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Last Updated: 11/29/2006Friedman Takes a Taxi Outta Town
As an elderly comedian I once met, unwilling to think of his death or any one else’s, referred to the death of a friend as his “taking a taxi outta town”. Another friend, also elderly, refers to death as “hanging up his tennis shoes”. One big event last week in terms of life and death was Professor Milton Friedman’s last taxi ride, or, if you prefer, his hanging up his tennis shoes at the age of 94. Though dead, he is unlikely to be forgotten in books on the history of economic thought.
I was educated as what is known as a Keynesian. That is, I was introduced to a form of economic theory and policy which allowed for more government intervention in economic activity than was allowed by economists before the year 1936 when Keynes published his “General Theory of Money, Interest and Employment”.
Before I go on I feel I have to apologise for being an economist. I used to stand in the corner of cocktail parties (in those far off times when they were fashionable) on my own for the most part because when another party goer appeared and asked what did I do, I, unable to think of a suitable untruth, always said “I am an economist” and after a moment or two of embarrassed silence I was left alone again. There was one occasion when I said my usual and the party–goer said in great excitement, “Oh, really! How exciting!” But then went on to say, “I have never met a Communist before.” Of course I had to correct him and say as distinctly as I could: economist, not communist. Soon I was alone again. This was the only occasion that muttering into my beard might have got me into an all out conversation at a cocktail party. Actually, economists rarely have beards with the exception of Karl Marx, of course, but then he was a communist, and an economist, too. A neat trick, I must say.
The interesting thing about Milton Friedman was that his most famous bit of economics was not much more than a sound bite: government economic policy should concentrate on controlling the money supply and everything else will be taken care of by the market. This was very kind of him because economists normally try to make economic theory simple with models, graphs, diagrams and equations, often with lots of Greek letters. This has a tendency to make simple things harder to understand, turning everything into Greek which as we know is nearly as difficult as double-dutch. My apologies are offered to Greeks and Netherlanders who may be reading this. No harm meant. Actually economics is quite complicated I must say. Economists, as far as I can make out, do not seem to have made a distinction between the market (which distributes resources through the use of money) and capitalism (which is designed to make a surplus which is usually measured in money terms). In the interests of not going on interminably and losing my audience entirely I would just like to say that until economists realise that markets require small government and surpluses require big government they will never understand that economic policy is likely to be forever totally contradictory. In other words economists will tend be wrong all the time and simultaneously correct.
Friedman came up with his idea about monetarism in the 1970s when the rich countries in the world were bothered about inflation. In fact, if anybody had read the economist with the beard (not me, but Karl M) they would have known that the real problem had something to do with the tendency of the rate of profit to fall, and M. Thatcher, one of Friedman’s most ardent adherents, thought that monetarism would allow her to sack lots of civil servants, sell off the family silver (as one elderly aristocrat put it) and provide scope for the increase the rate of profit. Actually what M. Thatcher was doing was creating unemployment which is what all economists tell you to do when inflation rates go up as high as they did in the 1970s.
In more recent years no government pays any attention to monetarism. Friedman himself admitted in a conversation with the Financial Times in 2003 that: “the use of the quantity of money as a target has not been a success”, and all governments of the richer countries have drifted back to Keynesianism, more or less, by managing the economy through interest rates. Of course there are many shortcomings with this policy, too, but you can’t expect too much from economists. Indeed as George Bernard Shaw famously said (glimpsing the nature of contradiction in economic processes): “if you place all economists in the world head to toe, they would still not reach a conclusion.” So there we are, goodbye to Milton and his simple sound bite theory and back to the economists who do it with models. I wish…..
Simon Stander is editor-in-chief of the Peace and Conflict Monitor