Milton Friedman - Some additional thoughts

I only met Friedman once - at a dinner for an institute at Santa Clara University. He and his wife were there celebrating the creation of an institute designed to give students some background in free market thought. He seemed gracious - he was the star of the evening but seemed to move around the room, always with Rose at his side, talking with almost every guest.

As I was thinking about Friedman I read most of the obits in places like the NYT and the WP. His contributions to advancing the free market were continuous. Yet, at several times he intervened in issues where I was directly working.

For example, he was a passionate supporter of the volunteer army. He had a great comment to General WIlliam Westmorland who had said he was reluctant to lead a band of mercenaries. Friedman encountered him and told of the encounter. "I stopped him and said, 'General, would you rather command an army of slaves. . . . If they are mercenaries, then I, sir, am a mercenary professor, and you, sir, are a mercenary general, and we are served by mercenary physicians, we use a mercenary lawyer and we get our meat from a mercenary butcher.' "

He also was willing to confront cliches. He responded in 1962 to Kennedy's famous soundbite that is was wrong headed. Rather than "ask not what your country can do for you, ask what you can do for your country" he argued, in an introduction to Capitalism and Freedom that You should ask neither. “What your country can do for you, implies that the government is the patron, the citizen the ward; and “what you can do for your country” assumes that the government is the master, the citizen the servant." Rather, he said, you should ask, “What I and my compatriots can do through government to help discharge our individual responsibilities, to achieve our several goals and purposes, and above all protect our freedom.” Not as good a soundbite but a clear understanding of how the world should work.

Friedman worked for the government during WWII in the Department of the Treasury. He commented that it was something his wife never forgave him for. He commented “There is no doubt that it would not have been possible to collect the amount of taxes imposed during World War II without withholding taxes at the source. But it is also true, that the existence of withholding has made it possible for taxes to be higher after the war than they otherwise could have been. So I have a good deal of sympathy for the view that, however necessary withholding may have been for wartime purposes, its existence has had some negative effects in the postwar period.”

The Nobel laureate understood the free market is a real democratizing force. “The free market is the only mechanism that has ever been discovered for achieving participatory democracy.”

My favorite quote from Friedman was one that was reprinted in the WSJ today. "Given our monstrous, overgrown government structure, any three letters chosen at random would probably designate an agency or part of a department that could profitably be abolished." I was reminded of what happened when a friend during the Nixon administration who went to an interagency meeting (he was representing Elliott Richardson at HEW) signed in as the Deputy Assistant Secretary for Aircraft and Sewage and began getting meeting notices for interagency meetings on transportation and solid waste issues.

There were two reflections that were especially important. The first came from a small minded biographer of John Kenneth Galbraith. Richard Parker commented in the Boston Globe last year (and requoted in the WP story) that Friedman's calls for market deregulation had negative consequences. Friedman's "passionate calls for financial and securities market deregulation played no small role in ushering in the half-trillion dollar S&L fiasco of the 1980s and the deeply corrupt Wall Street stock market boom of the 1990s. His tax-reduction-at-all-costs policies helped lead to the nation's yawning budget deficits." Obviously, both conclusions are nonsense. As I remember the S&L crisis came about in part because of democrat leaders like St. Germain who wanted to socialize risk but dramatically increasing the insurance of these accounts while simultaneously attempting to broader their charters. Those were not adherence to free market principles but the opposite. The tax policies advocated by Friedman did not increase the deficit rather increases in spending (which Friedman continuously argued for) did. One should not be surprised that a fan of Galbraith would be so misinformed.

But then there was a more balanced comment from a colleague at Chicago. As noted yesterday, one of the things which impressed me most was Friedman's passionate commitment to reasoned debate. (Something that the political system could benefit from today.) W. Allen Wallis who was both a classmate and faculty colleague said “What was really so important about him,” was his tremendous basic intelligence, his ingenuity, perseverance — his way of getting to the bottom of things, of looking at them in a new way.”