12. February 2005 · Comments Off on Milton Friedman A “Utopian”? · Categories: General

Robert Formaini critiques Richard Parker’s February 6th Boston Globe article “The Pragmatist and the Utopian” in TCS:

In any case, Friedman was absolutely right to criticize Nixon for wage and price control policy regardless of whether one calls that criticism “far right.” Has Parker ever read (Nixon’s “price czar”) C. Jackson Grayson’s The Confessions of A Price Controller? Doubtful. He’s too busy listing Galbraith’s term as World War II “price czar” approvingly. I once watched — I think it was an episode of Galbraith’s tendentious Age of Uncertainty — him describe the glee he felt when some poor businessmen came to his Washington office begging for a price increase. The look in his eyes as he recounted the story was like something out of an Ayn Rand novel, and I don’t mean a look one would find on any of her hero’s faces. Perhaps Parker saw that episode as well, his head nodding in liberal approval. All I felt was complete disgust. But for Galbraith, and so many others, to have been young then and pro-Keynesian and in Washington, well, dare I say it sounds almost….utopian?

Parker claims that Reagan’s White House fully accepted Friedman’s monetarist positions for the Fed and acted on them. It’s true that, starting in late 1979, the Fed began to target the quantity of money, seeing at that time a double-digit inflation rate, high unemployment, and a prime rate that peaked at over 22%. (This was all due to the Keynesian fine tuning under Ford and Carter, but Parker and Galbraith want to argue, one supposes, that had only Galbraith been doing the tuning…well, everything would somehow have come out better.) In fact, Friedman’s (or Hume’s….or Mill’s….or Fisher’s….) ideas worked exactly as he said they would: cutting the quantity of money did bring the inflation rate down. But this outcome came at a price: a severe recession. So, according to Parker, the Fed and Regan abandoned Friedman and pursued a policy of “turbo-charged” Keynesian-style deficits to get Reagan re-elected in 1984 even after his disastrous — yes, here it comes again, the worst political cliché in modern economic history — “tax cuts for the wealthy.”

It’s really sad to see people still clinging to tired old Keynesian fantasies in this day and age. Far from being “utopian”, free-market economics recognize such human failings as greed and sloth, and make the best of them.

Comments closed.