIG said...

"I understand hime fine. He wanted state controlled money where central banks would set the inflation rate to provide the economy with just the right amount of money. He did not want the state out of education. He wanted to make the state more efficient in providing education. He still called for the state to provide all kinds of goods and services that could just as easily have been provided by the private sector and was too much of a Knight/Fisher follower to be a true free market guy."

As with most dogmatic ideologues, you have no concept of balancing your utopian "should be"-s with realistic "can be"-s. Milton's suggestions were always balanced against the realistic political and social possibilities of what could be achieved, and always gradually. If you can't do this, you simply make yourself the object of ridicule (insert mises dot org joke here). The dogmatic ideologue recognizes no constraints, regardless of the fact that real life is created through constraints and their balancing.

BTW do you not also want the imposition of state control on banking with your gold obsession or 100% reserve banking? After all, if you're FORCING me to back my currency with a useless metal that has no relation to my economic activity, then aren't you by definition...you know...forcing me?

 
At 2/16/2012 10:49 PM, Blogger AIG said...

"Friedman opposed the University of Chicago offering Hayek a position. He still supported state control of money, fiat money, and a central bank. That is hardly a free market champion."

In your dogmatic ideologue parroting of things you have read on the internet, you have conveniently forgotten to tell us where exactly you got the idea that any of this is "against free markets"? Is there a "free market Bible" that you can quote me? (here's your chance to tell me to go read His Excellency's Dr. Ron Paul 36 books on gold and the coming apocalypse of, gold)

Because for myself, if I follow the historical evolution of classical liberalism, I see no contradiction or rejection of any of the above-mentioned concepts. I certainly don't see them if I follow the evolution of markets throughout history.

But of course, prior experience of the human race, nor the principles of classical liberalism and their evolution, are of any consequence to the dogmatic ideologue. He can only say "Friedman liked fiat money and therefore he was anti-free market", as if it self-evident that "fiat money" is anti free market, while tying your currency to sea shells or the stuff jewelry is made out of, is pro free market.

Why? That is never explained. Because to the dogmatic ideologue what matters are not the questions of what particular end is intended, and what methods are most likely to lead to the desired results (those desired results being derived from concepts of classical liberalism). No. What matters is dogma. Gold is good. That's it. Death to all enemies of Gold.

Of course, the fact that every single commodity backed currency in history has FAILED, certainly does little to make the dogmatic ideologue think.

Of course, the modern concepts of classical liberalism and the defense of free markets rest especially on the practical, not the ideological; free markets and free people are better BECAUSE they produce BETTER results. (except for the Ayn Rand types on whom it all rests on the ideological. But then again, the fringe is a fringe because they're in the fringe)

But you don't ask those questions. You just parrot a particular prescription without consideration of whether it really does produce better results or not, or whether it has shortcomings which undue its advantages, or whether it is realistic and consistent with human experience.

 
At 2/16/2012 10:56 PM, Blogger AIG said...

IE, if Milton was writing a book on what his dream land would look like, his prescriptions would be different. And you would end up with some version of Murry Rothbard's dribble.

But if you're writing on an actual real problem, and how to improve it so as to get more desirable results, constrained by realistic barriers, you end up with Milton Friedman's books.

Now, Milton had a huge impact on these last 30 years and profoundly shifted the direction of society towards a more positive trajectory, while Rothbard is a cult figure for gold aficionados at the Lew Rockwell show. Any particular reason why this may be so?

 
At 2/16/2012 11:19 PM, Blogger William Bruce said...

"He still supported state control of money, fiat money, and a central bank. That is hardly a free market champion."

VangelV, do you deny that Friedman later advocated freezing the monetary base as a first step in the effective privatization of the monetary system?

Would you also deny that his earlier monetary policy prescriptions at least effected a behavior of the money supply more closely mirroring the ideal (presumably that of a free banking system)?

 
At 2/16/2012 11:32 PM, Blogger William Bruce said...

"Because for myself, if I follow the historical evolution of classical liberalism, I see no contradiction or rejection of any of the above-mentioned concepts."

In VangelV's defense, there is strong intellectual support of free banking within the the classical liberal tradition, and not merely some of its libertarian offshoots. Once you grant intellectual robustness to opposing any central bank, you by consequence grant it to rejecting fiat monies, and so on...

 
At 2/17/2012 8:29 AM, Blogger VangelV said...

As with most dogmatic ideologues, you have no concept of balancing your utopian "should be"-s with realistic "can be"-s. Milton's suggestions were always balanced against the realistic political and social possibilities of what could be achieved, and always gradually. If you can't do this, you simply make yourself the object of ridicule (insert mises dot org joke here). The dogmatic ideologue recognizes no constraints, regardless of the fact that real life is created through constraints and their balancing.

BTW do you not also want the imposition of state control on banking with your gold obsession or 100% reserve banking? After all, if you're FORCING me to back my currency with a useless metal that has no relation to my economic activity, then aren't you by definition...you know...forcing me?


There is nothing utopian about letting the market choose the medium of exchange. That is exactly why gold and silver were the basis for money. And there is nothing utopian about private money.

What is utopian is the belief that you can have a stable system if you give a monopoly on the issuance of fiat money to any institution. That does not work in theory and has never worked out historically.

Friedman said a lot of good things. He was a champion of more choice in many areas. But when it comes down to it he tolerated too large a state presence in the economy to be a true champion of individual liberty and free markets. While better than most economists he fell quite short of where he should have been if he really cared about markets and liberty.

 
At 2/17/2012 8:41 AM, Blogger VangelV said...

In your dogmatic ideologue parroting of things you have read on the internet, you have conveniently forgotten to tell us where exactly you got the idea that any of this is "against free markets"? Is there a "free market Bible" that you can quote me? (here's your chance to tell me to go read His Excellency's Dr. Ron Paul 36 books on gold and the coming apocalypse of, gold)

As I pointed out, supporting a monopoly on the creation of money and management of the supply of money and credit is not a free market position. Since the medium of exchange is essential in any economy Friedman's position on money disqualifies him as a true champion of individual liberty and freedom.

Because for myself, if I follow the historical evolution of classical liberalism, I see no contradiction or rejection of any of the above-mentioned concepts. I certainly don't see them if I follow the evolution of markets throughout history.

Your ignorance is common. Most people have been fed a line about the benefits of flexible money controlled by the state. The problem with that position comes from historical facts. It is clear that commodity money has always provided a relatively stable medium of exchange. (Even the great gold discoveries in California and Australia in the mid 19th century did not create material inflationary pressure.) But it is also a historical fact that state fiat money has been a bust when judged through the lens of price stability and purchasing power. There is no period in history that I am aware of when commodity money was replaced by fiat money because of private demand for fiat money. All countries have gone off a commodity standard by state edict, usually to fight some war or another. (See the WWI example as one bit of evidence and the US War of Secession as another.)

History shows that commodity money brings a small but steady deflation that rewards workers, savers, and investors while fiat money brings a large and steady inflation that transfers wealth and purchasing power from workers, savers, and investors to the banking system and the state. This is why the first thing that tyrants always did was gain control over the issuance of money.

 
At 2/17/2012 11:14 AM, Blogger VangelV said...

VangelV, do you deny that Friedman later advocated freezing the monetary base as a first step in the effective privatization of the monetary system?

Near the end of his life Friedman gave a number of interviews and wrote articles in which was praising the central banks for finding the right thermostat (Fisher's equation) and controlling the economy. I am sorry but as much as I admire Milton on other issues there is no way to excuse the damage that he has done to monetary theory. Up until his last days he failed to see the problem that his following of Fisher caused him. Not only did Milton claim that there was some valid general price index, he assumed that it could actually be measured and that it applied to all individuals. His adherence to his failed theory led him to ignore (or fail to see) the massive bubble in financial instruments, housing, and equities that Greenspan was creating.

As a positivist, Friedman did not believe that theories could ever be proven. The way to judge them is to see just how good their predictive powers were. From that perspective, I would say that his monetarist theory failed miserably.

Alan Greenspan's great achievement is to have demonstrated that it is possible to maintain stable prices. He has set a standard. Other central banks around the world, whether independently or by following his example, are following suit. The timeworn excuses for central bank failure to stem inflation will no longer do. They will have to put up or shut up.

Funny how the great man failed to see the hosing bubble that was already popping and many of the problems that the Austrian School economists had seen building and had been warning about for three years. Milton was great at many things. Monetary theory was not one of them. Sadly, he spent most of his time on monetary theory and not enough on the things that he was very good at. Which is why I have my kids watch him explain the problems with minimum wage laws, rent control, and tariffs and keep them away from his immoral anti-liberty monetary ideas.

 
At 2/17/2012 5:25 PM, Blogger William Bruce said...

"Near the end of his life Friedman gave a number of interviews and wrote articles in which was praising the central banks for finding the right thermostat (Fisher's equation) and controlling the economy."

Considering the accusatory level of the rhetoric and the lack of any forthcoming answer to my questions, I decline to respond any further. To talk about "controlling the economy" in the context of Friedman's later thought is simply perverse.

 
At 2/17/2012 6:16 PM, Blogger truth or consequences said...

a three part PBS series??? Really.

and I thought PBS was a left wing, Pinko outfit, subsidized by money extorted at gunpoint that pushed a socialist agenda....guess I was wrong ;)

 
At 2/17/2012 10:06 PM, Blogger VangelV said...

Considering the accusatory level of the rhetoric and the lack of any forthcoming answer to my questions, I decline to respond any further. To talk about "controlling the economy" in the context of Friedman's later thought is simply perverse.

Is it? That is exactly what you do when you manipulate the supply of money and the interest rates.

Here is what Friedman wrote in his WSJ commentary when he praised Greenspan as a great Fed chairman. He said, Inflation averaged 3.7% per year from the end of World War II to the Volcker era, but only 2.4% per year during the Greenspan era. Even more important, inflation was much less variable. In the pre-Volcker, postwar period, it ranged from a low of -2% to a high of over 11%; in the Greenspan period the range was from a low of 1% to a high of 4%. Stated differently, the standard deviation of the inflation rates, a measure of variability, was three times as high during the pre-Volcker period as during the Greenspan period (2.6 versus 0.8)."

What do you think he means when he praises the Fed for reducing the standard deviation of the 'inflation' rate? Why do you suppose he forgot to mention that most of the inflation pre-Greenspan came in the 1970s after the US went off the gold standard?

As I said, Greenspan was great on many topics. Unfortunately, monetary theory was his major weakness. And as much as he talked about freedom and markets when the chips were down he came with the statists on the most important issue of them all.

Like Fisher before him, Friedman was fooled by the illusion of price stability. Just as Fisher did not see the inflation that was hidden by stable prices in the 1920s Friedman failed to see the inflation hidden by the stable prices in the early 2000s. Even as the Austrians were screaming about the distortions in the structure of production due to the artificially low interest rate, something that Monetarists ignore, and warning about the obvious housing bubble Friedman was oblivious to it all because he actually thought that the reported price level stability was actually meaningful.

Because I am running out of space I will continue this on the next posting.

 
At 2/17/2012 10:23 PM, Blogger VangelV said...

Continued...

Considering the accusatory level of the rhetoric and the lack of any forthcoming answer to my questions, I decline to respond any further. To talk about "controlling the economy" in the context of Friedman's later thought is simply perverse.

Let me quote the important parts of another commentary and you tell me what he is really saying. But before you read the commentary you might want to think about what people mean when they talk about thermostats.

The quotes below come from Milton's commentary, The Fed's Thermostat.

"The obvious question: whence the new thermostat? Why just then? Given the near coincidence of the improved behavior and Alan Greenspan's tenure as chairman of the Fed, it is tempting to conclude that Mr. Greenspan was the new thermostat. I am a great admirer of Alan Greenspan and he deserves much credit for the improvement in performance, yet this simple explanation is not tenable. It is contradicted by the simultaneous improvement in the control of inflation by many central banks at about the same time, including the central banks of New Zealand, the United Kingdom, Canada, Sweden, Australia, and still others. Many of these central banks adopted a policy known as inflation targeting, under which they specified a narrow target range for inflation -- 1% to 3%, for example. But inflation targeting and non-inflation targeting central banks did about equally well in controlling inflation, so explicit inflation targeting is not the answer.

Yet it does, I believe, suggest the answer. Central banks the world over performed badly prior to the '80s not because they lacked the capacity to do better, but because they pursued the wrong goals according to a wrong theory. Keynes had taught them that the quantity of money did not matter, that what mattered was autonomous spending and the multiplier, that the role of monetary policy was to keep interest rates low to promote investment and thereby full employment. Inflation, according to this vision, was produced primarily by pressures on cost that could best be restrained by direct controls on prices and wages.

That Keynesian vision was thoroughly discredited by experience in the '70s and '80s. It has since been replaced by what has become known as New Keynesian Economics, which incorporates some key quantity theory (monetarist) propositions: that inflation is always and everywhere a monetary phenomenon; that monetary policy has important effects on real magnitudes in the short run but no important effects in the long run (the long run Phillips curve is vertical), the crucial function of a central bank is to produce price stability, interpreted as a low and relatively steady recorded rate of inflation. Once the banks adopted price stability as their primary goal, they were able to improve their performance drastically.

* * *

Admittedly, this is an oversimplification. The accumulation of empirical evidence on monetary phenomena, improved understanding of monetary theory, and many other phenomena doubtless played a role. But I believe they were nowhere near as important as the shift in the theoretical paradigm. The MV=Py key to a good thermostat was there all along."


The man was talking in approving terms about central banks having found thermostats. He was clearly an advocate of price stabilization where the price level was some arbitrary construction that did not reflect the actual experience of most families. He used a simple mechanical treatment of money. He ignored the structure of production, the false signals sent by artificially low rates, and how meddling with money and credit falsifies investment return calculations made by producers of higher order goods.

I could go on but I trust that I have given you enough. Like I said, the man was great on many subjects. Money was not one of them.

 

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