Milton Friedman passes away...

[Crushaholic]

very sad...RIP Mr. Friedman...

http://www.usatoday.com/money/economy/2006-11-16-obituary-friedman_x.htm

Milton Friedman, the Nobel Prize-winning economist who advocated an unfettered free market and had the ear of three U.S. presidents, died Thursday at age 94.
Friedman died in San Francisco, said Robert Fanger, a spokesman for the Milton and Rose D. Friedman Foundation in Indianapolis. He did not know the cause of death.

"Milton's passion for freedom and liberty has influenced more lives than he ever could possibly know," said Gordon St. Angelo, the foundation's president and CEO, said in a statement. "His writings and ideas have transformed the minds of U.S. presidents, world leaders, entrepreneurs and freshmen economic majors alike."

In more than a dozen books, a column in Newsweek magazine and a TV show on PBS, Friedman championed individual freedom in economics and politics. The longtime University of Chicago professor pioneered a school of thought that became known as the Chicago school of economics.

His theory of monetarism, adopted in part by the Nixon, Ford and Reagan administrations, opposed the traditional Keynesian economics that had dominated U.S. policy since the New Deal. He was a member of Reagan's Economic Policy Advisory Board.

His work in consumption analysis, monetary history and stabilization policy earned him the Nobel Prize in economics in 1976.

"He has used a brilliant mind to advance a moral vision — the vision of a society where men and women are free, free to choose, but where government is not as free to override their decisions," President Bush said in 2002. "That vision has changed America, and it is changing the world."

Friedman favored a policy of steady, moderate growth in the money supply, opposed wage and price controls and criticized the Federal Reserve when it tried to fine-tune the economy.

A believer in the principles of 18th century economist Adam Smith, he consistently argued that individual freedom should rule economic policy. Outspoken and controversial, Friedman saw his theories attacked by many traditional economists such as Harvard's John Kenneth Galbraith.

In an essay titled "Is Capitalism Humane?" he said that "a set of social institutions that stresses individual responsibility, that treats the individual ... as responsible for and to himself, will lead to a higher and more desirable moral climate."

Friedman acknowledged that "pure capitalism" did not exist, but said that nations that cherished freedom must strive to keep the economy as close to the ideal as possible.

He said government should allow the free market to operate to solve inflation and other economic problems. But he also urged adoption of a "negative income tax" in which people who earn less than a certain amount would get money from the government.

He lived to see free market reforms spread in the former communist world and Latin America, but played down his own influence.

"I hope what I wrote contributed to that, but it was not the moving force," Friedman told The New York Sun in March 2006. "People like myself, what we did was keep these ideas open until the time came when they could be accepted."

Born in New York City on July 31, 1912, Friedman began developing his economic theories during the Great Depression when President Franklin D. Roosevelt's based his New Deal on the ideas of Britain's John Maynard Keynes, the most influential economist of the time.

Keynes argued that the government should intervene in economic affairs to avoid depressions by increasing spending and controlling interest rates.

Friedman graduated from Rutgers University in 1932 and earned his master's degree the following year at the University of Chicago.

[Rohirrim]

I'm a Keynesian, but RIP anyway, Milt.

[W*GS]

Damn.

[elsid13]

One of the greatest minds in the last half century. Amazing man

[BroncoBuff]

He urged adoption of a "negative income tax" in which people who earn less than a certain amount would get money from the government.

Wow ... doesn't sound like any 'Chicago school conomics' I was ever taught.


I'm a Keynesian.
I'm not so clear here ... gimme a thumbnail of each as you see them, Ro. Are they opposites?

The Keynes nutshell in the article ("the government should intervene in economic affair") sounds more like the Milton Friedman I was taught, in that the Chicago school people - two of whom taught at my law school - believed the feds should have stepped in during the depression and flooded the economy with cheap money. But I suppose FDR did just that - in a different way - through New Deal programs.

[Rohirrim]

Wow ... doesn't sound like any 'Chicago school conomics' I was ever taught.



I'm not so clear here ... gimme a thumbnail of each as you see them, Ro. Are they opposites?

The Keynes nutshell in the article ("the government should intervene in economic affair") sounds more like the Milton Friedman I was taught, in that the Chicago school people - two of whom taught at my law school - believed the feds should have stepped in during the depression and flooded the economy with cheap money. But I suppose FDR did just that - in a different way - through New Deal programs.

IMO, economics is a form of shamanism, but the way I understand it is that Friedman advocated a no-holds-barred free market, kind of like Smith's original laizzez-faire economics (and let the loser take the hind teat) while Keynes preferred a regulated approach, realizing that when an economy tanks, it's the working man who pays for it, so, when the situation demands it, he recommended government stepping in with deficit spending or tax manipulations to ease recessions, forestall depressions and curb inflation. I don't really know whose philosophies we're following anymore in the U.S. At the beginning of Bush's first term, he did a bunch of deficit spending to ease a slump and Greenspan was always messing with the interest rates to control inflation, but these guys consider themselves free marketeers. So, who knows? I just know I'm opposed to the idea of unregulated capitalism, due to its inherently dog-eat-dog, winner-take-all ethos.

[elsid13]

IMO, economics is a form of shamanism, but the way I understand it is that Friedman advocated a no-holds-barred free market, kind of like Smith's original laizzez-faire economics (and let the loser take the hind teat) while Keynes preferred a regulated approach, realizing that when an economy tanks, it's the working man who pays for it, so, when the situation demands it, he recommended government stepping in with deficit spending or tax manipulations to ease recessions, forestall depressions and curb inflation. I don't really know whose philosophies we're following anymore in the U.S. At the beginning of Bush's first term, he did a bunch of deficit spending to ease a slump and Greenspan was always messing with the interest rates to control inflation, but these guys consider themselves free marketeers. So, who knows? I just know I'm opposed to the idea of unregulated capitalism, due to its inherently dog-eat-dog, winner-take-all ethos.

That is not exactly true, in a nut shell Friedmen advocated that markets are the most effective methods of allocation limited resources (which they are) and intervention by the government cause ineffective allocation of resources
because most of the time the government oversupplies resources to things that are not in demand by the market. Keynes believed that the government with the correct knowledge could manipulate the markets through fiscal policies to ensure steady predicatible markets for everyone. Keynes fails because of two things having the correct knowledge (there is transaction cost) and timing (the system needs to manipulated at the "correct second") Friedmen theory is correct but fails to take into accounts things like free rider problem, that we have the prefect market and sometime society wants ineffective resources allocations.

[Rohirrim]

That is not exactly true, in a nut shell Friedmen advocated that markets are the most effective methods of allocation limited resources (which they are) and intervention by the government cause ineffective allocation of resources
because most of the time the government oversupplies resources to things that are not in demand by the market. Keynes believed that the government with the correct knowledge could manipulate the markets through fiscal policies to ensure steady predicatible markets for everyone. Keynes fails because of two things having the correct knowledge (there is transaction cost) and timing (the system needs to manipulated at the "correct second") Friedmen theory is correct but fails to take into accounts things like free rider problem, that we have the prefect market and sometime society wants ineffective resources allocations.

See? This is what I mean about economics. I don't understand a word of this post. :rofl:

[elsid13]

See? This is what I mean about economics. I don't understand a word of this post. :rofl:


sorry, I was trying to put it into layman terms.

[W*GS]

Read the Friedmans' "Free to Choose". Or watch the TV show.

[W*GS]

There's this passage near the beginning of his classic "Capitalism and Freedom":

"In a much quoted passage in his inaugural address, President Kennedy said, "Ask not what your country can do for you -- ask what you can do for your country." It is a striking sign of the temper of our times that the controversy about this passage centered on its origin and not on its content. Neither half of the statement expresses a relation between the citizen and his government that is worthy of the ideals of free men in a free society. The paternalistic "what your country can do for you" implies that government is the patron, the citizen the ward, a view that is at odds with the free man's belief in his own responsibility for his own destiny. The organismic, "what you can do for your country" implies that government is the master or the deity, the citizen, the servant or the votary. To the free man, the country is the collection of individuals who compose it, not something over and above them. He is proud of a common heritage and loyal to common traditions. But he regards government as a means, an instrumentality, neither a grantor of favors and gifts, nor a master or god to be blindly worshipped and served. He recognizes no national goal except as it is the consensus of the goals that the citizens severally serve. He recognizes no national purpose except as it is the consensus of the purposes for which the citizens severally strive.

The free man will ask neither what his country can do for him nor what he can do for his country. He will ask rather "What can I and my compatriots do through government" to help us discharge our individual responsibilities, to achieve our several goals and purposes, and above all, to protect our freedom? And he will accompany this question with another: How can we keep the government we create from becoming a Frankenstein that will destroy the very freedom we establish it to protect? Freedom is a rare and delicate plant. Our minds tell us, and history confirms, that the great threat to freedom is the concentration of power. Government is necessary to preserve our freedom, it is an instrument through which we can exercise our freedom; yet by concentrating power in political hands, it is also a threat to freedom. Even though the men who wield this power initially be of good will and even though they be not corrupted by the power they exercise, the power will both attract and form men of a different stamp."

[Bronco_Beerslug]

Friedman had one thing right, allowing insider trading (which would give a clearer picture of the company or security in question) would be better for markets not detrimental.

[W*GS]

Friedman's Sampler
A selection of writings from The Wall Street Journal.

BY MILTON FRIEDMAN

On Freedom
It is important to emphasize that economic arrangements play a dual role in the promotion of a free society. On the one hand, "freedom" in economic arrangements itself a component of freedom broadly understood, so "economic freedom" is an end in itself to a believer in freedom.

In the second place, economic freedom is also an indispensable means toward the achievement of political freedom. . . .

A citizen of the United States who under the laws of various states is not free to follow the occupation of his own choosing, unless he can get a license for it, is likewise being deprived of an essential part of his freedom. So economic freedom, in and of itself, is an extremely important part of total freedom.

The reason it is important to emphasize this point is because intellectuals in particular have a strong bias against regarding this aspect of freedom as important. They tend to express contempt for what they regard as material aspects of life and to regard their own pursuit of allegedly higher values as on a different plane of significance and as deserving special attention. But for the ordinary citizen of the country, for the great masses of the people, the direct importance of economic freedom is in many cases of at least comparable importance to the indirect importance of economic freedom as a means of political freedom.

Viewed as a means to the end of political freedom, economic arrangements are essential because of the effect which they have on the concentration of power. A major thesis of the new liberal is that the kind of economic organization that provides economic freedom directly, namely, organization of economic activities through a largely free market and private enterprises, in short, through competitive capitalism, is also a necessary though not a sufficient condition for political freedom.

The central reason why this is true is because such a form of economic organization separates economic power from political power and in this way enables the one to be an offset to the other. I cannot think of a single example at any time or any place where there was a large measure of political freedom without there also being something comparable to a private enterprise market form of economic organization for the bulk of economic activity.

--from "Capitalism and Freedom: Why and How the Two Ideas Are Mutually Dependent," May 17, 1961

On the Free Market
What most people really object to when they object to a free market is that it is so hard for them to shape it to their own will. The market gives people what the people want instead of what other people think they ought to want. At the bottom of many criticisms of the market economy is really lack of belief in freedom itself.

The essence of political freedom is the absence of coercion of one man by his fellow men. The fundamental danger to political freedom is the concentration of power. The existence of a large measure of power in the hands of a relatively few individuals enables them to use it to coerce their fellow men. Preservation of freedom requires either the elimination of power where that is possible, or its dispersal where it cannot be eliminated.

It essentially requires a system of checks and balances, like that explicitly incorporated in our Constitution. . . .

The person who buys bread doesn't know whether the wheat from which it was made was grown by a pleader of the Fifth Amendment or a McCarthyite, by person whose skin is black or whose skin is white. The market is an impersonal mechanism that separates economic activities of individual from their personal characteristics. It enables people to cooperate in the economic realm regardless of any differences of opinion or views or attitudes they may have in other areas.

--from "The New Liberal's Creed: Individual Freedom, Preserving Dissent Are Ultimate Goals," May 18, 1961

On Free Trade
What we ought to do is practice what we preach. We have been going around preaching the virtues of free enterprise, of free competition in a free market. What have we been doing? We've been practicing the opposite, not only through our foreign aid program, but also at home. We tell other countries, use the market: we tell our farmers, look to Washington. We tell other countries, don't try to be self-sustained; try to develop valuable industries that can compete on the international market, and then what do we do? We impose import quotas on oil, we impose tariffs on goods that come in, we dump agricultural products abroad, and impose quota on their import at home. The rest of the world listens to what we say and they think, "now there is a fine bunch of hypocrites," and they are right.

--from "An Alternative to Aid: An Economist Urges U.S. to Free Trade, End Grants of Money," April 30, 1962

On Inflation
If the Fed does not explain to the public the nature of our problem and the costs involved in ending inflation, if it does not take the lead in imposing the temporarily unpopular measure required, who will?

--From "Why Curbing Inflation Is the Fed's Job, March 6, 1974

On Taxes
To summarize, deficits are bad--but not because they necessarily raise interest rates. They are bad because they encourage political irresponsibility. They enable our representatives in Washington to buy votes at our expense without having to vote explicitly for taxes to finance the largesse. The result is a bigger government and a poorer nation. That is why I favor a constitutional amendment requiring Congress to balance the budget and limit taxation.

--from "The Taxes Called Deficits," April 24, 1984

On the Economy
The Wall Street Journal has been a firm and dedicated supporter of free markets at home and free trade abroad. It has repeatedly stressed its view that the invisible hand of Adam Smith is a far more effective and equitable means of organizing economic activity than the visible hand of government. Yet when it comes to foreign economic policy, a recent editorial, "Beyond Venice" (June 8), relies upon a wholly different and thoroughly incompatible set of ideas.

According to that editorial, "The economic summits of leading free-market nations are a sound recognition that the world economy defies sovereign borders, and can be run only through international cooperation."

Would the Journal describe the American economy as being "run," whether through international cooperation or by the powers that be in Washington or through cooperation among the individual states? Or would it rather, in accordance with its general philosophy, describe it as a system that is coordinated by the voluntary activities of millions of individuals, a system that runs but is not run?

--from "Please Reread Your Adam Smith," June 24, 1987

On Social Security
I have long been a critic of Social Security, basically because I believe that it is not the business of government to tell people what fraction of their incomes they should devote to providing for their own or someone else's old age. On a more pragmatic level, Social Security is another example of the generalization that government programs typically have effects that are the opposite of those intended by their well-meaning sponsors (what Rep. Richard Armey calls the "invisible foot of government").

The well-meaning sponsors intended Social Security to ensure a minimum income to the poor in their old age. It has largely done that, but at the cost of what they would have regarded as a perverse redistribution of income from the young to the old, from black to white, from the relatively poor to the relatively well-to-do.

From its inception, Social Security has been an unholy combination of two items: a flat-rate tax on earnings up to a maximum with no exemption and a benefit program that awards subsidies that have essentially no relation to need but are based on such criteria as marital status, longevity and recent earnings. As I wrote many years ago, "hardly anyone approves of either part separately. Yet the two combined have become a sacred cow. What a triumph of imaginative packaging and Madison Avenue advertising!"

--from "Social Security: The General And the Personal," March 15, 1988

On the Future
Let us put aside the scarecrows of the twin deficits and face up to the real problems that threaten U.S. growth and prosperity: excessive and wasteful government spending and taxing, including in particular the real time bomb in Social Security, Medicare and Medicaid programs; concealed taxes in the form of mandated expenditures on private business; excessive and misguided regulation of individuals as well as businesses; the changes in tort legislation that are discouraging innovation; and not least, the recent increase in protectionism and the threat of a further major increase. We should and can do something about these problems, not allow ourselves to be diverted by politically convenient scarecrows.

--from "Why the Twin Deficits are a Blessing," Dec. 14, 1988

On Health Care Prices
Toward the end of World War II, I served as an instructor in a quality-control course for Navy procurement officers. It was held in Hershey, Pa. As I recall, we stayed at the Hershey Hotel, on the corner of Cocoa Avenue and Chocolate Boulevard, across the street from the Hershey Junior College, where the actual instruction took place, a block or so from the Hershey Department Store, and so on. You get the idea. The stench--or perfume--of paternalism was heavy in the air.

Early in the century such company towns, most far less benevolently paternalistic than Hershey, were common. Workers who were employed at mines or factories located far from large cities, in towns that typically had only a single major employer, were often required, or induced, to live in company housing and buy their food and other supplies at company stores. In effect, they were paid in kind rather than in cash--the so-called truck system. . . .

The company town has been revived in one major area: medical care. It is taken for granted that workers should receive their pay partly in kind, in the form of medical care provided by the employer. How come? Why single out medical care? Surely food is no less essential to life than medical care. Why is it not at least as logical for workers to be required to buy their food at the company store as to be required to buy their medical care at the company store?

--from "Pricing Health Care: The Folly of Buying Health Care at the Company Store," Feb. 13, 1993

On Jobs
Proposed economic policies tend to be judged in terms of jobs "created." That is the wrong criterion. The economic problem is not creating jobs. That is easy: Hire people at minimum wages (or lower) to dig holes and fill them. True, raising taxes to finance that project would destroy jobs, but the jobs destroyed would be high-wage jobs, the jobs created low-wage jobs, so for each job destroyed more than one job would be created--a net gain of jobs.

The real problem is to establish an economic environment in which there is a demand for workers at wages that those workers not only regard as satisfactory, but are qualified to earn: Better qualified workers and better wages--not simply more jobs--is the real problem.

--from "Better Workers, Better Wages: The Real Issue," June 1, 1993

On the Flat Tax
The only way we are ever likely to get it is if there is a drive for a constitutional convention to repeal the 16th Amendment (which gives Congress the power to tax income) and replace it with one mandating a flat-rate tax.

However, I regret that that is not an immediate prospect.

--from "Why a Flat Tax Is Not Politically Feasible," March 30, 1995

On Health Care
The best way to restore freedom of choice to both patient and physician and to control costs would be to eliminate the tax exemption of employer-provided medical care. However, that is clearly not feasible politically. The best alternative available is to extend the tax exemption to all expenditures on medical care, whether made by the patient directly or by employers, to establish a level playing field, in terms of the currently popular cliche.

Many individuals would then find it attractive to negotiate with their employer for a higher cash wage in place of employer-financed medical care. With part or all of the higher cash wage, they could purchase an insurance policy with a very high deductible, i.e., a policy for medical catastrophes, which would be decidedly cheaper than the low-deductible policy their employer had been providing to them, and deposit all or part of the difference in a special "medical savings account" that could be drawn on only for medical purposes. Any amounts unused in a particular year could be allowed to accumulate without being subject to tax, or could be withdrawn with a tax penalty or for special purposes, as with current Individual Retirement Accounts--in effect, a medical IRA. Many employers would find it attractive to offer such an arrangement to their employees as an option.

--from "A Way Out of Soviet-Style Health Care," April 17, 1996

On School Choice
One result has been experimentation with such alternatives as vouchers, tax credits, and charter schools. Government voucher programs are in effect in a few places (Wisconsin, Ohio, Florida, the District of Columbia); private voucher programs are widespread; tax credits for educational expenses have been adopted in at least three states and tax credit vouchers (tax credits for gifts to scholarship-granting organizations) in three states. In addition, a major legal obstacle to the adoption of vouchers was removed when the Supreme Court affirmed the legality of the Cleveland voucher in 2002. However, all of these programs are limited; taken together they cover only a small fraction of all children in the country.

Throughout this long period, we have been repeatedly frustrated by the gulf between the clear and present need, the burning desire of parents to have more control over the schooling of their children, on the one hand, and the adamant and effective opposition of trade union leaders and educational administrators to any change that would in any way reduce their control of the educational system.

--from "Free to Choose," June 9, 2005

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