Milton Friedman Political Economist

Milton Friedman The Political Economist, Friedman Political Science

It is in the area of debate on government policy that Friedman has become most well-known publicly, and established himself as the most controversial - and influential -economist of his times. As noted earlier, Friedman's writings on these matters cover a vast variety of issues. He is perhaps best well-known for his re­doubtable advocacy of the cases for educational vouchers, the negative income tax, flexible exchange-rates, a volunteer army, a fixed money supply growth rate, and for general indexation as an anti-inflation measure. Each of these issues warrant lengthy and serious treatment: here I must confine myself to an evaluation of Friedman's general position as a normative political economist. A common characterization of Friedman by the media is that he is an intellectual father-figure of something called the 'extreme or far right'. Some Marxists go further and label Friedman as a 'fascist', or as a tool of the ruling (capitalist) class. Thus, for example, the noted writer on the political economy of develop­ment, Andre Gunder Frank, has openly accused Friedman (and his Chicago colleague, Arnold Harberger) of supporting policies of 'economic genocide' in ('fascist') Chile:
... for the glory and benefit of the bourgeoisie in the USA, whom you so faithfully serve as paid executors and ex­ecutioners (Frank, 1976, p. 48).

Both of these characterizations in fact involve gross - indeed grotesque, in Frank's case-misunderstanding or misrepresen­tation of the spectrum of ideological debate, and of Friedman's position in it. Underlying them both is a misconception that the array of ideological positions can be adequately represented by a one-dimensional political issue space, as shown in Figure 1 below, a continuum whose ends are defined as 'Left' and 'Right'. At the 'Centre' lay the advocates of the 'mixed economy', among which Keynes is often supposed to number. Friedman is pictured as being over on the 'far' right, close up against fascism.


Figure 1


I seriously doubt that a one-dimensional space can adequately represent the spectrum of ideological positions; and if one such must be chosen, it is not the one portrayed in Figure 1. It is also certainly not one that Friedman would accept, for a number of reasons.

First, the left-right spectrum confuses the distinction between means and ends. Friedman does not see himself divorced primarily from socialists on the question of goals or ends:
I would venture the judgement . . . that currently in the Western world . . . differences about economic policy among disinterested citizens derive predominantly from different predictions about the economic consequences of taking action - differences that in principle can be eliminated by the progress of positive economics - rather than from fundamental differences in basic values . . . (Friedman, 1953b, p. 5).

Where Friedman differs radically from socialist economists is on the issue of the likely effects of the means or actions that the latter advocate to tackle social problems such as poverty. Thus, for example, Friedman (1975, p. 9) argues that 'the actual outcome of almost all programs that are sold in the name of helping the poor (such as the minimum wage rate) is to make the poor worse off'. He himself advocates the replacement of the whole collection of welfare state programmes by a negative income tax - a sup­plement to the incomes of the poor, which is some fraction of their unused income tax exemptions/deductions.

Secondly, it is quite incongruous to position Friedman, in Figure 1, as next to fascism in his ideological position. Friedman is a staunch and consistent exponent of classical liberal philosophy - an advocate of a system of free enterprise and the free society. The non-individualistic, dirigiste economic phil­osophy of fascism-corporatism-is utterly alien to Friedman.

A more reasonable representation of Friedman's ideological position in terms of one-dimensional issue space is shown in Figure 2. This is cast in terms of the nature of the solutions advocated by different thinkers or systems of thought, as regards the balance they adopt as between the principles of voluntary exchange and state actions in co-ordinating the economy. At one end we have the totally state-controlled economy, or pure collectivism; at the other end we have zero government -anarchism or libertarianism.

Figure 2


There are a number of points to be emphasized in this more adequate characterization of Friedman's position in the ideo­logical spectrum. First, note that Keynes and Friedman are in the same general camp of classical liberalism; they are basically ideological fellow-travellers, not opponents, differing only on the issue of the advisability of aggregate demand management by the State. Both reject state control of the supply side of the economy, except in the case of public goods, such as defence.10 Secondly, even on this redefined spectrum, Friedman is by no means 'as far right as you can go'. Friedman is a classical liberal in the tradition of Adam Smith, John Stuart Mill and Henry C. Simons: a believer in limited, but not zero, government. As Friedman (1962, p. 34) himself expresses it: 'the consistent liberal is not an anarchist'. There are in fact, a growing number of libertarians who are 'to the right' of Friedman on our redefined spectrum - advocates of zero government and 'anarcho-capitalism'. Milton Friedman's own son, David Friedman (1973) is a leading member of them.


Gunder Frank's misrepresentation of Friedman's ideological position relies upon guilt by association - the fact that a military regime has adopted some of Friedman's advocated economic policies. It is pertinent to remember that one of the first major decisions taken by Mao Tse-tung upon coming to power was fully in line with Friedman's monetarist philosophy: that it is a folly to believe that economic development can be financed by printing money. Should we therefore label Milton Friedman as a Red Guard?

Conclusion

What has the 'impish gnome of economics' -as the media love to call him -contributed to the general direction of our subject?

He has provided us with a realistic strategy to follow in theoretical and empirical research. Secondly, he has managed to re-establish an awareness of the importance of monetary forces in generating macro-economic fluctuations and inflation, and added considerably to our understanding of these complex matters. Thirdly, he has with great courage-for a long time being misrepresented and derided as an 'extremist', etc.,-challenged the prevailing dirigisme in the economic philosophy and political practice of our times, and exposed its flaws. He has done much, with Hayek, to turn the intellectual tide, and to re-establish classical liberalism as a vibrant and influential economic philosophy, of great pertinence to the major issues of our times.

I suspect that, long after the huff-and-puff of the monetarist-Keynesian debate has subsided into a realization that Friedman's monetarism is but a sophisticated elaboration of Keynes' basic macro-economic framework, it will be the last matter for which Friedman will be remembered most of all in the annals of political economy. Milton Friedman is the Adam Smith of this century.