Friedman on Intolerance: A Critique

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Milton Friedman

http://mises.org/daily/6208/Friedman-on-Intolerance-A-Critique

I’m a bit embarrassed to say so, but I have not yet taken the time to learn how to update Wikipedia pages. But if you do have such skills or the desire and means to learn, as well as the desire to use them, please read on. If not, read on anyway.

I was reading the Wiki for the renowned, yet under-appreciated, economist Ludwig von Mises. It was interesting to note the criticism of him by another economist, Milton Friedman:

Milton Friedman considered Mises inflexible in his thinking:

The story I remember best happened at the initial Mont Pelerin meeting when he got up and said, “You’re all a bunch of socialists.” We were discussing the distribution of income, and whether you should have progressive income taxes. Some of the people there were expressing the view that there could be a justification for it.

However, in the Mises Daily link above, Walter Block gives a different version of events:

What, precisely, was the issue under discussion on the part of those supposed free-market economists? Contrary to our reporter, it was not “distribution of income, taxes, progressive taxes.” Rather, the talks at this Mont Pelerin meeting focused on Freidman’s “negative income tax,” which, long after 1947, he still has the effrontery to defend on libertarian grounds.

The “negative income tax” makes it so that there is a minimum level of income: if your reported income is underneath the minimum, it is supplemented with tax dollars until it equals it. Needless to say, this destroys any financial incentive for people earning an income underneath such a minimum to work harder to increase it to anything below that minimum. The higher the minimum, the greater the number of people facing such a circumstance. Though Friedman ostensibly held no substantial role for the welfare state as his ideal, his judgment is questionable if he thinks that a negative income tax is a good means of transitioning from the then current state of affairs to the ideal. Rather, it sounds like a perfect plan if you want to entrench the welfare state even further.

But the real issue is this: was Mises inflexible in his thinking by calling support of the negative income tax a “socialist” idea? Strictly speaking, socialism is when the means of production are owned and operated by a central authority. The negative income tax supposes that a central authority has a right to some percentage of people’s incomes, i.e. their production, and can do with it as it pleases, which is give it to others in this case. Full socialism would be the central authority taking 100 percent of people’s production. So we could say the negative income tax is socialist to the extent that it steals productive people’s income. But perhaps as important as the amount that the central authority steals is the premise that it has a right to take any of it in the first place. I believe here that the guise of “central authority” obfuscates basic moral ideas in the minds of many people.

Consider this example from Dr. Block’s article: Friedman says gradual change is morally superior to instant change. Block changes the consideration from the welfare state to slavery. We could say chattel slavery in the antebellum US was comparable to taxing 100 percent of one’s income. If we did so, I think the next appropriate question is at what percentage is it no longer slavery? Would Friedman have argued that a gradual transition from slavery to freedom would be morally superior to instant freedom? Even if one were to argue that slaves would be unable to care for themselves, another could respond that any training in agriculture, literacy, etc. that would benefit former slaves could be done in freedom just as well, if not better, as in bondage.

To summarize, it seems that Friedman conflates “inflexibility” with “consistency.” It bothers me that someone who should know better frequently accuses libertarians who actually take the non-aggression principle seriously as being inflexible. He, himself, seemed quite dedicated to his middle-of-the-road free market advocacy. I will, however, give him credit for having the humility to change some of his god-awful positions later in life.

But, to get back to the Wikipedia thing, I think Mises deserves someone to come to his defense against Friedman. A clarification of the criticism, as well as a citation to the Block article, would undoubtedly be an improvement to the page. Please let me know of your heroism if you decide to take up such a challenge.

P.S.

Paul “Too Cool For You” Krugman

As I was looking through Wikipedia pages about economists, I looked at the criticisms facing our boy, Milton. Again he is off-point in his distinction between himself and Rothbard in saying that at least he (Friedman) was “willing to discuss changes that are less than ideal so long as they point [him] in that direction.” Rothbard did, indeed, talk about his ideal: no coercive State at all. Obviously, a smaller State would be a change in the right direction. Duh. Plus, I think Rothbard makes a compelling argument against Friedman’s free market credentials. However, Milton does not deserve the criticism from the Keynesian school. James Galbraith and Joseph Stiglitz blame the ideas of Friedman and the Chicago School for the “financial crisis of 2007-2010.” This is a bit rich since the dominant mainstream macroeconomic paradigm among government and academic economists is the Keynesian neoclassical tradition. Friedman’s famous prescription for the Federal Reserve was a monetary rule, rather than the current regime of discretion, and it never came to be. In fact, if one takes the time to read the cited sources of Galbraith and Stiglitz, they don’t point to any actual policies, just that “The Chicago School bears the blame for providing a seeming intellectual foundation for the idea that markets are self- adjusting and the best role for government is to do nothing.” Sometimes I feel like I must be living in crazy world, since the actual case is that 1) the Chicago School pays more lip-service to “free markets” than many of their advocated policies would justify, 2) the US government has policies far more in line with Keynesian ideas than Chicago school (one oft-cited country with Chicago policies is Chile. The outlook there is optimistic, especially compared to the US and Western Europe), and 3) the majority of professional economists seem to not understand this. I am baffled that Paul Krugman, also mentioned among the Keynesian critics, would say, “It’s extremely hard to find cases in which Friedman acknowledged the possibility that markets could go wrong, or that government intervention could serve a useful purpose.” How hard did you look, Paul? It’s hard to believe that Nobel Prize winners in economics, individuals likely much brighter than myself, would come to these conclusions in good faith. I also have a hard time thinking that they are intentionally being disingenuous. What is another possible explanation?

I’m not sure if it means anything, but Krugman’s Wiki has a “Controversies” section rather than a “criticisms” one. I do not think it’s anywhere near as long as it should be. If you’d like to have a list of things to add to it, please contact me. Or Robert Murphy at consultingbyrpm.com.

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