Not Friedman!
from Peter Radford
While I was checking the inner debates the Republicans are having about health care I came across this quote [in an article written by Tierney Sneed in TPM] from Representative David Brat, an extreme right winger:
“When it comes to how much you want to park in the HSAs for providing catastrophic care, that, when it comes, to the safety net, we have to find the Milton Friedman way of doing that,” Brat said. “The Price bill would do tax credits. I am not a fan of those because it keeps the federal government in the center of that.”
My heart sank.
Milton Friedman? Really.
His version of economics is simply an ideology cloaked in clever language. And it is profoundly anti-democratic.
Friedman’s stalwart libertarianism led him to develop an economics that started, unscientifically, with a built-in bias against communal action. This meant that anything the government did was, a priori, damaging to the magic that Friedman was desperate to ascribe to the workings of something he, and most economists, call markets.
Markets, you see, are wonderlands that always and inevitably lead to efficient outcomes. And it is no good any starry eyed liberal tinkering with those outcomes. They are magically correct. By correct we mean that they cannot be improved upon. Economists have this vice like attachment to certain core beliefs. One of those is that, if left unfettered, markets will zero in on an allocation of stuff that can never be improved, especially by meddlesome governments.
The way you get to this particular promised land is by letting the great forces of supply and demand batter away at individual preferences and budgets until all the trading and so on ends with no one able to make another trade without such a trade making someone else worse off. It sounds wonderful. Now to make this all work we have to believe in magic. We have to suspend our intelligence and imagine a world where everyone knows exactly what everyone else is doing, where no one cheats, where everyone is marvelously rational, where they don’t suddenly change their minds, where they can calculate at the speed of light, absorb vast amounts of data, and always — yes always — arrive at precisely that combination of stuff they wanted. Within the constraints of their budget of course.
The distribution of stuff in this fantasy world is not an issue to libertarians like Friedman. It is always deserved. It is always morally right. This leads the libertarians to have to argue that the distribution of original privilege and opportunity is equally deserved. They don’t care about egalitarian opportunity: what they are concerned with is the rationality of what people do with what they begin with — no matter how poor they are. Poverty is the individual’s fault.
Poverty, some of them argue, is relative anyway. Aren’t we all better off than our forbears? Yes of course we are. So, they argue, we ought not quibble about the distribution of wealth. Yes, we have poor people, but so what? They have lots of stuff our ancestors didn’t have. So quiet down and stop whining about redistribution.
Anyway, as Friedman argues, markets are never ever wrong. And markets can always fix any temporary problems: all those clever and rational consumers will punish bad companies and reward good ones, so we don’t need to regulate.
And so on.
It’s fantasy stuff. It’s patently absurd as a description of the real world. It is plainly ridiculous when you examine the contortions necessary to make it all work out the way Friedman says it does — he famously argued that we ought worry about the absurdity of the inputs to his reasoning we ought only focus on the veracity of the outputs. Naturally those outputs “proved” the efficacy of markets.
So, with this all swirling in my head I hope you can understand why my heart sank when I read that a member of Congress actually wants to build the real world in the image of the Friedman fantasy. It’s all simply ideology. It is an attempt to provide intellectual rigor to an anti-social policy outcome.
Beware of Friedman! He was an ideologue first and foremost. His so-called economics were, in truth, a political agenda. Quoting him approvingly marks you as anti-democratic because he valued market efficiency over and above any other social outcome no matter how repressive the political process needed to be to arrive at that efficiency.
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Well said. Friedman’s economics ideology is wrong and out of touch with the real world.
Friedman did for economics what Lysenko did for genetics: nothing more, and nothing less.
“So, with this all swirling in my head I hope you can understand why my heart sank when I read that a member of Congress actually wants to build the real world in the image of the Friedman fantasy.”
We tried building this in Iraq in 2003 and dishearteningly, our news services reported to us that that the reason people started shooting at us in Iraq was because that was somehow the natural consequence of deposing Saddam Hussein.
To me, what happened in Iraq was pretty much what would have happened in America if the Business Plot of 1934 had succeeded and we had another several years of even more extreme Calvin Coolidge policies put in place by an “emergency manager” Smedley Butler (assuming he was willing to do it instead of violently against it).
Two things going on here. First, Friedman sounded anti-democratic and totalitarian because he was. Democracy in his view was anathema to a well functioning society. That is, a well functioning libertarian society. Democracy was anti-libertarian, so it had to go. Second, there is and always has been in a the US and the West generally a strong totalitarian and anti-democratic element of its culture. We complain that things don’t run on schedule, that democracy allows people to strike and protest, thus impeding our daily lives and getting in the way of enjoying our possessions and wealth. Government was first invented to provide the security of food, shelter, and protection for life. Democracy actually impedes this pursuit as it forces such things as free speech, voting, and civil rights to to be placed on an equal footing with security. And sometimes even above security. Humans are often torn about how to prioritize these. And then fear and paranoia take over. Friedman simply said, it’s okay – fuck democracy if it gets in the way of your secure life.
Good. Friedman, despite his eyes, assumed the ‘market’ was perfect. That assumption meant that this ‘perfection’ would be lost if governments ‘interfered’. All of his ‘analysis’ requires his assumption that we live in the best of all possible worlds if and only if we never ‘interfere’, and that ‘interference’ includes such things as attempting to level playing fields to ‘make’ markets ‘more efficient’, since, of course, they are always and everywhere operating with peak efficiency all of the time.
His complicity with authoritarian regimes noted for their inhumanity of man to man is writ large for all to see.
This kind of absurdity is not new. Nor is satirizing it. But in this instance the new satires can’t hold a candle to the original master, “Candide” by Voltaire. After Candide has suffered every sort of physical and mental torture the book ends as follows,
Pangloss says to Candide:
“There is a concatenation of all events in the best of possible worlds; for, in short, had you not been kicked out of a fine castle for the love of Miss Cunegund; had you not been put into the Inquisition; had you not traveled over America on foot; had you not run the Baron through the body; and had you not lost all your sheep, which you brought from the good country of El Dorado, you would not have been here to eat preserved citrons and pistachio nuts.”
“Excellently observed,” answered Candide; “but let us cultivate our garden.”
You see in the best of all possible worlds every suffering, every torture, every pain is just one more signal that it is the best of all possible worlds. And could not be otherwise. I wonder if Candide is still required reading in Freshmen English classes?
Frankly, I wish it was required reading in every economics class, undergrad, grad, and Ph.D. THAT would ameliorate the nonsense that is mainstream Chicago-school type economics.
It certainly might help. But student-economists may be just as ignorant about western literature as they are about western science. I’ve never been certain just what knowledge base economists acquire. Certainly not science or literature. They seem to know just enough mathematics to consistently misuse mathematics. The have few practical business skills or knowledge. And their knowledge of philosophy is just basic. So what do they know?
My B.A. was in literature –minor in economics– though my Masters is economics. When I took my Masters, I did so at Chicago school North (Carleton University, Ottawa, Canada) where professors taught various semesters at Chicago and Carleton.
I was shocked at how little ‘arts’ or ‘science’ was present in the backgrounds of students and their professors. And I was doubly shocked at how ‘markets’ were deemed perfect by assumption, ruling out any need to intervene in markets and making any such interventions a ‘welfare’ cost monetized through a utility framework. I was also appalled by the Hicksian and Samuelsonian notion that budgets were not altered when prices of goods changed; rather, the mix in a basket changed without any changes in the budget allocated for the basket. That, very fundamentally, ignores budget changes out of income by confusing a fixed budget for some items with a fixed income for all consumer goods.
In the Masters program, getting the degree required learning about an imaginery economy with imaginary beings [who could never be dis-satisfied with what they managed to get, beings which simply vanished :: having neither ‘welfare’ nor ‘welfare losses’ for ‘economic welfare’ depended solely upon ‘ability to pay’ and ‘nothing else’] having imaginary downward sloping ‘demand’ curves characteristic of imagined behaviors and imagined market equilibria.
Those who taught me this nonsense could not understand when I said to them that what they were teaching was neither science nor economics. [I’d worked as an economist for 10 years at the time, doing all manner of studies, always using observations :: often constructing the data itself :: on which my inferences, analysis, and recommendations were based. Even after I got my Masters credential, I continued to do that and I seldom found that ‘academic theory’ applied to anything I looked at. (And, ironically, ‘academic economists’ often walked away from a discussion with me to publish a paper on things like older ‘capital’ being utilized for production in inflationary environments, and what-not like that. Also, ironically, I became to goto economist for studies that had never before been done because the theory of ‘consumer surplus’ was utterly inadequate because of all of the assumptions needed to make it work.
Obviously, there is no need to let our politics and laws to govern economics if every economic outcome is already perfect without any politics. But that, all by itself is a political statement.
I’ve heard this same story from many others. That’s why I never even considered earning an economics degree. Seemed like a waste of time, energy, and money.
In my work I’m often testifying with and against economists. I enjoy “yanking their chain.” Once on a panel discussion with me and three economists, I asked the economists to give us the statistics on markets that fail, from operational factors, structural factors, and basic design factors. They didn’t have the statistics. But they refused to accept as even possible that markets could fail for anything other than mistakes by the humans who designed them. If designed properly markets never failed. Convenient piece of fiction, since I had just spent 20 minutes discussing markets that failed due to operational and structural factors. But I had to marvel at the creativity of the economists and the extent to which they were impervious to observational data on market failures.
Economics became post-factual with the rise of the marginal utility schools who shifted from examining economic behavior and power relations to modeling the mathematical magics of subjective utility theory. Though Bentham well knew the distinction between a benefit and a satisfaction (or not) with that benefit, he ignored it as did Marshall who famously defined utility as a benefit or a satisfaction, and then proceeding to conduct all of his analysis using mathematical functions with built-in diminishing marginal satisfactions while ignoring the difference between benefits and satisfaction with such benefits. {And, Marshall went on to say that an economic framework/theory constructed upon actual benefits would be very different from his constructed ‘principles’.}
So, economists have what amounts to a pre-factual economics today, having shifted to post-factual ‘modelling’ almost two hundred years ago. That post-factualism has now managed to contaminate thought generally, and it certainly accounts for much of the Freidmanesque ‘libertarian’ politics that underlies all of his economic, er, ‘contributions’ to imaginary economics.
I agree the “marginal revolution” marked the end of efforts to create an honest economic discipline. It said there is only one way to assess value, the utility (satisfaction) of consumers. Labor, work, the good worker, living the Godly life through work, and the whole structure of business and integration of economics actions into the general life of the community left the world of professional economists. Life and economics were reduced to a simple and wholly ahistorical equation – the best economy and life is the one that satisfies the greatest number of wants through maximizing utility. Economists have never been able to figure out what utility really is and their definition of “wants” is useless as it includes everything from ice cream cones to ruling the world. This also helps explain the ultimate victory of marginal theory and neoliberal economics. Those who supported these offered the airs and appearances of scientific rigor, including lots of mathematical equations along with the promise of every person’s wants being fully met. Their opponents could offer only the uncertainty of history filled unfulfilled desires and limited opportunities. In other words, neoliberal economics offered utopia, transcending and defeating history with secure and complete bounty in everything for all people. By this time, you’d think the all too real multiple failures and disasters from “living” in this utopia would have forced people to abandon the path. What was it P.T. Barnum believed? “There’s a sucker born every minute.” Economists know that quote well.
Exactly!
You might wish to look at my comment to Peter Radford’s Economics is a waste of time that I made earleir today.