It’s almost amazing to me the sea change in economic thought in my lifetime. In 1969, Richard Nixon said “We are all Keynesians now.” In fact, in 1977, my Econ 101 professor cautioned us that it was the only economic theory he was allowed to teach “but other theories exist.” Today Keynes has been almost totally discredited, at least in academic circles – if not political. His warped theories have been supplanted largely by the “Chicago School” of economic thought, championed by (among others) Fed Chairman Alan Greenspan, and Milton Friedman. And, to a lesser degree, the “Austrian School”, of Ludwig Von Mises and Fredrich Hayek (as well as your author), which differs from the Chicago School principally on matters of monetarism.

The tide was turning in the mid-seventies, just as I was reaching adulthood. Milton Friedman won the Nobel Prize in 1976. Last Saturday, he turned 92. It has been said that no other economist did more to further the cause of liberty in the 20th century. This is certainly so by his acclaim, if not strictly by his body of work. But it is only fitting that he be honored. Pepperdine University Economics Professor Gary M. Galles cites Friedman, in his own words, here:

Fundamentally, there are only two ways of coordinating the economic activities of millions. One is central direction involve the use of coercion…The other is voluntary cooperation of individuals.

The Invisible Hand:

The problem of social organization is how to set up an arrangement under which greed will do the least harm; capitalism is that kind of a system.

The possibility of co-ordination through voluntary co-operation rests on the elementary…proposition that both parties to an economic transaction benefit from it…Exchange can therefore bring about coordination without coercion. A working model of a society organized through voluntary exchange is the free private enterprise exchange economy.

The great virtue of a free market system is that it does not care what color people are; it does not care what their religion is; it only cares whether they can produce something you want to buy. It is the most effective system we have discovered to enable people who hate one another to…help one another.

The Visible Hand:

Government has three primary functions. It should provide for military defense of the nation. It should enforce contracts between individuals. It should protect citizens against crimes against themselves or their property.

When government…tries to rearrange the economy, legislate morality, or help special interests, the costs come in inefficiency, lack of innovation, and loss of freedom. Government should be a referee, not an active player.

…governmental measures taken with good intentions and for good purposes often, if not typically, go astray and do harm instead of good…There are many causes for the loss of freedom, but surely a major cause has been the growth of government…

The most unresolved problem of the day is precisely the problem that concerned the founders of this nation-how to limit the scope and power of government…Tyranny, restrictions on human freedom, come primarily from governmental restrictions that we ourselves have set up.

Problems with the Visible Hand:

The government solution to a problem is usually as bad as the problem.

Wherever the state undertakes to control in detail the economic activities of its citizens…[they] have little power to control their own destiny.

Most of the energy of political work is devoted to correcting the effects of mismanagement of government.
Many people want the government to protect the consumer. A much more urgent problem is to protect the consumer from the government.

The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy.

Only government can take perfectly good paper, cover it with perfectly good ink, and make the combination worthless.

If you put the federal government in charge of the Sahara desert, in 5 years there would be a shortage of sand.

On the One Hand; On the Other:

The greatest advances of civilization…have never come from centralized government.

Anything that government can do, private enterprise can do for half the cost.

If you spend your own money on yourself, you are very concerned about how much is spent and how it is spent… However, if you spend someone else’s money on someone else, you are not very concerned about how much is spent, or how it is spent.

The United States has continued to progress…the product of the initiative and drive of individuals co-operating through the free market. Government measures have hampered, not helped, this development. We have been able to afford and surmount these measures only because of the extraordinary fecundity of the market. The invisible hand has been more potent for progress than the visible hand for retrogression.