Milton Friedman on Greed

I found the video that follows of Milton Friedman on greed at The Foundation for Economic Education blog the other day. Freidman is best known as the 1976 Nobel Memorial Prize in Economic Sciences “for his achievements in the fields of consumption analysis, monetary history and theory and for his demonstration of the complexity of stabilization policy.”¹

After graduating from the University of Chicago in 1935 with an M.A. in economics, and a year long fellowship at Columbia University, Friedman worked in Washington, D.C. at the National Resources Committee during the height of the great depression. During this period and the subsequent WWII years, Friedman was heavily influenced by the work of John Maynard Keynes. Writing with his wife Rose, Friedman stated in his autobiography, “I had completely forgotten how thoroughly Keynesian I then was.”²

As an example, “in 1942 he advocated a Keynesian policy of taxation” and helped invent the payroll withholding tax system in the United States.³ Sixty years after its introduction during the height of WWII, Friedman regretted the role he played in implementing this plan and said, “I wish there were some way of abolishing withholding.”⁴

Following the war, Friedman joined the faculty at the University of Chicago where he helped create a community of economists collectively known as the Chicago School of Economics. In addition to the Nobel Memorial Prize he won in 1976, Milton Friedman is also best know for reviving interest in the quantity theory of money.

In 2003 at the Mont Pélerin Society Conference on “Freedom, Entrepreneurship and Prosperity”, Friedman,

. . . discussed the difference between the rhetoric and reality of freedom and socialism in the 56 years since the founding of [the society]. Implying a dual swinging social pendulum between the two, he pointed out that in the founding years of The Mont Pélerin Society the reality was that most economies were free, but the rhetoric was primarily socialist in nature. Academics and governments alike concentrated on attacking the free market for its inequalities and imperfections, suggesting that more equality and superior outcomes could be produced by greater socialism. After 56 years of tinkering, the vast majority of both academics and politicians today speak the rhetoric of the free market, but the socialist paradigm is far more the practice in the world’s economies. Friedman summarized by remarking that “There is no question in my mind that we are less free today than we were 50 years ago . . . I predict that in the next 50 years the importance of government will decline.”⁵

Milton Friedman passed away three years later (2006) and missed the latest turn of events which shows that government is still trying to remake the markets.

During the last six months, I’ve often blogged about various forms of political economies. One that I only briefly touched upon is the free market system. Given the recent outrage over the bonuses apparently paid to AIG executives with taxpayer money,⁶ it is important to point out the media’s outrage at the last vestiges of capitalism since it appears that there are really only two systems vying for control of the U.S. economy – dying capitalism versus rising socialism and fascism.

Over the course of the next month or so, I hope to explore the other side of this equation (i.e. free market capitalism) and provide a counterbalance to much of the content that has appeared on this blog to date. As Hugh W. Nibley wrote before the Berlin Wall fell:

The essence of evil being thus clearly exposed, the rationalizing, theorizing, and legalizing of the dialectical materialists on either side of the Iron Curtain is irrelevant to the issue—which is, that anyone who can argue that it is permissible to deny food to the hungry when we have food “shall with the wicked lift up his eyes in hell.”⁷

There were – and are – dialectical materialists (see Hegelian Dialectic for a primer) in the East and the West and free market capitalism has its downside as much as socialism or fascism. No doubt, this will excite my friend Chris H. at Approaching Justice who is an ardent fan of social justice and equality. And who shouldn’t be concerned about these concepts?

With that background, here is Milton Friedman on the “virtues” of the free market system some call greed.

Sources:

1. “Economics 1976”. Nobel Prize. 17 March 2009.↩
2. Friedman, Milton and Rose. Two Lucky People. Chicago: University of Chicago Press, 1998. 113.↩
3. “Milton Friedman”. Wikipedia.org. 19 March 2009.↩
4. Doherty, Brian. “Best of Both Worlds”. June 1995. Reason Online. 19 March 2009.↩
5. “UTC Probasco Chair of Freedom”. 2003. The University of Tennessee at Chattanooga. 20 March 2009.↩
6. See for example, Simon, Roger. “Bailout Ensures AIG’s Greed, Gall”. Boston Herald. 19 March 2009.↩
7. Nibley, Hugh W. “Work We Must, But the Lunch is Free”. Approaching Zion. Salt Lake City: Deseret Book and the Foundation for Ancient Research and Mormon Studies, 1989. 248.↩

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