Milton Friedman - Dead at 94

[August1991]

I just spent a few minutes reading another left wing forum's discussion (en masse) about Friedman. They missed the point about Friedman and his life.

Milton Friedman did the best he could. Friedman was a positivist.

Ask not what to do - ask why the world is the way it is.

[geoffrey]

He really modernized the concept of economic freedom, and for that, I thank him.

--

What I did notice is that CNN, FOX, CBC or BBC didn't have the report of his death on the front page of their website. He actually impacted our lives considerably, yet front page obituaries are limited only to Hollywood stars? Silly media.

[jdobbin]

I just spent a few minutes reading another left wing forum's discussion (en masse) about Friedman. They missed the point about Friedman and his life.

Milton Friedman did the best he could. Friedman was a positivist.

Ask not what to do - ask why the world is the way it is.

Friedman had as much faith in the free market to solve the world problems as Keynes did in the government. Both were incorrect but brilliant.

[Black Dog]

Friedman was a failure.

Milton Friedman, who has died aged 94, was not the most important economist of the post-war era - that title belongs to the brilliant Paul Samuelson - but he was certainly the most controversial. Yet despite his views being championed by so many politicians on the right, it may come as a surprise that Friedman's career as a policymaker largely ended in failure.

...

And Friedman's one success? In 1942, during world war two, Friedman actually went to work for the US government. While there he helped design the payroll tax that in Britain is known as PAYE, Pay As You Earn, and in the US as withholding tax, the system that allows the government to administer the taking of income tax directly from salaries and pay packets. Unlike everything else he argued for, withholding tax was withstood the test of time and is in use all around the world. It was the best thing that Keynesian-style government could ever have wished for, and Friedman bitterly regretted it. In his memoirs he wrote:

"It never occurred to me at the time that I was helping to develop machinery that would make possible a government that I would come to criticize severely as too large, too intrusive, too destructive of freedom. Yet, that is precisely what I was doing. [My wife] Rose has repeatedly chided me over the years about the role that I played in making possible the current overgrown government we both criticize so strongly."

Rest in peace Milton Friedman, big government's best friend.

[ClearWest]

Milton Friedman's theories in economics were an inspiration to me in my research on the benefits of free markets. It is partially thanks to Milton Friedman that I am a Libertarian today. I really appreciate his work. He was a great advocate of individual freedom.

Thank you Mr Friedman.

[Black Dog]

Milton Friedman did the best he could. Friedman was a positivist.

What does that even mean and of what relevance is it? "Sure he pioneered economic theories that, when applied in the real world, caused tremendous amount of suffering ane inequality. But damnit, he meant well."

[ClearWest]

Milton Friedman did the best he could. Friedman was a positivist.

What does that even mean and of what relevance is it? "Sure he pioneered economic theories that, when applied in the real world, caused tremendous amount of suffering ane inequality. But damnit, he meant well."

Socialism causes far more suffering and injustice than free markets do. In our capitalist society, even the poorest among us have an abundance of food, employment opportunities, access to goods & services, and consumer products like shampoo and vacuum cleaners which were once considered luxuries by our ancestors. People are allowed and even encouraged to trade and profit and flourish.

Countries in which economies are planned and dictated never provide equal opportunity for all. They often benefit one group at the expense of another--whether it be the government officials, or the special interest groups which keep the government in office.

Friedman advocated letting individuals decide what they do with their own money and property, whereas a socialist state would decide that for us and try to regulate every economic decision we make. Friedman advocated phasing out all tarriffs, whereas a socialist state would keep tarriffs high in an attempt to 'protect' national industry. What that really does is limit trade, eventually leading to severe problems in the economy--(Look up the Smoot-Hawley Tarriff Act which pretty much CAUSED the great depression--Not capitalism).

He more than just meant well--He saw the real causes of injustice: Government imposing its will upon people's individual decisions. And he devoted his life to studying the economy and coming up with solutions to make it work better.

[Black Dog]

Socialism causes far more suffering and injustice than free markets do. In our capitalist society, even the poorest among us have an abundance of food, employment opportunities, access to goods & services, and consumer products like shampoo and vacuum cleaners which were once considered luxuries by our ancestors. People are allowed and even encouraged to trade and profit and flourish.

Largely because we don't have a free market system like the one Friedman invisioned. Any time and place his ideas were applied, the result was great suffering for the multitudes.

[Riverwind]

Countries in which economies are planned and dictated never provide equal opportunity for all. They often benefit one group at the expense of another--whether it be the government officials, or the special interest groups which keep the government in office.

You are making the assumption that the only options available are 'pure socialism' (a.k.a communism) or 'pure capitalism' (a.k.a. anarchism). When taken to extreme both of these ideologies are deeply flawed can never produce a 'just' society. The best societies are those that try to balance these extremes and encourage the free market as much as possible but still use the power of gov't to address social values that the free market is not capable of addressing.

[Charles Anthony]

When taken to extreme both of these ideologies are deeply flawed can never produce a 'just' society.

That is not a fair criticism because neither ideology CAN be taken to the extreme.

The best societies are those that try to balance these extremes and encourage the free market as much as possible but still use the power of gov't to address social values that the free market is not capable of addressing.

What does "not capable of addressing" mean?

On the one hand, you say "encourage the free market as much as possible" but than you critize an ideology that encourages the free market as much as possible. What ideology do you recommend we follow to determine whether "the free market is not capable of addressing" something????

Also, do you honestly think that Milton Friedman advocated anything other than a "just" society?

[Riverwind]

What ideology do you recommend we follow to determine whether "the free market is not capable of addressing" something????

I recommend freedom from ideology and absolutes of any sort. Each circumstance should be judged individually to determine whether the free market can do the job or whether government needs to be involved.

Also, do you honestly think that Milton Friedman advocated anything other than a "just" society?

People are capable of rationalizing almost anything as 'just'. Friedman might have believed his economics would produce a 'just' society according the values that he considered to be important. However, many people would consider his society extremely 'unjust' because they have different values which they consider to be important. The need to balance the fact that different people have different values is one of the main reasons why a society built on extremist ideologies is unworkable.

[jbg]

I just spent a few minutes reading another left wing forum's discussion (en masse) about Friedman. They missed the point about Friedman and his life.

Milton Friedman did the best he could. Friedman was a positivist.

Ask not what to do - ask why the world is the way it is.

Friedman had as much faith in the free market to solve the world problems as Keynes did in the government. Both were incorrect but brilliant.

Friedman turned out to be largely spot on. Inflation fell from over 14% to around 2% as a result of monetarist policies. Unemployment dropped from around 7% to around 4.4% during this period. Not bad for a legacy. Certainly more than "incorrect but brilliant".

[jdobbin]

Friedman turned out to be largely spot on. Inflation fell from over 14% to around 2% as a result of monetarist policies. Unemployment dropped from around 7% to around 4.4% during this period. Not bad for a legacy. Certainly more than "incorrect but brilliant".

Friedman was right about low inflation. He was wrong amount money supply. No country was able to implement that policy successfully.

[Charles Anthony]

This:

Each circumstance should be judged individually to determine whether the free market can do the job or whether government needs to be involved.

...is a fervent ideology in its own right.

The need to balance the fact that different people have different values is one of the main reasons why a society built on extremist ideologies is unworkable.

Every time YOUR "society" fails to be just, I can equally say that you are blind to its unworkability too. The "society" has the brute force to implement what it wants and you are not willing to define limits. Milton Friedman was able to define limits.

Try to change your plane of reference: what YOU label as extremism can also be identified as a middlepoint (or a balance) in objectivity with respect to treating people fairly. While YOU make "the government" and "its agents" as the final judge or authority, if I replace them with God or Freedom or Anarchy, I would be labeled as an religious extremist if I did so.

Friedman was right about low inflation. He was wrong amount money supply. No country was able to implement that policy successfully.

Please expand on a few things:

1) Exactly what was his error with respect to money supply?

2) What is the difference between his recommendation about low inflation and money supply?

3) What do you mean no country?? Name a few examples.

4) What do you think the Bank of Canada has been doing for the last few decades???

[jdobbin]

Please expand on a few things:

1) Exactly what was his error with respect to money supply?

2) What is the difference between his recommendation about low inflation and money supply?

3) What do you mean no country?? Name a few examples.

4) What do you think the Bank of Canada has been doing for the last few decades???

The whole thing is laid out here.

http://www.theglobeandmail.com/servlet/sto...PStory/Business

[August1991]

Friedman turned out to be largely spot on. Inflation fell from over 14% to around 2% as a result of monetarist policies. Unemployment dropped from around 7% to around 4.4% during this period. Not bad for a legacy. Certainly more than "incorrect but brilliant".

Friedman was right about low inflation. He was wrong amount money supply. No country was able to implement that policy successfully.

Huh? Canada, the US and Europe largely follow 'monetarist' policies now. They do it through control of nominal interest rates. Direct control of the money supply poses too many technical problems but the practical effect is the same.

Even the tremendously simplified newspaper article you linked above Doibbin gets a few basic facts right. Referring to BoC Governor John Crow:

He did not, however, abandon Mr. Friedman's theories wholesale. The governor argued strongly, and controversially, that monetary policy should be directed at price stability. He would use interest rates, rather than money supply, to manage inflation expectations.

"It turned out to be startling to people in Canada," he recalls, referring back to a speech he made in 1988. "It was something that struck people as being too monetarist."

Mr. Crow was widely vilified for the economic pain caused by his strict focus on keeping prices stable.

But his policy on inflation targeting was a turning point for Canadian monetary policy and for Canadian capital markets.

The concept of Canada's central bank focusing solely on low and stable inflation to create a vibrant business and investment environment is a core value of the Bank of Canada to this day.

Indeed, it has become the conventional wisdom of monetary policy around the world.

Incidentally, I wouldn't credit Crow with being the first to introduce Friedman's ideas in Canada. I'd say that was Gerald Bouey.

BTW, the journalist shows her naivety by mentioning John Kenneth Galbraith. Nobody talks about Galbraith anymore and fewer people will talk about him in the future.

Milton Friedman did the best he could. Friedman was a positivist.

What does that even mean and of what relevance is it? "Sure he pioneered economic theories that, when applied in the real world, caused tremendous amount of suffering ane inequality. But damnit, he meant well."

Friedman introduced many important ideas and he took on established views when he realized they were wrong. IMV, Friedman most importantly argued for a positive (as opposed to normative) view of economics.

It's too bad that more posters on this forum don't do likewise more often.

[jdobbin]

Huh? Canada, the US and Europe largely follow 'monetarist' policies now. They do it through control of nominal interest rates. Direct control of the money supply poses too many technical problems but the practical effect is the same.

Even the tremendously simplified newspaper article you linked above Doibbin gets a few basic facts right. Referring to BoC Governor John Crow:Incidentally, I wouldn't credit Crow with being the first to introduce Friedman's ideas in Canada. I'd say that was Gerald Bouey.

BTW, the journalist shows her naivety by mentioning John Kenneth Galbraith. Nobody talks about Galbraith anymore and fewer people will talk about him in the future.

One of the Friedman's central tenets was money supply. I simply said it was tried but didn't work in any practical sense. It is why many people said that Friedman was half right in his theory.

From the Globe article:

"Mr. Friedman's theory -- that a central bank can dampen inflation by limiting the supply of money in the economy -- was appealing. The money supply, however, turned out to be far too dynamic for any central bank to contain. The Bank of Canada tied itself in knots trying to define and keep track of the ever-expanding supply of money, Mr. Crow said.

In the end, the sophistication of financial markets outstripped the bank's efforts.

Unlike in the 1960s and 1970s, the markets are now characterized by high-speed, global trading of complicated derivatives and debt instruments. Something as seemingly simple as the widespread use of credit cards has confounded attempts to measure the money supply.

"It didn't work well, because M1 [a narrow definition of the amount of money in the economy] turned out to be unreliable," Mr. Crow said."

You'll have to read more of Galbraith to understand his influence. He was quite correct when he wrote about the culture of entitlement. Both Galbraith and Friedman had significant influence on the economy and still do.

[August1991]

One of the Friedman's central tenets was money supply. I simply said it was tried but didn't work in any practical sense. It is why many people said that Friedman was half right in his theory.

And the money supply is what the Bank of Canada controls. It exercices its control through the nominal interest rate.

You'll have to read more of Galbraith to understand his influence. He was quite correct when he wrote about the culture of entitlement. Both Galbraith and Friedman had significant influence on the economy and still do.

I have read quite a bit of Galbraith. I think it's fair to say that his ideas have no influence on any economist under the age of 40 and not many over 40.

Galbraith is remembered mostly by boomer liberal arts graduates and when they die, no one will remember Galbraith. I am confident that people will be reading Friedman's 'Capitalism and Freedom' well into this century and likely the next.

[jdobbin]

And the money supply is what the Bank of Canada controls. It exercices its control through the nominal interest rate.

I have read quite a bit of Galbraith. I think it's fair to say that his ideas have no influence on any economist under the age of 40 and not many over 40.

Galbraith is remembered mostly by boomer liberal arts graduates and when they die, no one will remember Galbraith. I am confident that people will be reading Friedman's 'Capitalism and Freedom' well into this century and likely the next.

I agree that the bank controls money supply by interest rates. But for a long time, they tried to actually control money in print as per Freidman's writings. It was too difficult given the market and credit and much easier to raise or lower interest rates. The only problem with the interest rate solution is that it requires a tremendous amount of forecasting and while it surely can lower inflation, it can push certain parts of the economy into recession. Lowering interest rates takes a lot longer to kick start the economiy than raising interest rates does to slow it down.

It's possible both economists will be forgotten when the next big thing comes. Who knows.

[August1991]

I agree that the bank controls money supply by interest rates. But for a long time, they tried to actually control money in print as per Freidman's writings. It was too difficult given the market and credit and much easier to raise or lower interest rates. The only problem with the interest rate solution is that it requires a tremendous amount of forecasting and while it surely can lower inflation, it can push certain parts of the economy into recession. Lowering interest rates takes a lot longer to kick start the economiy than raising interest rates does to slow it down.

It's possible both economists will be forgotten when the next big thing comes. Who knows.

Dobbin, not to belabour the point but you seem to see a difference between controlling the nominal interest rate and controlling the money supply. There isn't any theoretical difference. Hydro can control the price of electricity or it can control the amount of electricity it generates. It happens to be easier to fix the price and then supply the electricity demanded.

Friedman made important contributions to economic theory for which he won the Nobel Prize. As a minimum, he will be remembered for this.

[jdobbin]

Dobbin, not to belabour the point but you seem to see a difference between controlling the nominal interest rate and controlling the money supply. There isn't any theoretical difference. Hydro can control the price of electricity or it can control the amount of electricity it generates. It happens to be easier to fix the price and then supply the electricity demanded.

Friedman made important contributions to economic theory for which he won the Nobel Prize. As a minimum, he will be remembered for this.

The point was that Friedman believed interest rate hikes were not as incremental in controlling inflation. It was the flaw that he pointed out and one that the Fed and Bank of Canada acknowledge is a weakness in the system. Interest rates are not as deft a tool. However, it is the only one that Bank can use as they don't have other controls over the money supply to make incremental changes.

[Charles Anthony]

The point was that Friedman believed interest rate hikes were not as incremental in controlling inflation.

So what?? At the time, they may not have been.

Friedman could have also advocated daily exercise and losing weight believing that the hoola-hoop was a great tool -- not knowing that gym memberships will become fashionable in the future.

The real point is that Friedman advocated price stability as a goal for central banks -- just like losing weight. Would you knock him because the hoola-hoop is not as good as a treadmill?

[jdobbin]

So what?? At the time, they may not have been.

Friedman could have also advocated daily exercise and losing weight believing that the hoola-hoop was a great tool -- not knowing that gym memberships will become fashionable in the future.

The real point is that Friedman advocated price stability as a goal for central banks -- just like losing weight. Would you knock him because the hoola-hoop is not as good as a treadmill?

Didn't knock him for anything. I said he was half right on the money supply issue.

Interest rates though are a devastating tool regionally when one area is doing well economically and another area doing poorly. It is not a deft tool for that type of inflationary controls. Both Alberta and Ontario have been on both sides of the interest rate problem. At one time Ontario's economy was booming and the high interest rates were no good for Alberta. Now, it is a vice versa situation.

For a federal bank though, it is the best solution to a national problem within an international market.

For governments, the inflationary controls remain with spending and cutting. This comes from the Galbraith school of thought. Most governments in the 1970s and early 1980s used some form of price and wage controls. This is good for countries dominated by certain industries and and having a large government workforce. It is not so good for the nimble economy.

Since 1981, the U.S. has used the Friedman way of thinking. Sadly, the U.S. government does not do its part on spending and cutting.

[August1991]

The point was that Friedman believed interest rate hikes were not as incremental in controlling inflation. It was the flaw that he pointed out and one that the Fed and Bank of Canada acknowledge is a weakness in the system. Interest rates are not as deft a tool. However, it is the only one that Bank can use as they don't have other controls over the money supply to make incremental changes.

Dobbin, I have read you post several times and I simply do not understand what you mean.

The Bank of Canada has control over the high-powered money supply. Interest rates do not control inflation.

It is difficult to impossible to target a specific M1 supply. So, instead, the Bank announces an interest rate as a signal of its intentions with high powered money. The end result is the same as if it were controlling M1.

Interest rates though are a devastating tool regionally when one area is doing well economically and another area doing poorly.

As long as all of Canada uses the same money, this will be a problem. It has nothing to do with interest rates.

For governments, the inflationary controls remain with spending and cutting. This comes from the Galbraith school of thought. Most governments in the 1970s and early 1980s used some form of price and wage controls. This is good for countries dominated by certain industries and and having a large government workforce. It is not so good for the nimble economy.

Huh? You are missing one of Friedman's major contributions - simple as it may seem. You print too much money, you get inflation.

[jdobbin]

Dobbin, I have read you post several times and I simply do not understand what you mean.

The Bank of Canada has control over the high-powered money supply. Interest rates do not control inflation.

It is difficult to impossible to target a specific M1 supply. So, instead, the Bank announces an interest rate as a signal of its intentions with high powered money. The end result is the same as if it were controlling M1.

Huh? You are missing one of Friedman's major contributions - simple as it may seem. You print too much money, you get inflation.

http://article.nationalreview.com/print/?q...jFjOGZjNTc2M2E=

"Thatcher herself wrote in The Downing Street Years, “The only effective way to control inflation is by using interest rates to control the money supply.”

If interest rates were not a problem, why does Alberta and Ontario makes an issue of it every time they go up or down?

I was not talking about national bank's contribution to inflation control but the government's control in regards to spending.