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Category — Friedman, Milton

Milton Friedman on the Energy Crisis (and ObamaCare to come)

July 31st is the birth date of one of the great intellectuals of the freedom philosophy. Milton Friedman (1912–2006) would have been 101 today.

Friedman Legacy Day is being celebrated at 144 events: 90 in 44 states and Washington,D.C., and 54 events in 25 countries abroad. Here in Houston, a “Milton Friedman Rocks” party is tonight.

Friedman was more than a technical economist and early Nobel Laureate in this field; he was a popularizer of the case for free markets. His shorter tracts and biweekly column for Newsweek covered a variety of in-the-news issues, including energy. And he became more libertarian and appreciative of Austrian School economics (market-process economics), the rival to his Chicago School of economics, as time went on.

Friedman’s insight into the distortions from government intervention shortages are timeless. Consider this from Milton and Rose Friedmans’ classic, Free to Choose (1979: p. 219):

Economists may not know much. But we know one thing very well: how to produce surpluses and shortages. Do you want a surplus? Have the government legislate a minimum price that is above the price that would otherwise prevail…. Do you want a shortage? Have the government legislate a maximum price that is below the price that would otherwise prevail.

Still the major example of our time is the 1970s energy crisis in the United States–the result of price and allocation controls by the Department of Energy. But get ready for a new chamber of economic horrors.

With ObamaCare’s use of price and allocation controls–and the growing problem of Medicare today–shortages and strife are upon us in the all-important health care field. The Wall Street Journal article, More Doctors Steer Clear of Medicare, said as much this week: [Read more →]

July 31, 2013   3 Comments

‘Trends Can Change’ (Mises): The Context (Part II)

“Soviet-style central planning may have died with the fall of the Berlin Wall in 1989 and the collapse of the Soviet Union in 1991. But what has not yet had that demise is that other variation on the collectivist theme: ‘democratic socialism’ (European-style) and the redistributive welfare state.”

“But what is required, what is asked of all of us who care about liberty, is not to allow the everyday ‘trends’ and outcomes of electoral politics to make us so despondent that we ‘give up the good fight.’ Only if we do so will the institutions of the paternalistic welfare state remain intact — even as the money dries up!”

It is worth recalling the state of the world when Ludwig von Mises wrote “Trends Can Change” 61 years ago (see Part I in this series).

Nazi socialism had been defeated six years earlier in 1945. But Soviet-style socialism seemed to be the wave of the future. Stalin had imposed an “iron curtain” over Eastern Europe. Two years earlier, in 1949, communism had triumphed in mainland China under Chairman Mao. And the U.S. was in the midst of fighting a war in Korea against the Chinese Communists who had come to the aid of the North Koreans.

At home, under President Harry Truman, wage and price controls had been imposed in the name of the (Korean) “war effort,” and the steel industry had been threatened with nationalization as part of a wartime “national emergency.” And due to the “Red Scare,” civil liberties seemed threatened on the basis of a person’s political beliefs.

The trends toward collectivism at home and abroad seemed irresistible and “inevitable.”

Freedom Foes: Old and New

Yet a half century later, we learned that it was Soviet communism that ended up (to use Karl Marx’s phrase) on the “ash heap of history.” [Read more →]

November 13, 2012   2 Comments

Milton Friedman’s 100th: Exploring His Wisdom for the Ages (Part III: Political Capitalism)

[Ed. note: Milton Friedman's views are also explored in Part I of this series (worldview) and in Part II (energy).]

“The two greatest enemies of free enterprise in the United States … have been, on the one hand, my fellow intellectuals and, on the other hand, the business corporations of this country.”

- Milton Friedman, “Which Way for Capitalism?” Reason, May 1977, p. 21.

The above quotation is striking, not so much for the ‘fellow intellectual’ part but for ‘business corporations.’ We often think of business in the same breath as ‘free enterprise,’ right?

But on closer inspection, and with the Bush/Obama bailouts, cronyism, or crony capitalism, is in focus. And Friedman’s above Reason quotation from 35 years ago is more understandable.

I have a whole website dedicated to the subject of political capitalism. I speak on this subject regularly to groups like the Bastiat Society, a group that is “building an international society of principled wealth creators.” In many of these talks, I share the Milton Friedman quotations from below.

Political Capitalism

“With some notable exceptions, businessmen favor free enterprise in general but are opposed to it when it comes to themselves.”

- Lecture “The Suicidal Impulse of the Business Community” (1983); cited in Filters Against Folly (1985) by Garrett Hardin ISBN 067080410X.

“Few U.S. industries sing the praises of free enterprise more loudly than the oil industry. Yet few industries rely so heavily on special government favors.”

- Milton Friedman, “Oil and the Middle East,” Newsweek, June 26, 1967. Reprinted in Friedman, An Economists Protest. Glen Ridge, NJ: Thomas Horton and Daughters , p. 21. [Read more →]

August 3, 2012   7 Comments

Milton Friedman’s 100th: Exploring His Wisdom for the Ages (Part II: Energy)

[Ed. note: Milton Friedman's views are also explored in Part I of this series (worldview) and in Part III (political capitalism).]

“Economists may not know much. But we know one thing very well: how to produce surpluses and shortages. Do you want a surplus? Have the government legislate a minimum price that is above the price that would otherwise prevail…. Do you want a shortage? Have the government legislate a maximum price that is below the price that would otherwise prevail.”

       – Milton and Rose Friedman, Free to Choose (New York: Harcourt Brace Jovanovich, 1979), pp. 219.

“It is a mark of how far we have gone on the road to serfdom that government allocation and rationing of oil is the automatic response to the oil crisis.”

- Milton Friedman, “Why Some Prices Should Rise,” Newsweek, November 19, 1973.

Milton Friedman is best known for his monetary economics,  Monetarism, a school of economics that challenged and largely defeated Keynesianism. “By century’s end, stated Paul Krugman in the New York Review of Books, “classical economics had regained much though by no means all of its former dominion, and Friedman deserves much of the credit.”

But as Friedman became a public intellectual, writing popular books and writing his biweekly Newsweek columns, he became conversant in different fields, including energy. And energy, and Harold Hotelling’s fixity/depletion model in particular, became the rage of applied economics in the energy-troubled 1970s.

Friedman’s harsh negative reaction to President Nixon’s wage and price control order of August 1971 is particularly important for the energy debate, for this action (and not the Arab Embargo) created the oil shortages that led to a decade of oil regulation and misery from U.S. consumers.

Friedman’s salient quotations on energy, at least what I have been able to find, are presented below. (Perhaps readers can add to this compilation in the comments section below.) For additional thoughts of Friedman on energy, see the MasterResource post, Milton Friedman on Mineral Resource Theory. [Read more →]

August 2, 2012   5 Comments

Milton Friedman’s 100th: Exploring His Wisdom for the Ages (Part I: Worldview)

[Ed. note: Milton Friedman's views will be further explored in Part II on energy and Part III on political capitalism.]

“Our central theme in public advocacy has been the promotion of human freedom … [It] underlies our opposition to rent control and general wage and price controls, our support for educational choice, privatizing radio and television channels, an all-volunteer army, limitation of government spending, legalization of drugs, privatizing social security, free trade, and the deregulation of industry and private life to the fullest extent possible.”

- Milton and Rose Friedman, Two Lucky People (1998), p. 588.

Today some 150 events are taking place in the U.S. and internationally to commemorate the 100th anniversary of the birth of Milton Friedman (1912–2006). I will be hosting a Houston event this evening with presentations by myself and University of Houston economist Thomas Mayor on Friedman’s many contributions that, in sum, opened the door for libertarian thought in academia and within the wider public.

The Wikipedia entry for Friedman begins as follows:

Milton Friedman (July 31, 1912 – November 16, 2006) was an American economist, statistician, and author who taught at the University of Chicago for more than three decades. He was a recipient of the Nobel Memorial Prize in Economic Sciences, and is known for his research on consumption analysis, monetary history and theory, and the complexity of stabilization policy.

As a leader of the Chicago school of economics, he influenced the research agenda of the economics profession. A survey of economists ranked Friedman as the second most popular economist of the twentieth century behind John Maynard Keynes, and The Economist described him as “the most influential economist of the second half of the 20th century…possibly of all of it.”

Many other biographies can be accessed on Friedman; this post will continue with some Friedman quotations of import on various topics except for those to come in Part II (energy) and Part III (political and special-interest capitalism). [Read more →]

July 31, 2012   8 Comments

Milton Friedman on Mineral Resource Theory (remembering a giant of social thought)

Editor note: Milton Friedman would be 98 this Saturday July 31. (He died on November 16, 2006.) This exchange with Robert Bradley–when Dr. Friedman was 91 years old–is testament to the mental powers of one of the greatest social thinkers of modern time.

Friedman had not met Bradley but was in the habit of actively communicating with scholars until his final illness.

I had heard that the great economist and social thinker Milton Friedman (1912–2006) was a prolific communicator with those who posed worthy questions to him. So when I got interested in mineral resource theory, which would culminate with my 2007 essay, Resourceship: An Austrian Theory of Mineral Resources, I asked Dr. Friedman in August 2003 about his views on the late Julian Simon (1932–98), specifically whether Simon’s work on resources, and his conception of the ultimate resource, merited a Nobel Prize in economics.

The discussion continued from there as I tried to flesh out his views of whether “depletable” minerals such as oil were somehow different from “nondepletable” resources. I believe Friedman agreed with Simon that there is no difference from a social science/business perspective. But Friedman disagreed with Simon’s assessment of the contribution of Harold Hotelling, who mathematically proved that the cost and thus price of a fixed resource in a world of perfect knowledge was ‘good’ economics. Read on…. [Read more →]

July 30, 2010   24 Comments