Right from the Start?
What Milton Friedman can teach progressives.
Lanny Ebenstein’s Milton Friedman: A Biography comes out at what is both a bad and a good time for us. We mourn the loss of the biography’s subject, who died last November. And we will never now know what the late libertarian economist thought about the book–which is too bad, because his thoughts would have been lively, instructive, and optimistic about us and our future. Nevertheless, Ebenstein’s unintentional timing is fortuitous because it provides a well-thought-out, if largely biased, roadmap for any discussion of Friedman’s legacy. And while that legacy will inevitably be more appreciated by those on the right, and in particular those with a strong libertarian leaning, it would be wrong for his purported intellectual adversaries to give him the short shrift. As a first-class intellect, Friedman provides us with a worthy adversary, one that challenges our assumptions and prescriptions, and in so doing prods us to improve ourselves and our ideas. But, while he is rightly credited with providing intellectual impetus to the rise of the right in the latter half of the twentieth century, he also leaves behind a surprisingly liberal legacy. Indeed, many of his ideas, most notably the “negative tax” (later adopted as the Earned Income Tax Credit), have become central parts of the liberal policy agenda. Which means that, while Friedman will always occupy a place in the conservative intellectual history, he should receive credit from liberals as well.
Ebenstein covers a lot of material with an engaging, lively style, and he does so in a relatively short space. And there is a lot to cover. His subject was one of the top handful of professional, technical research economists in the second half of the twentieth century; one of the very best and most open-minded teachers, someone who truly understood the value of a diversified intellectual portfolio, and that education was about the growth of the student rather than the cloning of the teacher; among the top echelon of public intellectuals; and, as many fellow economists and policymakers knew well, one of the most lively and curious dinner partners.
Milton Friedman was born in 1912 in New York City to immigrant parents. Somewhat surprisingly for a libertarian, he always called himself one of the world’s supremely “lucky”–rather than “skillful” or “meritorious”–people, having managed, despite his family’s relative poverty, to graduate from Rutgers University at the start of the Great Depression, before going on to get a master’s in economics from the University of Chicago in 1933. Like many young professors at the time, he couldn’t make an academic career during the Depression; he was let go by the University of Wisconsin, probably primarily for being Jewish. But he did not despair of making a go at being an economist. In the late 1930s he hooked up with the National Bureau of Economic Research’s Simon Kuznets and Arthur Burns, worked for the U.S. Treasury during World War II (where he was one of the designers of our current system of income-tax withholding), earned his Ph.D. from Columbia University in 1946, and finally landed on his feet at the University of Chicago.
Back then, Friedman was relatively liberal in the American sense. He had trust and confidence in the market, yet he also thought that Franklin Roosevelt’s New Deal, while destructive in a considerable part of its detailed policies, was worth doing. He believed that it was, on balance, a positive contribution to economic recovery. Nevertheless, there are more than hints of the later libertarian in his doctoral dissertation, entitled “Income from Independent Professional Practice.” Friedman–correctly–viewed the high incomes of independent professionals as being, to a considerable degree, the moral equivalent of a racketeering enterprise: Using the government to seize control over licensing under color of guaranteeing high quality standards, the true aim of professional licensing was to restrict entry (especially of religious, ethnic, and racial minorities) and so guarantee high incomes to a favored few. Generalizing from this study would underpin all of Friedman’s arguments when cornered: “Yes,” he would say when debating opponents who thought they had him trapped, “this market may be failing–but any attempt to use government to fix it will only make matters worse.”
Friedman rapidly became the intellectual leader of the macroeconomic wing of the Chicago faculty, otherwise known as the monetarist wing–those economists who focused on the banking system and the money supply as the keys to understanding the dynamics of inflation and unemployment. By 1951 he was already a superstar, having won the John Bates Clark Medal, awarded every second year to the outstanding American economist under 40. The next 15 years recorded his meteoric rise to the top of his profession: 1953 saw him publish his Essays in Positive Economics; in 1956, he edited Studies in the Quantity Theory of Money, the book that restored Chicago School monetarism to respectability in technical economics; in 1957, he published Theory of the Consumption Function; 1962 saw the birth of Friedman the public intellectual with Capitalism and Freedom; in 1963, together with Anna J. Schwartz, he wrote Monetary History of the United States; and in 1967 he gave his landmark American Economic Association presidential address, “The Role of Monetary Policy.”
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