The grand high poobah of free-market capitalism died this past week. While there are many who would heap glory, laud, and honor upon him, and there is no doubt he made fundamental changes to the way we discuss the role of government in the economy, my own feeling is that, taken on balance, the prophet of the new libertarianism has been a horrid influence not just on economic practice, but on how we understand what an "economy" is.
One thing Friedman did, and it is a good thing on the whole, was reintroduce the idea that there is a moral dimension to economic decision making. The choices we make on how we spend our money create, over time, a picture of what we as a soceity value. The Keynsians were enraptured with managing the economy simply as a function of balancing monetary and fiscal policy in order to prevent major economic disruptions. They were the great macro-economists. Friedman was much more concerned with the micro-economic realities human beings face when they shop, pay the phone bill, property taxes, and buy braces for their kids. For that reason, monetary policy - controlling the amount of money flowing through the economy - was key to preventing major shifts. Fiscal policy may provide the framework, but monetary policy was the nuts and bolts, because it was here the rubber hit the road. For that alone, Friedman was important because he reminded us that economics was not about curves, graphs, and charts, but about the everyday living and choices people make.
On the other hand, the undying insistence that the market is always a better arbiter for deciding what is and is not preferrable simply ignores another reality - there are limits to how capable markets are of rationing marginal resources and decision-making; and there are situations where markets simply don't function, and that is why government is a necessary supplement. Of course, this creates a whole area of debate and decision-making, but that is part of the point - human beings sometimes need to be deliberate rather than trusting to random forces. A perfect example is dog food. There are six or seven major brands of dog food, and probably a dozen or so other smaller brands, and of course there are store and local and regional brands as well. Friedmanites would claim that this shows the power of the market - human beings are not only free to spend their money on a variety of brands of dog food, but by creating an environment in which there is enough money available, it creates incentives for others to enter the market as well. Yet, does this not beg a question concerning the rationing of our resources? In a world where millions die every year of prevetable diseases because there is no profit margin for providing prevention; in a nation where fifty million people live without adequate access to necessary health care for economic reasons, what possible moral reasoning sees the borgeoning of dog food brands as a good for society as a whole.
Am I suggesting the limiting of dog food brands to one, or perhaps two? Of course not. What I am suggesting is that, the marketplace does one thing - provide a multitude of dog food brands - but it does not do everything necessary for the healthy operation of a society. The notion that economic and social questions be limited to discussions of "the market" and nothing else misses the fact that there are a multitude of things we do together as human beings that require concerted action, deliberate action, and we need to break out of a model that limits debates to false choices and dichotomies when human ingenuity and possibility might create opportunities not available within a certain limited framework.
Friedman's legacy is large, and his influence will be long, perhaps even longer than Keynes. He forced us to see the economy as one way of understanding human social moral decision making. We need to use that tool to question much of the rest of his legacy.
Virtual Tin Cup
