If you want to get to the meat of the question, just skip to the paragraph starting with a bolded letter.
I'm sure there are many current Austrians who were influenced by the writings and beliefs of Milton Friedman before arriving at their current place on the economic spectrum. If I had to name one person who has been most influential in moulding my economic and political beliefs, it would be Friedman.
I had been shown the Free to Choose PBS series by a friend, which really set things off. I watched and rewatched it several times- I loved it. I had somewhat leaned libertarian, but this series solidified and gave basis to my beliefs. After watching it I ate up every piece of Friedman literature I could- Capitalism and Freedom, Free to Choose, Monetary History etc. etc. So far these beliefs have essentially held firm, but I have recently began to look into the Austrian side of things, which seems appealing as well. So far the only work by an Austrian economist I have read is Road to Serfdom, which I found incredible and in many ways prophetic. (At least by looking at the route Britain has been taking lately- nannystatism all around)
So what I am trying to ask is, from an Austrian prospective what are the major flaws in the Friedmanite model of things? The only thing I can think of off the top of my head would be his fondness for fiat money. (Which I suppose is a pretty significant distinction...) What books would you recommend to "jump in" to general Austrian beliefs?
Thank you
Rabble159:So what I am trying to ask is, from an Austrian prospective what are the major flaws in the Friedmanite model of things? The only thing I can think of off the top of my head would be his fondness for fiat money. (Which I suppose is a pretty significant distinction...) What books would you recommend to "jump in" to general Austrian beliefs?
Aside from that the Principles of Economics by Carl Menger is probably a good one to start off with, considering the simplistic (yet still amazing considering its simplicity) nature of Economics in One Lesson.
Hey Rabble,
It seems like you took a very simlar route to mine. When I was first exposed to Friedman and his ideas I was blown away. That is, until I got into Austrian economics. I think that while Friedman is relatively good at introducing the layman to the ideas of freedom, the Austrian school is leagues better in terms of actually explaining economic phenomenon. Much of this is certainly due to Friedman's being one of the only "free-market" economists that can be considererd even remotely mainstream.
Here's a good critique of Friedman by Murray Rothbard Milton Friedman Unraveled
It really brings to light the shortcomings of Friedman.
While Friedman was thousands of times better than most economists out there, he falls short in a number of ways.
Besides his epistemology, here are some other grave flaws:
1. He prescribes maintaining stable prices, even if that means expanding the money supply. Read The Austrian Theory of the Trade Cycle. This theory shows that monetary expansion, regardless of the price level (which often ought to fall due to increased efficiency of production), causes booms and busts, and that monetary expansion cannot cure recessions/depressions (as we are about to painfully learn).
2. He was the most important advocate of reforming government so that it apes the market, instead of outright limiting it.
3. He had the ridiculous idea of a negative income tax.
Austrian Theory of the Business Cycle in 9 steps (Soliciting comments)
Didn't Friedman promote the negative income tax as a way of phasing out welfare? I may be mistaken about this.
First of all, welcome Rabble.
I personally think Milton Friedman is great. I think a lot of hostility towards him comes from his empirical methodology. I don't see this as necessarily a bad thing. Milton Friedman arrived at very similar conclusions to many Austrian school economists using empirical methods. Although I disagree with the methodology, it has its advantages. The main advantage is that mainstream economists can understand what he is talking about and how he reached free market conclusions. The mainstream economists don't have to get over the hump of thinking completely differently all of the sudden.
Of course, more principled institutions like the Ludwig von Mises institute are great. They develop monumental ideas and contribute greatly to thought. As much as the LvMI is intellectually sound, however, it has trouble winning over the masses to free-market economics. A lot of Austrian ideas tend to alienate many people from free market thinking. That is where I see a role for people like Milton Friedman. They can be out on the front lines with their more mainstream ideologies and get people over to the free market side.
I find it very counterproductive and even downright stupid to antagonize monetarists. Many of Friedman's ideas have been misrepresented, especially on banking. Friedman said in a 1995 interview with Reason Magazine, "So while I'd like to abolish the Fed, I've written many pages on how the Fed, if it does exist, should be run."
I think the origin of this hostility of the Austrians to the Chicago monetarists came about because of Murray Rothbard's uncompromising nature. Murray Rothbard criticized Friedman for his advocacy of school vouchers. Again, Friedman said that he would like to see the government out of the education business entirely, but he was putting forth a more politically viable alternative.
I really respect Murray Rothbard, but at times he seemed callous and rather intolerant. Again, I think uncompromising Austrians are great and they are unparalleled in their ideas and ability to think, but Austrians are not necessarily good at being "big tent." That job is left to Milton Friedman and the monetarists.
Where I come from, the women don't glow, but the men definitely plunder.
Friedman completely misunderstood Mises, and praxeology. Friedman thought that the propostions of praxeology, were somehow only true in the minds of the economist, Friedmen was positivist and completely misunderstood the nature of 'a priori' epistemology. Friedman did not understand that the basic propositions of economics are similar to the propositions of formal logic and mathematics, statements which are true by reason and not by appealing to 'if then' methodology.
do we get free cheezeburger in socielism?
I've watched the PBS series but it sounds like you're a lot more familiar with Friedman's works than I am and you may be able to provde some constructive criticism. None the less, the following may interest you: http://mises.org/Community/blogs/jimmy/archive/2009/01/22/numerophilia.aspx
It's an attempt to summarize, in a reasonably digestible form, one of the main differences between the Moneterist and Austrian economists... namely that Monetarists tend to look at broad aggregates where the Austrians point to imbalances within the capital structure (quite regardless of the total nominal output as measured by aggregate consumption).
The above is unlikely to be the best summary of this that you'll find. In particular, the Austrian capital theory points to problems with the intertemporal relationship between capital and supply/demand... so the theory is much more subtle and intricate than what I've presented. None the less, if the above peaks your interest, you might like to take a peak at Garrison's stuff at http://www.auburn.edu/~garriro/tam.htm (still on my todo list, but I believe the powerpoint presentations etc. on his site there deal with the later).
As I say, it sounds like you're more familiar with Friedman than I am so any constructive criticism on the above article welcome. When it comes to it though, I just cited Friedman and Schwarz as an introduction to the article and I didn't really have a gripe with Friedman in particular - the article was mainly to highlight differences between Monetarist/Mainstream and Austrian analysis and recommendation.
nameless: Didn't Friedman promote the negative income tax as a way of phasing out welfare? I may be mistaken about this.
Yes he did. Complete crap, but better than the current system. At least it doesnt provide incentive to not work.