At a time when skepticism about markets ran rampant, Friedman explained in clear, accessible language that private enterprise is the foundation of economic prosperity. All successful economies are built on thrift, hard work, and individual initiative. He railed against government regulations that encumber entrepreneurship and restrict markets. What Adam Smith was to the eighteenth century, Milton Friedman was to the twentieth….But Friedman also produced a less felicitous legacy. In his zeal to promote the power of markets, he drew too sharp a distinction between the market and the state. In effect, he presented government as the enemy of the market. He therefore blinded us to the evident reality that all successful economies are, in fact, mixed. Unfortunately, the world economy is still contending with that blindness in the aftermath of a financial crisis that resulted, in no small part, from letting financial markets run too free.The Friedmanite perspective greatly underestimates the institutional prerequisites of markets. Let the government simply enforce property rights and contracts, and – presto! – markets can work their magic. In fact, the kind of markets that modern economies need are not self-creating, self-regulating, self-stabilizing, or self-legitimizing. Governments must invest in transport and communication networks; counteract asymmetric information, externalities, and unequal bargaining power; moderate financial panics and recessions; and respond to popular demands for safety nets and social insurance.
Read the whole post at Project Syndicate, Milton Friedman’s Magical Thinking
Sadly, Friedman and monomaniacal monetarism seem to be all the rage these days among mainstream Democrat policy pros, pundits and economics bloggers, who have seemingly given up on fiscal policy to get in line behind the conservative outlook that rules Washington - a fusion of the radical conservatism of the Republican House and the moderate conservatism of the Obama administration.
ReplyDeleteFriedman did believe in a strong government role in regulating the business cycle and preventing/responding to financial crises. Obviously, he favored monetary policy responses.
ReplyDeleteAnd of course, he was a demand-sider when it came to recessions, which is good.
I think he was too ideologically libertarian at times, but he was not the absolutist that we see too many of today.
There were many facets to Friedman and several stages in the development of this thinking, both economic and political. I agree that many now see him as the Friedman the (infallible) Libertarian, rather than as an economic thinker who made many contributions, but did not get it all right.
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