« What the Election Proves--Posner | Main | On Milton Friedman's Ideas--BECKER »

11/19/2006

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d8341c031153ef0133efd1e69e970b

Listed below are links to weblogs that reference Milton Friedman--Posner's Comment:

Comments

Feed You can follow this conversation by subscribing to the comment feed for this post.

KipEsquire

"For then the government's heavy demand for military labor, coupled with the high cost of military service to soldiers at significant risk, would drive the market wage rate for such service through the roof."

So? Just because defense is a public good doesn't mean the lives of potential conscripts are too.

"Very heavy taxes would be required to defray the expense of a volunteer army in these circumstances and those taxes would have misallocative effects that might well exceed the misallocative effects of conscription."

Better to conscript and send people to die than to tax them? Easy to say that when you're not the one being conscripted. And what, exactly, is the marginal rate of substitution between death and taxes? How exactly would you propose measuring it, either theoretically or empiracally?

"I don't think that there is a good theoretical or empirical basis for [Friedman's] view."

Pot.Kettle.Black.

Greg Ransom

Let's be fair to Hayek (and simply honest) -- Britain abandoned many of the things Hayek most worried about, often _because_ of what Hayek wrote. And it is clear that the British left did listen to Hayek, and did adjust their thinking due to his arguments. (This is also true of America, as the historian Alan Brinkley has pointed out.)

Hayek says he wrote his book _The Road to Serfdom_ to change history and Hayek believes his book did change how history came out -- and a number of historians back Hayek up on this.

Hayek wasn't making a prophecy or a prediction -- he was intervening to change history. Hayek, I shouldn't have to tell you, was not a Marxist. Hayek didn't believe in historical inevitability and he believed arguments and ideas could change history.

I'm wondering if you've actually read Hayek -- your many comments over the years on the ideas of Hayek lead me to believe you haven't read his actual writings, only misleading or false accounts of Hayek's actual thoughts and arguments. Am I right?

Greg Ransom

Let's be fair to Hayek (and simply honest) -- Britain abandoned many of the things Hayek most worried about, often _because_ of what Hayek wrote. And it is clear that the British left did listen to Hayek, and did adjust their thinking due to his arguments. (This is also true of America, as the historian Alan Brinkley has pointed out.)

Hayek says he wrote his book _The Road to Serfdom_ to change history and Hayek believes his book did change how history came out -- and a number of historians back Hayek up on this.

Hayek wasn't making a prophecy or a prediction -- he was intervening to change history. Hayek, I shouldn't have to tell you, was not a Marxist. Hayek didn't believe in historical inevitability and he believed arguments and ideas could change history.

I'm wondering if you've actually read Hayek -- your many comments over the years on the ideas of Hayek lead me to believe you haven't read his actual writings, only misleading or false accounts of Hayek's actual thoughts and arguments. Am I right?

Barry

Posner: "Very heavy taxes would be required to defray the expense of a volunteer army in these circumstances and those taxes would have misallocative effects that might well exceed the misallocative effects of conscription."

In short 'I want my wars, but perish the thought of high taxes on *me*. Never should I suffer even one-tenth of what peasant draftees should be made to suffer.' According to: http://en.wikipedia.org/wiki/Richard_Posner, it looks like Posner is another right-winger who never found it necessary to serve his country.

If wars, by law, led immediately to higher taxes on the rich, I bet that the USA might discover diplomacy again. Force would be used by the USA only when necessary, not when desired.

David

In discussing Friedman, Posner identifies a pervasive problem in the political debate today. Many modern conservatives believe as a matter of faith in the superiority of unregulated markets and private industry. They ignore the reality that some regulation (though certainly not all regulation) provides beneficial results. Indeed, "think tanks" funded by corporate money propogate the faith by singing the praises of deregulation in every industry and by advocating tax breaks for the corporate class. Unfortunately, most citizens are unaware of the conflicts of interest that underlie such advocacy. And, many politicians have their own conflicts of interest, because the same corporate money funds their compaigns.

robert

The greatest argument for a volunteer army lay in the fact that the state, in this context, has no right to man's life and his decision as to what to do with it. The argument is moral, not economic.

Chris Silvey

FYI - In a recent update of Free To Choose, Milton Friedman softened his views on the connection between democracy and capitalism and pointed toward China as an example of a country that (so-far) has managed to be an outlier.

Patrick R. Sullivan

I think Posner is guilty of creating a Straw Friedman. He accepted the possibility of needing total mobilization for a WWII type of war for national survival. In Capitalism and Freedom he accepted universal military training for just such a contingency.

At any rate, today we are a nation of 300 million people, with about 50 million in the prime soldiering ages 18-30. There's no way we could have an army that size. And then the Hayek of The Use of Knowledge in Society becomes very important.

Friedman's own contribution to WWII is very instructive too. He was part of Allen Wallis' Statistical Research Group at Columbia.

Friedman actually was used as a consultant during the Battle of the Bulge to explain the math behind the settings on proximity fuses for air bursts against German ground troops. Army officers flew into Washington DC and then went back to the battlefield and put into action what they'd learned.

Don Boudreaux

Jeffrey Sachs misreads Hayek just as Judge Posner misreads Hayek. This letter that I sent last month to Scientific American -- which published Sachs's misinterpretation of Hayek -- applies also to Judge Posner's misinterpretation:

6 October 2006

Editor, Scientific American

To the Editor:

Jeffrey Sachs writes that the late "Friedrich Von Hayek was Wrong" ("Welfare States, beyond Ideology," November 2006). This Nobel laureate's error allegedly was to argue that the welfare state paves - as the title of Hayek's 1944 book expressed it - "the road to serfdom."

Sachs misreads Hayek. Although he was no fan of the welfare state, Hayek never argued that it leads to tyranny. In The Road to Serfdom, Hayek distinguished between government efforts to ensure "limited security" and government efforts to achieve "absolute security." Hayek warned only against efforts to achieve the latter, which he described as "the security of a given standard of life, or of the relative position which one person or group enjoys compared with others." Hayek was correct that such "security" is achievable only by tyranny.

But as for limited security, Hayek wrote that "There is no reason why in a society which has reached the general level of wealth which ours has attained the first kind of security [that is, limited security] should not be guaranteed to all without endangering general freedom…. Nor is there any reason why the state should not assist the individuals in providing for those common hazards of life against which, because of their uncertainty, few individuals can make adequate provision" [pages 133-134].

Sincerely,
Donald J. Boudreaux
George Mason University

Peter Pearson

"A country can be highly productive though it has an authoritarian political system, as in China, or democratic and impoverished, as was true for the first half century or so of India's democracy..."

Neither of these observations contradicts Friedman in any significant way. Considering, first, the China example, remember that Friedman admired Hong Kong for its immense economic accomplishments under a British colonial rule that happend to give great economic freedom with little political freedom.

India's history merely illustrates that one can have democracy with very little economic freedom. Indeed, if the US had intended to retard India's emergence as an economic power, a dozen nuclear bombs would have been less effective than sending them Ambassador John Kenneth Galbraith to teach them how to run a properly socialist economy.

If there's any refutation of Friedman to be found in India, it would be that Friedman's thesis of political freedom depending on economic freedom is inconsistent with India's political freedoms surviving so well and so long in the absence of better economic freedoms. But I don't think you were trying to make that case.

Jay

Poser says: I also think that Friedman, again more as a matter of faith than of science, exaggerated the correlation between economic and political freedom.

Something is wrong in what Posner says, I don't know what it is.

As a matter of fact there is a strong relationship between Economic Freedom and Development, Economic Growth. Better the economic growth better the development thereby higher standard of living for the common man.

Plain political freedom achieves nothing. What is the use of political freedom if I have to live below poverty line for my whole life due to lack of economic freedom. But wait, even in India Political freedom had to depend upon Economic freedom. In 1991, India had very very less economic freedom even though is had political freedom, it averted becoming a total collapse and insolvency by liberalising its economy, otherwise all hell would have broken loose.

India would have become like another african state with civil war and warring tribes.

Poser says:protection of property rights, which authoritarian government threatens.
People in India do not have any property right, so does it make it Authoritarian or a Politically free nation??
Even in the US of A there is 'Eminent Domain', does this law protect property right??.
Is America Authoritarian as it threatens property rights??

Poser says:The Road to Serfdom flunks the test of accuracy of prediction!
I wish Posner should have lived in germany under nazi rule or atleast in Soviet Russia or under Mao in China.

Anon

Posner,

You don't sound like a Federalist in this post.

Eric Crampton

Greg: that the left in Britain listened to Hayek suggests that his initial argument wasn't strictly correct. For the mechanism in RTS to work, planners have to prefer authoritarianism to free markets. Planning has to have value over and above anything else, otherwise we get a retreat from planning prior to the rise of the demagogue. If the British left found persuasive Hayek's argument that a planned economy was inconsistent with democratic freedom, and chose the latter rather than the former, they also gave evidence against the RTS mechanism. Planning led to serfdom really only where planning was initiated by those already non-benevolent; where it started with largely benevolent planners, we instead saw a retreat to the welfare state.

Michael Strong

Hayek was not opposed to a welfare state, he was opposed to the notion that the government could plan the economy. The original understanding of socialism was that government planning would out-perform the chaos of markets. Britain started to become socialist in this sense, but then became more of a welfare state. Hayek was arguing that the socialist idea, in the sense of a commitment to a planned economy, if followed, would result in tyranny. Something like this happened in India in the 1970s, at which point India began to back down from socialist planning. The case of India, as well as much of the communist world, validates Hayek. If a thorough-going socialist party had actually insisted on socialism, rather than large welfare states, we would have seen more of the pathologies suggested by Hayek (whose rhetoric in TRS was admittedly less nuanced than it should have been, but whose logic still had a certain validity).

IJH

I agree ... a misreading of Hayek and a misleading description of Sweden (lets see Sweden maintain its current situation as birth-rates decline and the Ponzi scheme of pay-as-you-go pensions and unemployment insurance unravels -- also - Sweden has no defense budget and is homogeneous.)

DCA

The last part of Posner's comment brings to mind (for both Friedman and Hayek) Schumpeter's distinction between "Marx the Economist" (a source of many valuable insights) and "Marx
the Prophet" (wrong, as I think Hayek was in RTS, but in this role bringing the kind of vigor and vision needed to get one's ideas adopted--for good or ill).

cls

In regards to Sweden. There seems to be confusion here regarding the taxation. It is true that taxes on consumers and wage earners is very high. Not so on production however. Business taxes are rather moderate. Sweden’s socialism was not a socialisation of production but of consumption. It is meant to control consumers and force them to spend their funds the way the government wishes. For businesses, especially those in export, the situation is not much different than other well off nations. So when you mention the high taxes it is a bit odd since the high taxes are not on the production which you then mention but on the consumption which you don’t mention.

wml

I noticed that schizophrenic tendency in Friedman as well. I agree that theory based on shaky assumptions should be judged by its predictions, not the shaky assumptions. But then arguing for policy changes based on a theory not specifically tested in the relevent area or case is absurd. You can't have it both ways. Either your assumptions behind the theory you want to apply need to be rock-solid, or you need specific empirical evidence.

Jacob

You refer to Popper but then violate his principle of falsifiability. You praise Friedman for a great theory but say that it needs to be tested. Do you have an alternate theory that does not need to be tested. I think that the proposition that Sweden's system could work as effectively in any country is more likely to be falsifiable than Friedman's theories. Same with Britain's policies. And both could yet fail. Friedman's theories could also fail but they have stood up better than any other.

But like he implied, in the absence of all other theories being falsified, you have to go with the ones left standing. Since condition A is unattainable, Friedman's prescription is just as good as Sweden's.

CaptainVideo

Friedman liked to compare the relative performances of the economies of West Germany and East Germany as the closest thing one could come to a controled experiment, proving the superiority of market economies over socialism. But Friedman ignored the fact that West Germany was not an example of the kind of laissez-faire capitalism he advocated, but, rather, a welfare state, similar to, though to a lesser degree, Sweden, with, among other things, universal health insurance.

Jacob

Also, on the conscription topic. If Germany had been living by Friedman's principles, there never would have been a war, or a holocaust in the first place. You can't fault his prescription by throwing up an example in which they weren't being applied.

Until all countries go with volunteer armies, unnecessary and irrational wars will continue to be waged, but that is more an affirmation than a negation of Friedman's views.

CaptainVideo

The basic tenet of Friedman's version of monetarism was that the velocity of money was stable, or at least predictable, so that to stabilize the economy one merely had to keep the rate of growth of the money supply constant. This turned out to be totally incorrect. Friedman at one point even advocated passing a constitutional amemdment requiring the Fed to keep the rate of growth of the money supply at a constant rate. Fortunately he did not get his way because the effect of this would have been disasterous on the economy.

(My criticsms should not be misinterpreted, I think Friedman made very important contributions to economics and deserved the Nobel Prize. But there are important areas where he was mislead by his ideological blinders.)

Jacob

Economic and political rights do go hand in hand. The reason for the inequality and lack of freedom in China and India is not because they have economic rights without political rights, but because they have economic rights only selectively applied. In India, there are only certain industries and regions that are economically free. The same with China, which is why rural China is still so poor.

China's high rate of growth is not evidence of economic freedom decoupled from political freedom. They still have little economic freedom...the only reason the country is growing is because they have MORE freedom (very little) than they did (zero). Without ever more economic freedom, that growth will stop.

Jacob

Captain Video, why is Friedman's monetary theory incorrect? He never said the velocity of money was perfectly stable, he said that IF it is stable then the government can stabilize the economy by controlling the money supply (either growing it or not growing it). I think most economists would agree that this holds up, certainly the Central Bankers do.

If you are saying that it is merely hard to measure the velocity, that doesn't weaken his theory.

CaptainVideo

"He never said the velocity of money was perfectly stable,"

He argued that it was actually stable enough, or at least predictable enough, so that having the money supply grow at a low constant rate would stabilize the economy. He very strongly advocated that such a policy be followed, to the point of supporting a constitutional amendment requiring the government to do this.

The fact that velocity turned out to be very unstable and unpredictable did orthodox monetarism in.

Obviously, if velocity were stable, such a policy would work. Few would dispute this point, but this theoretical tecnicality was not what monetarism was all about.

Check his writings on economic policy and you will see that I am right. Unfortunately I do not have the time to dig through the material and come up with quotations at the present time.

The comments to this entry are closed.

Become a Fan

May 2014

Sun Mon Tue Wed Thu Fri Sat
        1 2 3
4 5 6 7 8 9 10
11 12 13 14 15 16 17
18 19 20 21 22 23 24
25 26 27 28 29 30 31