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peristaltorin industry or agriculture,
have never come from centralized government.
-- Milton Friedman, Capitalism and Freedom,
published in 1962, five years after
the Soviets launched Sputnik.
When it comes to analysis of current events in the news, I've discovered that one must enter every reading with a critical eye to what the ideologically faithful have altered, caused to be altered, or caused to be omitted altogether. And, oh boy, when it comes to blinders on and fixed, there's one group of professionals out there who are becoming a particularly nasty source of assumptions and pronouncements. I'm talking here, of course, about Uncle Miltie's Minions, the Friedmanite economists.
I recently heard Stephen J. Dubner go off on an Ein Volk! Ein Reich! Ayn Rand! tear on his podcast Freakonomics. In this linked episode, he asks a fellow economist what he would do if put in charge. I'll give you an especially long excerpted taste:
SJD: Okay, let’s play a fantasy game for a minute and pretend that you, Russ Roberts, a creative and very bright economist come to Washington and are put in charge of the whole country. And unlike every other economist that’s ever gone to high office, you don’t start acting like a politician. You really act like an economist from day one. So you get there, you’re behind the desk, you’ve got a pen and paper. What are some of the first things you do as soon as you arrive?
RR: I’m getting goose bumps, it’s so exciting. Well, what I would do? Let’s start with some obvious things. I would get rid of the Department of Commerce. The Department of Commerce doesn’t do anything except subsidize exports, which is just a way of saying it makes certain companies rich at the expense of the rest of us. So I don’t think the Department of Commerce does anything particularly useful, I would get rid of that. I’d get rid of the Department of Education. I don’t think that the Federal Government has any productive role to play in the school system. I’d get rid of all tariffs. I’d let people be free to buy whatever they wanted from all around the world. What else? I would get rid of the minimum wage law, which I think makes it hard for low-skilled people to find work; it makes them artificially expensive. . . .
I'm going to cut off the self-aggrandizing bloviation here and point out what really got my dander up. The episode was titled, "What would the world look like if economists were in charge?" I mentioned this episode and what was said to a good friend the other day, and he got equally pissed. And for the same reason. You see, he feels all of the above positions Russ Roberts suggested have Major Fail! written all over them . . . and he has been working as a professional economist for almost 20 years now.
For some reason, Dubner's entire episode either attempted to conflate or assumed a conflation of right-wing libertarian Friedman-esque whack-job economists for all economists.
What happens when this conflation becomes too common? Then you find reporters hunting down the people they think are the true experts in the economy -- despite the tendency for these folks to wear Milton's asscheeks as blinders -- and the Friedman view becomes the only view reported. I suspect this is what happened to Adam Davidson of NPR's Planet Money. Early in the podcast (I listened from episode one), he got most of his education on the economy from bankers, brokers and economists working in New York. The anti-regulation invective some of these guys could spew must have singed their lips badly enough to leave charred marks. They hate government.
As a result, when Davidson interviews folks that don't don Friedman's particular brand of cheek, he stands on very, very shaky ground. He seems to view non-Friedman economic thinkers as somehow skewed in their thinking away from the norm, when in fact it is his thinking that has been skewed. This failure to realize his own biases steers him into sometimes overt frustration and anger. You can hear this frustrated naivete when he interviews Rep. Barney Frank, who calls Davidson on his muddled thinking and stands firm when the interviewer Adam makes shit up in his defense. Oh, and his interview with Elizabeth Warren really must be heard to be believed. It's not often you get to hear NPR reporters in shouting matches with their subjects.
I think both of these cases illustrates how out of his depth Davidson has waded. He has early in his career -- perhaps too early -- talked with too many people who would disagree with (or outright dismiss as unworthy of discussion) Warren and Frank to even try to understand what those two actual experts have to say.
The result? We, the listening audience, don't get to hear what those two experts have to say. The bumbling reporter messes up the conversation.
I don't think it's too late for Davidson, not just yet. There's a real chance someone will turn him on to an economic thinker that can actually explain to him why defending Friedman is not a good expert to cite all of the time. (Hey, it might be me. Google "adam davidson barney frank" and check out the third hit.)
But exactly what did Friedman say that instilled this singular defense of No Rules! capitalism? Though I haven't read his seminal work, others have:
One of the great heroes of the American right of the late twentieth century was neoliberal economist Milton Friedman. In his most famous work, Capitalism and Freedom, Friedman argued (as its title suggests) that capitalism and freedom go hand in hand -- that there can be no freedom without capitalism and no capitalism without freedom. So defense of one was the defense of the other. It was as simple -- and as fundamental -- as that.
(Naomi Oreskes and Erik M. Conway, The Merchants of Doubt, Bloomsbury Press, 2010, pp. 64-65.)
Milton Friedman was an expert economist who suggested that defense of freedom means defending free enterprise (provided one ignore the obvious and glaring examples to the contrary, such as the one cited in this entry's opening quote). We as Americans want to be free, and many of us equate economic liberty -- even the unrestrained variety -- as actual freedom. As humans, we want experts in this world:
We all eagerly assume there exist people, somewhere, who unlike ourselves do have a grip on the bedrock reality that underlies our societies, who understand how things work and will take care of us if severe problems arise. We also deeply fear the possibility that it isn't true, and there are no such people. . . .
(Thomas Homer-Dixon, The Ingenuity Gap, Alfred A. Knopf, 2000, p. 150.)
No, despite those that hold Friedman in such high esteem, there probably aren't any experts guiding these times. Another author agrees:
We think that experts will, in some sense, identify themselves, announcing their presence and demonstrating their expertise by their level of confidence. But it doesn't work that way. Strangely, experts are no more confident in their abilities than average people are, which is to say that they are overconfident like everyone else, but no more so. Similarly, there is very little correlation between experts' self-assessment and their performance. Knowing and knowing that you know are apparently two very different skills.
If this is the case, then why do we cling so tightly to the idea that the right expert will save us?
(James Surowiecki, The Wisdom of Crowds, Doubleday, 2004, p. 35.)
The answer probably has something to do with how people respond better to individuals. We like our heroes. We like it when someone takes charge and saves the day. Somehow, as Homer-Dixon noted, we are unnerved at the thought that there are no such heroes. Even worse, we have very little experience letting the madding crowd take the reins. Surowiecki continues:
And why do we ignore the fact that simply averaging a group's estimates will produce a very good result? . . . (One) reason, surely, is our assumption that true intelligence resides only in individuals, so that finding the right person -- the right consultant, the right CEO -- will make all the difference. In a sense, the crowd is blind to its own wisdom. . . . Again, trying to find smart people will not lead you astray. Trying to find the smartest person will.
(Surowiecki, ibid, pp. 35-35.)
But that's just what happened, I think, to most recently explode our economy and cause the resulting collapse. Someone placed a great deal of faith in Milton Friedman's economic theory and emphasis on government non-intervention in markets. And, sadly, that person until recently headed the Federal Reserve.
Alan Greenspan may not have been in charge of the Fed during the most severe and obvious part of the collapse, but his actions -- or rather, his ideological inaction -- sowed the seeds for the impending disaster. To understand what happened, we need to note how systems work in general, how our economic system works in particular, and how we individuals within the systems can have more control over system outcomes than the leaders supposedly guiding the system with their authoritarian control.