R.I.P. Milton Friedman

Milton Friedman

R.I.P. Milton Friedman

Milton Friedman, Nobel prizewinning economist, died at 94. Friedman was a free market economist who opposed Keynesian economic theory and most forms of government regulation of private markets. He got the Nobel prize for correctly forecasting the stagflation of the 1980s. He was outside the mainstream of economic theory most of his long career at the University of Chicago, but he and his Chicago school associates influenced American economic policy and that of many other countries as well.

Paul Samuelson of MIT used to joke to his classes that "just because Friedman said it, it's not necessarily untrue."

Friedman's obituary in the New York Times  ran to a full page, space usually reserved for kings, queens and presidents.

Here is a link to the obit which will give you a quick lesson in post-WWII economics.

http://www.nytimes.com/2006/11/16/business/17friedmancnd.html

 

 

Duncan K. Foley--"Adam's Fallacy--A Guide to Economic Theology"

Harvard economist Duncan Foley has recently published a book which questions economic orthodoxy or as he calls it "economic theology." Foley maintains that, as is the case with other disciplines, economics has declared independence from rule by religion, custom, intuition or 'speculative philosophical discourse.'

According to Foley, economics has historically suggested what attitudes people should take about our capitalist market system and about moral conflicts accompanying it.

"Economics functions in a theological role in our society to justify the ways of the market to men....Economists are becoming priestly figures, with arcane knowledge and special powers."

Several areas come to mind where free economic doctrine is used to justify pure free market policies. Trade policy is justified by the economic doctrine of comparative advantage, and orthodox economists and trade negotiators of both political parties have resisted proposals to make trade agreements contingent on the adp[topm of environmental and worker rights and safety standards. More and more people are beginning to question the benefits of unalloyed free trade to the American economy. Trade opponents are asking why American workers should be expected sacrifice their jobs to competition from overseas operations of American companies or their contractors where workers work long hours in unsafe conditions in plants that pollute the environment. Another policy long opposed by many orthodox economists is the minimum wage. Their opposition has based not on empirical studies but rather dogmatic, theological assumptions about the behavior of employers in the labor market. More recent studies have brought these assumptions into question. Moreover, voters by a wide margin support the minimum wage.

Executive compensation is another area where traditional economic motivation theory's contribution is being questioned based on results in the past 20 years or so which have seen a huge increase in the compensation of corporate officers, many believe without the corresponding increase in results posited by the theories handed to us by traditional economic theory. Apparently the sky's the limit for compensation needed to motivate corporate CEO's at the same time workers in their companies are expected to work for less and give up their pensions and health care benefits. Some of our leading business handed us the theory that CEO compensation should be more closely aligned with the interests of the shareholders by the awarding of stock options. This may or may not have been a good theory, but in practice the result in too many cases was not so good. Company after company cooked their books to pump the price of their stock to increase the value of their officers' options. And for many, that wasn't enough so they back-dated the options to make sure they were worth more than if the stock was valued as of the date they were actually issued.

Organizational behavior theory says that human motivation in organizations is complex and influenced by many factors not just money as assumed by traditional economic "theology."

 

http://www.nytimes.com/2006/11/25/us/25beliefs.html

 

 

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7 comments

Paul Edmondson profile image

Paul Edmondson 9 years ago from Burlingame, CA

Thanks for posting. I've read some of his papers. Very interesting guy.


Davinne profile image

Davinne 9 years ago

Very interesting, sadly to say I don't think I've ever heard of him; will not read up on him...insiteful


Chuck profile image

Chuck 9 years ago from Tucson, Arizona

Great Hub. Many of my professors at UW-Milwaukee studied under Friedman and we used his text in our graduate micro economics theory class. I first saw the announcement of his death in a link to the Times of London and that was also a long one. I knew of his influence on U.S. economic policy but he was also a close advisor to Lady Margaret Thatcher and her government in the U.K.


Iðunn 9 years ago

I just read your linked krugman piece. excellent article.


Ralph Deeds profile image

Ralph Deeds 8 years ago Author

Just so we know what kind of ideologues we are dealing with with Friedman and Greenspan, here's a quotation from an article in today's (2-10-08) NYT by middle-of the-road economist Robert H. Frank:

"The Nobel laureate Milton Friedman, for example began the opening chapter of his book, "Capitalism and Freedom," by quoting the already-famous passage from Kennedy's inaugural address in which he said, "Ask not what your country can do for you, ask what you can do for your country." Mr. Friedman seemed to find the the statement unintelligible, or at any rate not "worthy of the ideals of free men in a free society."

"The free man," he wrote "will ask neither what his country can do for him nor what he can do for his country."

In other words, Friedman's politics are straight out of Ayn Rand as are Alan Greenspan's. Greenspan's devotion to free markets and aversion to regulation are one of the reasons why our economy is currently sliding down the drain.

http://www.nytimes.com/2008/02/10/business/10view....

Another article in today's NYTimes by Ben Stein concisely summarizes where we are and how we got there. His article concludes as follows:

"But something else was missing here. since the era of Ronald Reagan, we have been told by powerful groups that regulation is bad and that our economy will grow like magic if we take it away. So regulation was removed from savings and loans, and they were looted mercilessly.

The Glass-Stegall Act was repealed so that large commercial banks could get into selling investments, and we got the near ruin of immense banks. And regulation of the mortgage-based securities was confined to a boilerplate that says everything and means nothing. And the cheerleaders in Washington say, "Now we need even less regulation!" And the Supreme Court, that highest judicial body in the land, just spoke through its cloaks most deep and distinguished, and severely limited the ability of shareholders to file federal class-action suits against investment banks that help a company accused of committing fraud.

"Is anyone ever going to wake up to the fact that there is a lot of larceny in the human heart and that there are a lot of sheep waiting to be shorn and that regulation is not a bad thing? Or will we just lurch from massive meltdown to massive theft and on and on? Is anyone ever going to get it? Anyone? Anyone?"

http://www.nytimes.com/2008/02/10/business/10every...


Ralph Deeds profile image

Ralph Deeds 6 years ago Author

Thanks for your kind comment. I enjoy your Hubs, too.


Wiz 6 years ago

The kind of freedom Friedman and his rightwing oligarchs advocate is the freedom to exploit, plunder and evade responsibility to any other members of the living community.

We've morphed into a Corporate Communism as the Communists have morphed into State Capitalism that's beating us at our own game.

As we foul our Earth-nest and destroy all species who dwell in it, we are quickly moving towards life imitating art . . . and in this case, the art is the book and movie Bladerunner.

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