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Milton and Rose Friedman. Free to Choose: A Personal Statement. HBJ, 1979, 1980. See here to purchase the book.
Milton Friedman was a Nobel Prize-winning economist, known for his advocacy of monetarism and free market economics. He met his wife, Rose, in a graduate program in economics, so she, too, was knowledgeable about the field.
Here are some thoughts and observations:
A. I read this book in conjunction with Binyamin Appelbaum’s The Economists’ Hour, which has excellent discussions on Milton Friedman’s contributions to economics. Reading both gave me a better understanding of monetarism. In the past, I have been puzzled about what exactly Friedman believed about inflation and the money supply. On the one hand, G. Edward Griffin said in The Creature of Jekyll Island that Friedman was in favor of restricting the money supply to lower inflation. On the other hand, David Stockman in The Great Deformation chastised Friedman for wanting to detach the dollar from the gold standard. Who was right? In a sense, both were. The Friedmans definitely supported limiting the money supply, and the growth of the money supply, as a way to combat and prevent inflation. They did not support a return to the gold standard, though. They acknowledge that there were times when the federal government needed to print more money, for they attribute the deepening of the Great Depression, in part, to the failure of the government to supply the failing banks with more cash. The key is to make sure that the amount of money in circulation does not dramatically outpace productivity, for that can lead to inflation: higher prices that result from the demand for products exceeding their supply.
B. Applebaum in his book says that Friedman believed inflation was primarily related to money supply. Prices on individual items can go up due to other factors, but general inflation is caused by an increase in the money supply. In Free to Choose, the Friedmans do focus on money supply as the contributor to inflation. They also think that government spending is a contributing factor, but this, too, is related to the money supply because the money, in part, comes from the Federal Reserve increasing its supply, and inflation rises as the government spending accentuates demand. The Friedmans also criticize labor unions as contributing to high prices, but, as was said, this may refer to prices on a case-by-case basis rather than inflation in general.
C. Depending on the issue, the Friedmans were more liberal than I expected and more conservative than I expected. In the section on the environment, the Friedmans essentially endorse a cap-and-trade sort of policy and more taxes on pollution, with the tax revenue being used to clean up the pollution. Nowadays, it is mostly the Democrats who support cap-and-trade for carbon omissions and Republicans who oppose it. On where the Friedmans were more radically conservative than I anticipated, they advocate the abolition of the FDA. The Friedmans lament how the FDA hinders the invention, development, and distribution of medication, and they are fairly optimistic that the free market wants safe products and that consumers can make their own decisions with information that the government provides.
D. Applebaum argues that Friedman was a late convert to supply-side economics, the idea that tax cuts can stimulate economic growth and lead to increased revenue. What was the Friedmans’ position on tax cuts in Free to Choose? They support the abolition of the corporate income tax and speak favorably of states’ limitations of tax rates. They are critical of how inflation pushes people into higher tax brackets, even as their standard of living remains the same. The Friedmans also support a negative income tax to take the place of welfare programs. Overall, though, the Friedmans’ primary concern is with the growth in government spending. In many cases, they note, the government chooses not to raise taxes to keep up with government spending because that is politically unpopular, so it has the Federal Reserve print out more money instead. The result is inflation, which is a hidden tax.
E. The Friedmans repeatedly argue that government intervention redistributes money from the lower economic classes to the higher ones. It reinforces inefficient, costly cartels in the fields of railroads and airports, among other areas. The people who lobby most for an increase in the minimum wage are not the poor, who can benefit from the availability of more work due to lower wages, but rather the unions, which do not want their workers to compete with low wages. The Friedmans make legitimate observations, but their point about the unions and the minimum wage may be more obsolete now due to the decline of unions, and their point about the upward redistribution of wealth may need some updating because lower income people nowadays do not pay much, if any, federal income tax.
F. The Friedmans argue robustly for school choice and voucher programs, and they actually attempt to respond to critiques of their position. Against the charge that school choice can lead to greater racial segregation, they point out that segregation already exists in the public schools, as people send their children to the public schools in their neighborhood. If people attended schools based on common interests rather than where they live, we might have diverse schools. Against the argument that school choice is expensive, the Friedmans state that private schools have often gotten better academic results, with little money.
G. The Friedmans support free trade, since that makes goods and products cheaper and enables people to have more money to spend on other goods and products. But what if Americans are buying more from other countries than they are selling to them? Does that not benefit other countries more than Americans? The Friedmans think that things will work out well for Americans, too. People in other countries receive dollars for the products that they sell to Americans, and those dollars are good for buying American products, especially if the American dollar is stronger than the native currency. That sounds reasonable, but I doubt that it excuses or dismisses the problem of outsourcing leading to a decline in American manufacturing jobs.
This book contains a lot of the usual conservative spiel, though it was clearly influential and groundbreaking at the time. The book is lucid overall, and the Friedmans do well to walk the reader step-by-step through what happens when the government is raising money so it can spend more, and who is affected in the process. I believe that I gained greater insight into the Friedmans’ economic views as a result of reading this book.
Milton Friedman was a Nobel Prize-winning economist, known for his advocacy of monetarism and free market economics. He met his wife, Rose, in a graduate program in economics, so she, too, was knowledgeable about the field.
Here are some thoughts and observations:
A. I read this book in conjunction with Binyamin Appelbaum’s The Economists’ Hour, which has excellent discussions on Milton Friedman’s contributions to economics. Reading both gave me a better understanding of monetarism. In the past, I have been puzzled about what exactly Friedman believed about inflation and the money supply. On the one hand, G. Edward Griffin said in The Creature of Jekyll Island that Friedman was in favor of restricting the money supply to lower inflation. On the other hand, David Stockman in The Great Deformation chastised Friedman for wanting to detach the dollar from the gold standard. Who was right? In a sense, both were. The Friedmans definitely supported limiting the money supply, and the growth of the money supply, as a way to combat and prevent inflation. They did not support a return to the gold standard, though. They acknowledge that there were times when the federal government needed to print more money, for they attribute the deepening of the Great Depression, in part, to the failure of the government to supply the failing banks with more cash. The key is to make sure that the amount of money in circulation does not dramatically outpace productivity, for that can lead to inflation: higher prices that result from the demand for products exceeding their supply.
B. Applebaum in his book says that Friedman believed inflation was primarily related to money supply. Prices on individual items can go up due to other factors, but general inflation is caused by an increase in the money supply. In Free to Choose, the Friedmans do focus on money supply as the contributor to inflation. They also think that government spending is a contributing factor, but this, too, is related to the money supply because the money, in part, comes from the Federal Reserve increasing its supply, and inflation rises as the government spending accentuates demand. The Friedmans also criticize labor unions as contributing to high prices, but, as was said, this may refer to prices on a case-by-case basis rather than inflation in general.
C. Depending on the issue, the Friedmans were more liberal than I expected and more conservative than I expected. In the section on the environment, the Friedmans essentially endorse a cap-and-trade sort of policy and more taxes on pollution, with the tax revenue being used to clean up the pollution. Nowadays, it is mostly the Democrats who support cap-and-trade for carbon omissions and Republicans who oppose it. On where the Friedmans were more radically conservative than I anticipated, they advocate the abolition of the FDA. The Friedmans lament how the FDA hinders the invention, development, and distribution of medication, and they are fairly optimistic that the free market wants safe products and that consumers can make their own decisions with information that the government provides.
D. Applebaum argues that Friedman was a late convert to supply-side economics, the idea that tax cuts can stimulate economic growth and lead to increased revenue. What was the Friedmans’ position on tax cuts in Free to Choose? They support the abolition of the corporate income tax and speak favorably of states’ limitations of tax rates. They are critical of how inflation pushes people into higher tax brackets, even as their standard of living remains the same. The Friedmans also support a negative income tax to take the place of welfare programs. Overall, though, the Friedmans’ primary concern is with the growth in government spending. In many cases, they note, the government chooses not to raise taxes to keep up with government spending because that is politically unpopular, so it has the Federal Reserve print out more money instead. The result is inflation, which is a hidden tax.
E. The Friedmans repeatedly argue that government intervention redistributes money from the lower economic classes to the higher ones. It reinforces inefficient, costly cartels in the fields of railroads and airports, among other areas. The people who lobby most for an increase in the minimum wage are not the poor, who can benefit from the availability of more work due to lower wages, but rather the unions, which do not want their workers to compete with low wages. The Friedmans make legitimate observations, but their point about the unions and the minimum wage may be more obsolete now due to the decline of unions, and their point about the upward redistribution of wealth may need some updating because lower income people nowadays do not pay much, if any, federal income tax.
F. The Friedmans argue robustly for school choice and voucher programs, and they actually attempt to respond to critiques of their position. Against the charge that school choice can lead to greater racial segregation, they point out that segregation already exists in the public schools, as people send their children to the public schools in their neighborhood. If people attended schools based on common interests rather than where they live, we might have diverse schools. Against the argument that school choice is expensive, the Friedmans state that private schools have often gotten better academic results, with little money.
G. The Friedmans support free trade, since that makes goods and products cheaper and enables people to have more money to spend on other goods and products. But what if Americans are buying more from other countries than they are selling to them? Does that not benefit other countries more than Americans? The Friedmans think that things will work out well for Americans, too. People in other countries receive dollars for the products that they sell to Americans, and those dollars are good for buying American products, especially if the American dollar is stronger than the native currency. That sounds reasonable, but I doubt that it excuses or dismisses the problem of outsourcing leading to a decline in American manufacturing jobs.
This book contains a lot of the usual conservative spiel, though it was clearly influential and groundbreaking at the time. The book is lucid overall, and the Friedmans do well to walk the reader step-by-step through what happens when the government is raising money so it can spend more, and who is affected in the process. I believe that I gained greater insight into the Friedmans’ economic views as a result of reading this book.
