Saturday, January 27, 2007

Three facets of Milton Friedman

NYTimes columnist and Princeton Economist Paul Krugman paints a rather unflattering portrait of Milton Friedman who passed away recently:

Milton Friedman played three roles in the intellectual life of the twentieth century. There was Friedman the economist's economist, who wrote technical, more or less apolitical analyses of consumer behavior and inflation. There was Friedman the policy entrepreneur, who spent decades campaigning on behalf of the policy known as monetarism—finally seeing the Federal Reserve and the Bank of England adopt his doctrine at the end of the 1970s, only to abandon it as unworkable a few years later. Finally, there was Friedman the ideologue, the great popularizer of free-market doctrine.

Did the same man play all these roles? Yes and no. All three roles were informed by Friedman's faith in the classical verities of free-market economics. Moreover, Friedman's effectiveness as a popularizer and propagandist rested in part on his well-deserved reputation as a profound economic theorist. But there's an important difference between the rigor of his work as a professional economist and the looser, sometimes questionable logic of his pronouncements as a public intellectual. While Friedman's theoretical work is universally admired by professional economists, there's much more ambivalence about his policy pronouncements and especially his popularizing. And it must be said that there were some serious questions about his intellectual honesty when he was speaking to the mass public.

This passage, however, is puzzling:

... A decade ago it was common to cite the success of the Chilean economy, where Augusto Pinochet's Chicago-educated advisers turned to free-market policies after Pinochet seized power in 1973, as proof that Friedman-inspired policies showed the path to successful economic development. But although other Latin nations, from Mexico to Argentina, have followed Chile's lead in freeing up trade, privatizing industries, and deregulating, Chile's success story has not been replicated.

Huh? Chile under Pinochet? A success story? That cannot be quite correct, can it?


  1. Anonymous said...

    Dear Abi,

    Tyler Cowen at MR however, says :
    "Pinochet the man behaved so badly, both during his term and after, as to be morally indefensible. From second hand accounts I have heard, it is also not clear how much the man himself was personally responsible for the good economic policies. Still many good policies happened. We need a closer look at the Chilean economic legacy, which is a complicated story and by no means wholly negative.

    Addendum: It is worth asking which reforms could have succeeded in a democratic environment, but that would require a post all its own. Someday you will get it."

  2. Anonymous said...

    This particular post is illustrative of the fact that very often, one reads what one wants to in an article. Krugman begins his article by stating that "And just to be clear: although this essay argues that Friedman was wrong on some issues, and sometimes seemed less than honest with his readers, I regard him as a great economist and a great man." And the article ends by stating that "In the long run, great men are remembered for their strengths, not their weaknesses, and Milton Friedman was a very great man indeed—a man of intellectual courage who was one of the most important economic thinkers of all time, and possibly the most brilliant communicator of economic ideas to the general public that ever lived."

    Surely, all this doesn't quite add up to a "rather unflattering portrait." The article, rather self-consciously, focuses on Friedman's weaknesses especially in his propagating the "free market" doctrine but nowhere minimizes his greatness as an economist.

    But I guess, for those whose exposure to Friedman is mainly through his "free marketeer" avatar - and who are not enamoured of this ideology - Friedman is an unflattering figure anyway. So while I read the article as one illustrating the less flattering persona of a very great economist (being an economist myself), others do the reverse - while they may say a few words about Friedman's greatness as an economist, they treat that part as relatively minor while the major and relevant part of his personality is his public intellectual avatar. There's no way of deciding whose view is "right" and it is in this sense, we each read what we want to in an article.

    Anyway, regarding Chile -- Surely, a decade back, Chile *was* an economic success as compared to its Latin American neighbours. (It still is an economic success.) At that point, many did attribute that to the policies espoused by Friedman. Are you disputing that about a decade back -- what with Brazil and Argentina's financial crises -- that Chile was an economic success? And that credit for this was attributed to "free market" policies? What exactly is your point?

  3. Abi said...

    Guru, Anon: You may or may not believe the Hindu's pronouncements about Chile's economic health under the Pinochet regime, but I'm sure you would find the London Economist's assessment (quoted here) more believable. Check them out. The Economist, in particular, uses blunt language to describe the kind of disaster the Chicago Boys brought to Chile.

    Anon: I agree that what people read into articles is usually what affirms their beliefs.

    However, I can't imagine how an article that raises questions about a person's "intellectual honesty" can be read as anything other than unflattering. See the second paragraph I have quoted. It's not an one-off thing; Krugman keeps returning to this question again and again.