Posts tagged Milton Friedman

Essay on Ideological Thinking Revisited

Ideological Thinking Revisited

Tibor R. Machan

Following the December 15th Republican “debate,” New York Times columnist Paul Krugman wrote once again about the evils of ideological thinking.

Krugman began piece by criticizing Mitt Romney for his repeated vacillations about which public policies he supports, which he opposes, a problem Romney has been plagued by most of his political life. But Krugman didn’t do what follows form this, namely, praise Romney for being a pragmatist, for his agility and flexibility. No, he decried the former Massachusetts’s Governor’s various views. And then he moved on to a more familiar target, one he has been shooting at every chance he gets. This is Representative Ron Paul’s integrity and consistency. Calling it ideological thinking, Krugman considers this a far great failing than anything he could find with Romney.

As Krugman summarizes all this, “In a way, that makes sense. Romney isn’t trusted because he’s seen as someone who cynically takes whatever positions he thinks will advance his career – a charge that sticks because it’s true. Paul, by contrast, has been highly consistent. I bet you won’t find video clips from a few years back in which he says the opposite of what he’s saying now. Unfortunately, Paul has maintained his consistency by ignoring reality, clinging to his ideology even as the facts have demonstrated that ideology’s wrongness.”

Ignore, please, for the moment that Krugman is every bit as ideological as would be anyone who tries to make sense of political economy, just one field of study that tries to learn generalities from the past so as to prepare for the future. The way this is done is by the identification of certain principles and then implementing them with the expectation that bad results will be avoided and good ones fostered. There really is no practical field, such as farming, medicine, engineering, child raising, and so forth, that can carry forth without this approach. Call it theoretical or ideological thought, no one who even dabbles in them can avoid them.

Ron Paul’s theoretical guidance comes from a certain school of free market economics, laid out by the likes of Ludwig von Mises and F. A. Hayek. (Other free market schools are those of Milton Friedman–the Chicago School–and those of James Buchanan–the Virginia School.) Massive volumes lay out these positions, in more or less technical ways, as they do the positions of Paul Krugman and his idol, John Maynard Keynes. It is routine in the social sciences for up and coming scholars and researchers to hitch their wagon to some earlier leader in their field. Just check out sociology or anthropology–they all follow this pattern. Krugman is no exception–he has hitched his wagon to Keynes and follows Keynes’ pragmatic, erratic economic thought. It happens to accommodate his hostility to principles. It doesn’t demand any integrity in one’s thinking; only expediency counts.

Because we are talking here about how political economy should be approached, or if you will macroeconomic theory, the impact of unprincipled thinking is quite remote. It is difficult to tell which results of such a mishmash political-economic thinking come from which ideas–as I have argued before, it is like getting food poisoning or, alternatively, health benefits from a smorgasbord meal which contains many diverse ingredients. But if you consider some areas of concern that are more immediately relevant to one’s life, the unprincipled approach shows its damage right away.

For example, it is generally understood that people with certain medical maladies should stick to a certain diet–think of diabetics. In engineering, medicine, nutrition, farming and the rest the practitioners learn their general principles and implement them in the course of their practice. Or consider morality; it is pretty much the case that lying and cheating ought to be avoided. Eve more drastically, deploying coercion in sexual relations is not just immoral but outright criminal. Everyone must, therefore, practice consensual sex so that rape, for example, is never acceptable. That is the principle of the thing, no exception.

Yet by Krugman’s lights to prohibit rape in all cases, as a matter of one’s ideology, is a serious flaw in one’s character, just as sticking to free market economic analysis is supposed to be in Ron Paul’s thought. As Krugman says, “Paul has maintained his consistency by ignoring reality, clinging to his ideology even as the facts have demonstrated that ideology’s wrongness,” but the only case he offers to illustrate the alleged wrongness is that Paul and his allies have warned about inflation for years and yet we are not seeing inflation break out all over. (Of course, there are those, rather more subtle economists, who see it break out in numerous hidden way–like postponing the destruction of the value of money for a while, kicking the can down the road to confront the mess later, e.g., by our grand children.) In other words, inflation can be prevented in various clever ways but not without eventual dire consequences. So here, too, Krugman is off.

What Paul insists on is consistency in one’s economic theorizing, something that every bona fide science insists upon. Pseudo-sciences like astrology and tarot reading don’t, with the result that they accomplish nothing useful at all. Most of Krugman’s ad hoc economics is like that–fancy footwork without any useful wisdom in its wake.

The ideology that Krugman follows despite denying it–just as many pragmatists deny that they firmly stick to some ideas–is the economic philosophy of coercion, of the state’s regimenting economic agents at nearly every turn. At no time will coercion as such be frowned upon by Krugman–it would be ideological to do so, in his view.

But the issue isn’t whether ideology is admissible but which ideology is sound, which bogus.

Column on Knowing vs. Imposing What is Ethical

Knowing versus imposing What’s Ethical

Tibor R. Machan

Among those who champion human liberty–the sovereignty of every adult when it comes to managing one’s own life–some hold that if one could know what good conduct amounts to, one would be authorized to impose it on others. Among those who thought this was the world famous classical liberal economist, Milton Friedman. Friedman, who was an avid champion of human liberty, denied that we can “really know what sin is”. By this he meant that what for people is the wrong thing to do is not something anyone can know. And he also held that one could not reasonably champion human liberty, the sort that one enjoys when others must abstain from imposing their ideas of how one ought to act, “if you could be absolutely certain that you had the revealed truth.” By the “revealed truth” he merely meant whatever it is that others ought or ought not do. If one knew such things, one “could not let another man sin.”

Right away there is a problem here because the argument advanced is actually supposed to show how one should act, namely that no one ought to impose himself or herself on another adult human being. So others ought to be left free. And that is, of course, based on the moral knowledge that it is wrong to make people act in ways they don’t choose to. The only exception is when they choose to impose their idea on others. But that is self-defense, not any kind of imposition.

This point actually makes it evident that in some cases we do know what amounts to sinning or doing the wrong thing–for example, when one coerces peaceful others to act as one believes they should. But that is not all. We can pretty well know that when someone wastes away his or her life, say by becoming a junkie or a bum, this isn’t something the person should do. The details may vary but it doesn’t require rocket science to know that people who waste away their lives are normally misbehaving and ought to change. What is crucial here, however, is that it is they who must do the changing, not someone else. So imposing hard work or prudence on them simply cannot improve matters.

Some argue that if you impose worthwhile conduct on others and they later realize that this is indeed worthwhile and they should henceforth conduct themselves accordingly, your imposition is justified. This line of reasoning is advanced precisely because it is widely realized that to have moral significance one’s conduct must be freely chosen. So those who want urgently to make other people moral–for example, Professor Robert P. George in his book Making Men Moral (Oxford University Press, 1993)–reject the moral right to act immorally, a right to do what is wrong (provided no one is being victimized). Yet, since morally significant conduct does have to be chosen, be it right or wrong, adult human beings do have such a right. It is not a moral but a political or natural right, however.

The contrary doctrine, namely, libertarian paternalism or nudging, applies only to children. It does not to adults. One is of course welcome to attempt to persuade people to do the morally right thing, maybe even implore or exert peer pressure to encourage another to do what is right. However, in the end an adult must make the choice and not be coerced to do so. That’s part of what it means to respect human dignity. In nearly all major religions this is fully acknowledged. One must choose to accept Christ, for example. Even Stalinists believed that good communists had to voluntarily admit their flaws or ideological crimes before they could be punished meaningfully.

The only serious challenge to the idea that morally significant conduct must be voluntary comes from those who consider all of morality bogus, meaningless. In every known era of human history, including ours, there are serious moral skeptics–a recent issue of the magazine Philosophy Now features five philosophers arguing this position. Today the basis of the case rests mainly with neuroscience which supposedly shows that people are never free to choose to take actions, so in effect nothing they do is really their own doing! (This is what many defense attorneys set out to show about their clients and there are major institutes at universities embarking on research that promises to make the case for them!) But this brings up a whole bunch of other issues for which there is no room in this short essay.

Column on Krugman’s Trashy Debating Style

Krugman’s Trashy Debating Style

Tibor R. Machan

Looks like critics of the free market are at their whit’s end. At least one of the most prominent of them clearly appears to be.

Princeton economics professor and columnist for The New York Times Paul Krugman has always been discourteous to those with whom he disagrees but his latest exhibition of his way of going about debating issues takes the cake. It used to be that he would call everyone who finds even the slightest merit in free market economic theory a “market fundamentalist,” suggesting thereby that such folks are, like all fundamentalists, mindless in their convictions and merely blindly follow some sacred text or book of instructions. Besides wishing to score points for his statist economic politics by smearing the ideas and methods of his intellectual adversaries, he also regularly distorts the scholarly lay of the land by claiming that America is in the grip of such fundamentalism. This basically meant that throughout the academic landscape departments of economics are filled by people who hold and teach views similar to those held by the late Milton Friedman, F. A. Hayek and Ludwig von Mises (among others).

While these thinkers did consider the free market superior to its statist alternatives–ones that give a decisive role to government intervention in the lives and activities of market agents–they did not, of course, hold identical views. Nonetheless, Krugman lumps them all as fundamentalists. Moreover, he rarely takes on living supporters of the free market, such as James Buchanan or Gary Becker, not to mention such current members of the Austrian School as NYU’s Israel Kirzner. Might we suppose that he doesn’t wish to engage anyone in a dialogue about economic policy but merely discredit them once they could not respond? (Just after Milton Friedman died, he and his frequent co-author Robin Wells penned an extensive and it turns out demonstrably inaccurate essay on Friedman for The New York Review of Books.) Also, despite Krugman’s allegation, there is plainly no dominance of free market thinking in American universities. Mainstream economists are mostly followers of such notables as Paul Samuelson and, of course, John Maynard Keynes, with quite a few who are influenced by the political economics of welfare statism. At the universities where I have taught throughout the last 40 plus years, economists may have been respectful toward free market theorists but were by no means fully in line with their views. So even in this elementary matter, Krugman has it wrong.

But the claim that the country is in the grips of market fundamentalism is also mistaken if it’s meant to apply to official public policies bearing on economic matters. Just for starters, the financial market place has been heavily regulated for over a hundred years–consistent free market theorists usually don’t favor a central bank such as the country’s Federal Reserve Bank (even though, somewhat paradoxically, Alan Greenspan had been such a consistent free market thinker before he was selected to head up the Fed). Furthermore, the plethora of government regulation of various elements of the economy, including virtually all professions (apart from the clergy, journalism, and writers of all stripes who are protected against such regulation by the First Amendment of the U. S. Constitution), is decisive evidence that free market thinking does not dominate public policy in America.

Yet, despite all this, here is a Nobel Laureate and professor from a most prestigious academic institution and columnist for a most distinguished newspaper who keeps trying to distort reality. Why? But I will not speculate, again. Who knows what Krugman’s agenda is.

One thing does clearly stand out in his approach to making a case for more and more government involvement in the economy. This is that he relies extensively on name calling, on besmirching those with whom he disagrees. In a recent column he went so far as to dismiss all those who hold views opposed to his as zombies! Yes, zombies. That means that people, some very distinguished scholars, who are convinced that a public policy of laissez-faire when it comes to a country’s economic affairs is best are all mindless. They do not merely think mistakenly but cannot think at all.

When a critic of a position needs to resort to this kind of technique with which to attract readers of his missives to his own outlook, it suggests that the intellectual merits of that position are truly hopeless. And that is precisely so. Statism in economics has for a long time been proven and shown to be utterly unsupportable, be this the Draconian sort one found in Soviet Russia and finds in North Korea or the less drastic kind that has just produced the worldwide financial meltdown, namely the more or less interventionist welfare state.

Essay on Self-interest (from Machan’s Archives)

What is the Nature of Self-Interest?

Tibor R. Machan

The beauty of free market capitalism is that it does not require anything more than ruthless self-interest from its most ruthless self-interested citizens. When the system works properly they enrich us all by enriching themselves without giving the matter a great deal of thought. If that is no longer true it is a sign not that they are less moral, but that the invisible link between private gain and the public good has been severed. (Michael Lewis, “Lend the Money and Run,” The New Republic, December 7, 1992)
This observation, made in a review essay of books by Nicholas von Hoffman, Capitalist Fools: Tales of American Business, from Carnegie to Forbes to the Milken Gang [Doubleday, 1992], and James Grant, Money of the Mind: Borrowing and Lending in America from the Civil War to Michael Milken [Farrar, Strauss & Giroux, 1992], has several questionable assumptions embedded in it. And they are all worthy of some scrutiny. For although some economists who champion the free market embrace some version of the idea Lewis relates, even their use of it does not quite fit Lewis’ characterization.
First, Lewis assumes we all understand what “self-interest” means. But from the time of Plato to ours there has been a serious debate as to whether self-interest means “doing what one wants” “doing what is of concern to one,” or “doing what one actually benefits from (by some objective standard of what benefits a person).” There is nothing remotely “ruthless” about doing the latter, while the former borders on being tautologi¬cal when understood as many economist understand it. But it is the latter sense that critics of the market focus upon, claiming that such selfishness is callous, amoral and can produce high untoward consequences. They then derive from this a moral critique of the free market, forgetting that there are other sense of self-interest that may well escape such criticism and that even in their criticism they fail to acknowledge the most important element of morality to which free markets do homage.
The self-interest thesis critics attribute to economists amounts to the view that people act because they want to act, so invoking it as a characterization of what they do makes little sense unless they smuggle in some objective standard of what benefits oneself. In other words, the self-interest referred to in economic analysis is really what Milton Friedman said it is in his Nobel Prize acceptance address, namely, “The private [i.e., self] interest is whatever it is that drives an individual. (Milton Friedman, “The Line we Dare Not Cross,” Encounter, November 1976, p. 11) By this account, both Michael Milken and Mother Teresa act from self-interest. But what is true is that both have their own motives from which they act. Those motives, however, may be very different and to understand their conduct it is this difference that is most interesting. Knowing that they both want to do what they are doing isn’t going to tell us a lot. Yet that is all that being “self-interested” seems to mean here.
Second, the claim assumes we know what it means for some system of political economy to work properly. But there is a great deal of dispute about that. Does a system work properly if it enhances justice? Or economic prosperity? Or equality of well-being? Or stability? Or peace? Or all of these? Or God’s purposes for us by reference to Scripture, the Torah, or some other good book?
Indeed, those who talk along these lines may well have some hidden idea–even from themselves–of what “works” means, usually, advancing some ideal they hope they share with their readers. But that is just what is mistaken, especially in this age of multiculturalism: There are too many competing social ideals and by some accounts we aren’t even supposed to ask which is better, which has greater validity.
Yet without addressing that issue, there simply is no way to determine what system of political economy works. For example, it needs to be shown that a system that achieves equality of opportunity or aggregate prosperity or the protection of individual rights or spiritual enlight¬enment is to be preferred over ones that achieve some other objective instead. Yet when public discussion ensues concerning what kind of system works, it often seems that these matters are left untouched.
Third the claim assumes that being moral consists of doing things not for oneself but for the public interest, understood in some fashion or another. We find in the remark a necessary schism between private gain and the public good.
Just why are we to assume that this is what it is to be moral? After all, if the public is worth benefiting, why would not private citizens also be worth benefiting? Just because the public is large? But that assumes that mere numbers make something worthy. Yet a lot of scoundrels are worse than one good individual. Indeed, even in simple altruism, whereby benefiting others is good but oneself is at best morally irrelevant, why should this be so? After all, the agent is also a person who has needs and wants and why would serving those needs and wants rate lower than serving the needs and wants of others?
There are probably other assumptions involved here but these are of direct interest to us. The unabashed invocation of the Smithian doctrine, expressed so aptly by Bernard Mandeville, namely, “private vice, public benefits,” is instructive. It shows that we still embrace the conflict between the individual and common good that gave rise to many of our troubles. By this doc¬trine, people can only exonerate themselves morally when doing something that is to their benefit if this is done so that others also benefit. Moreover, even than one isn’t gaining moral credit, only escaping moral blame. For if one does not benefit others while benefiting oneself, one’s action lacks redeeming moral worth. The reason is that the agent is never taken to be worthy of benefit¬ing from his or her actions, only others are. Yet, that makes very little sense–why would other people be worthy of concern but not the agent who acts?
Not only does this view condemn many people in business to lacking in all moral worth–all those, namely, who are not guilty of moral wrongs but possess no positive moral achievement either by virtue of their business successes–but nearly all artists, scientists, educators, athletes, etc., who do what they do because they deem it to be to their own benefit, something they themselves value or find fulfilling. Most great artists do not set out to serve other persons but create their works because they have a vision they want to realize. The greatest scientists do not usually engage in their work because they want to benefit humanity but because they are intrigued by some problem.
The same view of what is moral that condemns people in business to moral irrelevance also condemns nearly everyone who isn’t a martyr or saint. Which is already enough to call it into question.
So instead of such sloppy approach to a vital problem, what needs to be addressed is just what kind of political economic system should human beings establish and maintain.