They leave out, in short, a vast array of elements that would muddy the clarity of their exposition. What appears to be a clear-cut demonstration, properly simplified to present a bold case, becomes in fact a case built on selected and omitted evidence that, were it used by an ideologue of the left, would unhesitatingly be described by the Friedmans as shameful. And it is not just in the contrast of India and Japan that we find this kind of argument. The contrast between East and West Germany makes no mention of the drain of resources out of East Germany by Russia. In discussing the difference between Israel and Egypt they do not consider the respective skills and training of the two populations or the critical infusion of philanthropic capital into Israel. The juxtaposition of Taiwan and mainland China omits the fact that the market system of pre-communist China collapsed.
This same one-sided argument characterizes much of their policy diagnoses and prescriptions. Their espousal of the voucher system, for example, pays no heed to the critics’ fears that such a system would convert our public schools into dumping grounds for all students who, for whatever reasons, would not be acceptable to private educational institutions. Their attack on the regulated industries effectively returns us to the aegis of free-market forces which is precisely the environment from which we fled into government regulation in the first place. Their confident call for a curb on the money supply to halt inflation ignores the growing body of professional skepticism with the monetarist position. Their attack on the antisocial consequences of the drive for equality leans on their insinuation that this is a factor behind the growth of “crude criminality in Britain in recent decades,” but leaves out of consideration the rise of racial conflicts in England stemming from Asian and African immigration or the appearance of a violent youth culture around the world.
In the face of such arguments, a critic can only throw up his hands. Some of the Friedmans’ specific proposals appear to me to be shrewd and worth consideration, but not on the basis of the winnowed evidence or shabby arguments they have advanced on their behalf. Free to Choose is to serious economic and political debate what fundamentalist preaching is to Bible scholarship.
Since I cannot, without writing a book as long as theirs, either defend the merits or demonstrate the demerits of their arguments, let me instead turn to a few basic ideas that seem to underlie their thinking. The first of these is their view of the historic role of capitalism itself with respect to “human nature.” To the Friedmans, capitalism represents a stage of history in which a propensity of deep, almost primordial, strength is finally accorded its rightful place and scope. This is the propensity for material betterment that provides the motor strength of capitalism and—as a consequence of competition—its built-in regulating device. Adam Smith certainly held such a view of history, calling the market economy the stage of “perfect liberty,” and the Friedmans continue to rest their social philosophy on that belief.
There is, however, an opposing view. It is that the market system, far from representing the fruition of a long-blocked propensity, is the product of a violent process of social displacement during the seventeenth and eighteenth centuries that culminated in an unstable and unwelcome structure of social and economic relationships. That is the view of such observers as Burke and Coleridge and Ruskin, not to mention Polanyi, Veblen, and Marx. From this standpoint, the market system is only a passing episode in the human drama, a tumultuous and creative era in which the economic sphere was temporarily lifted above the matrix of political and social forces that normally contain and control it.
From this perspective, I think, we get a clearer picture of the contrast between market and nonmarket societies that figures so large in the Friedmans’ book. No one denies that the forces of capitalism can give rise to dramatic economic growth. The Friedmans are entirely right in pointing to Hong Kong—or to Japan or West Germany or Israel—as monuments to the capital-accumulating capacities of such systems, and perhaps to their ability to create and nurture democratic political processes. That is not however the entire picture. Capitalism builds and it also undermines. It satisfies wants but creates new ones even more rapidly, so that capitalist societies are marked by a perpetual craving, not a sense of contentment. Capitalist societies create political freedoms and simultaneously fear the implications of applying the democratic creed to the economic sphere.
Thus capitalism is far more dynamic, more restive, more self-contradictory than the Friedmans would have us believe. Their view of the market system is naïve, grasping one part of its nature, blind to others.
Closely associated with this simplistic view of the market system is their conception of economic freedom. A key word here is one the Friedmans use often: “voluntary.” The hallmark of a market system, as they describe it, is that its members cooperate voluntarily, and therefore with enthusiasm and efficiency. “The key insight of Adam Smith’s Wealth of Nations is misleadingly simple,” the Friedmans write. “If an exchange between two parties is voluntary, it will not take place unless both believe they will benefit from it.” Yet even Adam Smith recognized that the voluntary exchange of the services of labor and of capital was not of exactly the same nature for both sides. “The workman may be as necessary to the master as the master to him,” he said, “but the necessity is not so immediate.” Thus the exchange of labor on the marketplace—the core activity of the market system—is not quite so natural or so unambiguously voluntary as the Friedmans make it out to be.
This restricted view of economic freedom of course affects their argument. As they use the term, economic freedom means the right to pursue one’s livelihood in the marketplace, and the allied right to enjoy as little public restraint as possible in that pursuit. But once again, there is another view. Economic freedom can take the form of laws that set men free from the pressures of the marketplace, for example by enabling them to demand a legal minimum wage, or to go on welfare rather than perform distasteful work. We may not like the effects of minimum wages or welfare provisions, but it is wrong to deny that they also provide freedom of a kind to those who benefit from them. So too, economic freedom can appear as the ability of individuals to achieve collectively ends they cannot attain singly: labor unions make men free to impose their desires, which they would not be free to do without them. Again, we may rail against the abuse of power by unions, but that is not to deny their effect in freeing their beneficiaries from their nonunion impotence.
The Friedmans of course recognize that unions can win special benefits for their own members, but they call our attention to the constraints they impose on others. It never seems to occur to them that the rights of property and of managerial prerogatives also enhance the freedom of some and limit the freedom of others. As with their conception of capitalism, the Friedmans’ use of the word freedom is oversimplified and abstract.*
A third idea also displays a curiously narrow view. This is the Friedmans’ approach to equality:
Much of the moral fervor behind the drive for equality of outcome comes from the widespread belief that it is not fair that some children should have a great advantage over others simply because they happen to have wealthy parents. Of course it is not fair. However, unfairness can take many forms. It can take the form of the inheritance of property—bonds and stocks, houses, factories; it can also take the form of the inheritance of talent—musical ability, strength, mathematical genius. The inheritance of property can be interfered with more readily than the inheritance of talent. But from an ethical point of view, is there any difference between the two?
The answer to this question is that there is indeed a difference, and moreover a difference that must surely be known to the authors. It is that we do not attach any moral significance to unfairnesses determined by nature, whereas we do attach such significance to those determined by society. No one considers it morally wrong that one person is handsome and another ugly, but everyone holds it to be morally wrong when two people have incomes which, when compared, offend sensibilities or violate conventions. This is true whether those incomes are equal or not. We are morally outraged when a gangster makes as much as a law-abiding citizen and when a useless citizen has more than a useful one. Thus the moral issue is not that of equality of outcomes at all. It is the character of the arguments that we adduce in favor of, or against, any kind of social determination, be it access to justice, work, income, or whatever. The Friedmans have failed to alert their readers to this obvious moral distinction. They must not be discomfitted, then, if their readers, on hearing it, conclude that their mentors are not altogether reliable moral guides.
THE WORKS OF FRIEDMAN
Milton Friedman’s work as an economist has made him famous on at least three fronts. Early recognized as an exceptionally brilliant and iconoclastic mind, he came to national attention in the 1950s and 1960s with a series of imaginative articles on the motivation behind consumption behavior. Vigorously challenged and skillfully defended, these articles vaguely associated Friedman with an “anti-Keynesian” view and identified him as a conservative because of the emphasis they placed on the self-asserting power of spontaneous economic behavior despite governmental efforts to influence it, especially with respect to the decisions of individuals to spend or save.
A second, related, element in Friedman’s reputation was the formulation of the bold hypothesis that “money mattered” in the determination of GNP, a view that flew in the face of the prevailing orthodoxy that only fiscal policy, not monetary policy, could affect GNP. Friedman’s Monetary History of the United States, written with Anna J. Schwartz and published in 1963, together with a number of disconcerting and sharply argued articles, gradually changed economic opinion, until monetarism itself became, by the early 1970s, the prevailing orthodox view. Never wholly unchallenged, the view is now perhaps in decline. It is typical of Friedman’s liking for extreme positions that he has always insisted that only money mattered, and that fiscal policy—spending and taxing—are policies that have little effect on the economy as a whole or at least little intended effect.
Third, Friedman is also known for his striking position on economic methodology—namely, that the only criterion for economic science is the correct outcome of the predictions that follow from its hypotheses. In arguing this position, Friedman asserts that the “realism” of those hypotheses has no relevance at all—that economic science should be entirely indifferent to the plausibility of its assumptions and only concerned with the reliability of its predictions. Needless to say, this contention has again brought him into the eye of a self-created storm.
Free to Choose is his second political book, preceded in 1962 by Capitalism and Freedom, also written with his wife. The philosophy of the earlier book is much like that of the present one. Indeed, the Friedmans themselves consider their latest book to be only a more “practical,” “nuts and bolts” version of the themes to be found in the first.
Many years ago, reviewing a book by the Polish economist Oskar Lange, Milton Friedman wrote: "Here is a brilliant display of formal logic, abstract thinking, complicated chains of deduction; yet the analysis seems more nearly a rationalization of policy conclusions previously reached than a basis for them. What is there about the type of theorizing employed that makes it sterile even in the hands of so competent a practitioner as Lange?" (Essays in Positive Economics, Chicago, 1966, p. 277).
Friedman answers that Lange stoops to "oversimplification" and to the "use of classifications that have no direct empirical counterpart." The shoe seems to fit.↩
Many years ago, reviewing a book by the Polish economist Oskar Lange, Milton Friedman wrote: “Here is a brilliant display of formal logic, abstract thinking, complicated chains of deduction; yet the analysis seems more nearly a rationalization of policy conclusions previously reached than a basis for them. What is there about the type of theorizing employed that makes it sterile even in the hands of so competent a practitioner as Lange?” (Essays in Positive Economics, Chicago, 1966, p. 277).
Friedman answers that Lange stoops to “oversimplification” and to the “use of classifications that have no direct empirical counterpart.” The shoe seems to fit.↩