Capitalism and Freedom

Rating:
Summary: Not God's gift to economics, but worth reading
Review: This is a pretty interesting book, if for no other reason than that it lays out one person's conservative economic views. Some may be ideas you haven't thought of before, and that, in itself, is valuable. This isn't the Bible of economics, though. Among the greatest faults of this book is that it doesn't really seriously address any views that compete with Friedman's ideas. (You'll notice a lot of the positive reviews here are from people who agreed with Friedman to begin with. A book that promotes one viewpoint without really answering its critics is perfect for preaching to the choir.) Friedman tends to set up problems in ways that aid his arguments, appeal to moral principles that are by no means universally shared, argue from analogies that don't quite fit, and (worst of all) water down opposing arguments or simply neglect to mention them. If you don't believe strongly that "Freedom is the ultimate value" (not basic survival? love? aesthetics? even material gain?) and that the Government is the only real limit on individual freedom (corporations? powerful individuals? lack of basic food and shelter?), prepare to be underwhelmed by Friedman's conservative tract. Read it though, if for no reason other than to understand what shaky arguments your libertarian friends base their views on.

Rating:
Summary: Skepticism
Review: Probably all scientists have political biases they would like to see proven, but a persistent theme among Friedman's critics is that he is unusually willing to cut corners to prove his points. Paul Krugman writes: "I think it is fair to say that up until the late 1960s Friedman and his followers, while influential, were regarded by many of their colleagues as faintly disreputable." (2) Edward Herman writes: "Friedman's methodology in attempting to prove his models have set a new standard in opportunism, manipulation, and the abuse of scientific method." (3) Paul Diesing lists six tactics Friedman uses to support a pet hypothesis called "Permanent Income" (or PI). These are:
"1. If raw or adjusted data are consistent with PI, he reports them as confirmation of PI...
2. If the fit with expectations is moderate, he exaggerates the fit...
3. If particular data points or groups differ from the predicted regression, he invents ad hoc explanations for the divergence...
4. If a whole set of data disagree with predictions, adjust them until they do agree...
5. If no plausible adjustment suggests itself, reject the data as unreliable...
6. If data adjustment or rejection are not feasible, express puzzlement. 'I have not been able to construct any plausible explanation for the discrepancy...'" (4)
Monetarism reached the peak of its popularity during the 1970s. In the 80s, however, it suffered a sudden reversal of fortune, and today economists generally agree that "monetarism is dead." Friedman stands virtually alone now among top economists in his belief that it contains any merit.

What happened? Monetarism was tried in Great Britain during the 80s, under Margaret Thatcher, and it proved to be a disaster. For almost seven years, the Bank of England tried its best to make it work. According to monetarist theory, the British economy should have enjoyed low inflation and high stability. But in fact, it went berserk. The economy sank into a deep recession, while lead economic indicators zigged and zagged. Although inflation came down, this was at the price of rising unemployment, which soared from 5.4 to 11.8 percent. Between 1979 and 1984, manufacturing output fell 10 percent, and manufacturing investment fell 30 percent. (5) Eventually production recovered to a respectable 2.8 percent growth, but it became clear that high unemployment was a permanent feature of the British economy. Eventually, the Bank of England came under overwhelming pressure to abandon monetarism, which it did in 1986. The experiment was such a failure that not even conservatives abroad wish to repeat it.

In step with Great Britain, the U.S. Federal Reserve announced in 1979 that it, too, would follow a monetarist policy. Many people blamed the double-digit inflation of the late 70s on Keynesian theory, on too much expansion of the money supply trying to achieve "full employment." Many critics thought that monetarism would restore some responsibility and stability at the Fed. Chairman Paul Volcker apparently agreed, and under the name of monetarism contracted the money supply down to a steady level. This produced a deep recession, but it did cure double-digit inflation.

In 1982, when inflation looked defeated, the Fed suddenly abandoned monetarism and reverted to a Keynesian policy. In that summer it sharply increased the money supply, and a few months later the economy roared to life, in a recovery that would last seven years. Milton Friedman was furious at the betrayal, but he got little sympathy from his fellow economists, who were witnessing a monetarist disaster unfold in Great Britain.

Why did the Fed abandon monetarism? Because it was never really monetarist in the first place. Volcker's strategy to defeat double-digit inflation had been classically Keynesian: reign in the money supply, and accept a deep recession in the process. The "monetarist" label was simply political cover, to mollify the Fed's growing number of critics. Such criticism was not renewed after monetarism failed in Britain, and Keynesian policies produced a seven-year boom in the U.S. The contrasting experience of those two nations was responsible for the demise of Friedman's theory.

Endnotes:

1. Except where otherwise noted, this review is primarily based on Paul Krugman, Peddling Prosperity (New York: W.W. Norton & Company, 1994), pp. 34-40, 172-178.

2. Krugman, p. 40.

3. Edward Herman, Triumph of the Market (Boston: South End Press, 1995), p. 36.

4. Paul Diesing, "Hypothesis Testing and Data Interpretation: The Case of Milton Friedman," Research in the History of Economic Thought and Methodology, vol. 3, pp. 61-69.

5. Peter Pugh and Chris Garratt, Introducing Keynes (Cambridge, UK: Icon Books Ltd., 1994), p. 152.

Rating:
Summary: great defense of classical economics
Review: Friedman, the new father of classic economics, has presented a theory that encapsulates Smith's theory of the market and some of the social realities of today. Contrary to many collegians who adhere to the Keynesian economic principles, Friedman offers a defense of liberal economics againt Keynes.

Rating:
Summary: Influential, to say the least.
Review: This book grows on you. You start out reading it with a lovely liberal mindset. By the time you're done, conservatism has entered your thoughts. Friedman's ability to create this transition is matched by few. His points are logical and interesting; they pull the reader along, convincing as they go. All in all, a great read. As it has become something of a classic, there's a good chance you'll want to read it.

And do take what Friedman says with a grain of salt. Yes economics is a powerful tool, but it relies on simplifying assumptions which can limit the relevence of models and ideas.

Rating:
Summary: An Excellent Look at Freedom from a Capitalist Point of View
Review: Or, maybe it's an "Excellent Look at Capitalism from a Freedom Point of View." In either case, this is a very interesting book. In the first two chapters, he summarizes the principles for everything else in the book. The remaining chapters are specific applications of these principles.

Even though the book was originally written in 1962, his analyses of these situations are real eye-openers. Everything's written for reasonably normal human beings: no math or anything special required. Just bring an open mind.

Rating:
Summary: The Truth about Capitalism and Freedom
Review: 30 Years ago, the sophisticated wags of the intelligencia told us Milton was wrong, that he was a guy who just didn't get it. ! Well, so many years later, the reality that capitalism and freedom are inextricably linked is the overriding truth of our times. Milton has triumphed. This great book is another brick in the wall of the Friedman legacy. While years ago no one might want to admit that Milton was right, today legions of people see the light. One of Milton's disciples, David Henderson, has just written a book that Friedman enthusiasts, like myself, may also enjoy: The Joy of Freedom: An Economist's Odyssey. A nice bookend to this new Friedman book.

Rating:
Summary: FREEDOM - what else?
Review: In the last 100 years we had quite a lot of economists (Keynes, Galbraith etc.) propagating Socialism and other fine ideas.Milton Friedmans convincing message is: FREEDOM.Milton Friedman really IS the best economist of the last century.Miltons books are the BEST you can read in economics.

Rating:
Summary: A Classic
Review: This book changed my life twenty years ago and I just read it again. I especially recommend this book to anyone who is a Democrat, as it really goes to the heart of the proper role of government in our lives and even explores the limits of capitalism. Friedman is a genius, yet writes the book as an easy read. Consider that this book was written over 40 years ago and we are still debating his proposal for school vouchers. A timeless classic that should be required reading for anyone interested in the American economic system.

Rating:
Summary: Required Reading
Review: Arguably the greatest economist of the 20th century makes complex concepts readily understandable. Easy to read, yet not "light reading," Friedman's book makes the basics of Political Economy understandable for even the novice.

Whether your interest is liberty, economics, or politics, this book is a must read.

I always enjoy watching a debate between someone who has read this book (or one of his others) with people who have not. Absolute slaughter...

Most highly recommended.

Rating:
Summary: Possibly the most underrated book of all time.
Review: Amazingly easy to read yet he puts forth profoundly important ideas. He does not need the security blanket of copious footnotes. What a concept. Those few reviewers that have trouble with its readability must be terrified by the power of its ideas and do not know where to turn. This book provides an understanding of mankind's true nature and how the private sector performs better than government functions. Even if you are a modern day left winger, you need to read this book because the people's ideas are increasing drawn from Milton Friedman's views. This book is full of ideas that are so compelling despite being minority views that they will not go away. Forty years later his ideas still are discussed as remedies needed for the future of the world not just the USA. The most powerful and easy to understand is free trade. How anyone can be intelligent enough to be elected to congress and not understand the power of free trade is very mystifying. Yet about half of them seem clueless of the mathematics.

As you can see from some reviews , Friedman's ability to use simple little examples to clarify issues is so effective that it gets some reviewers angry. The examples are nonetheless liberating to the mind that hesitates to think more deeply. His clarity is the reason for the power of his ideas through the decades. Realistically, this book can be recommended to anyone that is searching how to write on complex subjects and yet be understood.

He is accurately critical of the Federal Reserve. If written today he may say that the Federal Reserve did a very bad job in the last 10 years, It was not true that all we had was inflation of 2 to 3 percent per year and that is nothing to worry about. This excess money supply was sucked up into a stock market that is still overpriced. Reading this book may help you understand this viewpoint. More importantly, if you take a measure of the few ideas that have been accepted from Friedman versus the many that have not I can not help but wonder if another forty years from now Friedman will be seen as even wiser than he is currently. Freedom is not easy to hold unto and that was the greatest concern of the nations founders. If you share this fear even today then you will readily see how Friedman has such great appeal to those that love freedom and are willing to pay a short-term price to build on our freedoms.

Despite the age of this book their is little that is out of date. While the USA educational system has this great fear of teaching economics in the high school, the fact remains if you do not understand economics you do not understand America. Read this book and you will understand why economics belongs in the high schools. In the forty years of studying the markets, I remain in awe of how the best answers come from free markets. Every time the government steps in saying yes but in this case the market is wrong, it ends up the government was really wrong. Many times I thought the market mechanism was wrong, but I was wrong. If you read this book you could save a lot of time on your experience curve.

Today, capital moves around the world at lightening speed if your country does not provide the rule of law and free markets your prospects for attracting capital and retaining it are greatly diminished. If the country is not a democracy the stability of its laws is doubtful because the government's stability is suspect. This makes capitalism or free markets, the most likely path to freedom and the most likely protector of freedom. As democracy has become so widespread, each country provides an environment that is attractive to stock market investors or the money quickly goes elsewhere. Increasingly, governments must respond to subtle difference in the investment climate because there are so many attractive countries to consider. Free markets can not be turned back without experiencing withering capital flight. Capital is no longer the prisoner of governments, citizens are far less mobile than capital. Throughout modern history government is constantly trying to expand its power at the expense of the individual, capital is increasing the ally of individual freedoms and democracy. Doing business with a powerful undemocratic government has become to risky with so many democratic nations to chose from. In the long run big government is in deep trouble. If you do not understand market forces you will not understand the future. This book is easy to read written by one of the all time great thinkers on the subject.