Monday, July 25, 2011

(Not) Missing Milton Friedman

I have The Economist to thank for this commentary:

"The influence of this kind of [hawkish inflation] talk has been augmented powerfully by a certain moralising strand of Austrian economics, which is hostile to the very idea of fiat money, and encourages the idea that its entire purpose is to expropriate savings and monetise government debt."

But that IS the entire purpose. It was true in 1913 when the Fed was brought to creation, and it is true today. If the events of 2008 don't prove this unquestionably, then I would suggest a willful ignorance or worse on the part of the speaker.

But wait! What about smoothing out the business cycle, controlling inflation, reducing unemployment? What about all of THOSE things?

Distractions, all distractions. First and foremost, the Fed has failed miserably at all of these so-called objectives. To say otherwise is either willful ignorance or worse. However, it is the Fed that has been the PRIMARY engine of the business cycle (could there be such a thing in a free market for money?), and yet is for some reason hailed as the salvation from the evil it creates!

"Accordingly, macroeconomics as a discipline is often seen as pseudo-science that exists mainly to justify technocratic social control."

Well, macroeconomics is seen this way because it is true. All action is Human Action, taken by the individual based on circumstances and factors that are directly impacting the individual. There is some form of lunacy in those who accept, for example, the idea that financial prudence when taken by an individual is somehow catastrophic for the whole.

"To some, even to play the game of identifying optimal rules for the centralised state monetary authority is to give away the game to the Keynesian social planners."

But it IS social planning. What else can you call it? A small group of individuals is centrally planning the type, quantity, and price of money. It is central planning of the most fundamental commodity in an economic system. If they centrally plan this foundation, what is left to the market?

It is central planning, Soviet style. Just because they don't teach it this way in school does not make it so.

""As in many other spheres," Rothbard wrote, "[Friedman] has functioned not as an opponent of statism and advocate of the free market, but as a technician advising the State on how to be more efficient in going about its evil work.""

Imagine the mind it takes to develop and implement payroll tax withholding. This is the work of Friedman. Is it any wonder he was the "accepted" free market voice in the allowed dialogue? He had free reign to speak his mind, as long as he didn't question central banking and public funding of education. He did neither - however, through his creation of tax withholding and public school vouchers, he certainly did help the state go about its evil work.

"Rothbard's fulminations notwithstanding, Mr Friedman died a beloved figure of the free-market right."

I used to be one who "beloved" Friedman. Until I understood money in a proper, free-market context. And, until I learned about the father of the payroll tax. And until I concluded that school vouchers, while posing as "choice" actually further encroach the state into education. Yeah, besides these, I guess he was free-market.

"Yet it does seem that his influence on the subject of his greatest technical competence, monetary theory, immediately and significantly waned after his death."

Yes, because it all blew up immediately after his death.

Nothing like 2008 was ever supposed to happen when wizards were in charge of centrally planning money. The so-called Chicago School should be relegated to the dustbin where it belongs. Events of the last few years should discredit this idea forever, just like the certain failures due to the spending boom now taking place around the world will end up destroying Keynes once and for all...assuming anyone is actually paying attention.

"When a significant portion of a political movement's activists believe that the whole point of central banking is "systematic robbery", and that inflation is the means by which this robbery takes place, widespread, reflexive opposition to inflation is not surprising. "

Yes, precisely.

"Now, I don't claim that the right, loosely defined, is chock full of Murray Rothbard fanatics."

Sadly, not yet. But we are growing in number.

"And whatever it is that is keeping Ben Bernanke's Fed from loosening up, it's not the enduring intellectual legacy of Murray Rothbard."

WHAT? Ben Bernanke is somehow being kept from "loosening up"? Have you seen the Fed's balance sheet lately? Do we have any idea about the guarantee's and deals the Fed has cut in the last three years?

"If only the free-market right still had such a powerfully persuasive "technician advising the state how to be more efficient", our economy might now be slightly less screwed. Maybe it would help were "advising the state to be more efficient" less widely considered "evil work".

An efficient state, in any sense of the word, is inherently impossible as any student of free markets, capitalism, and incentives would understand.

Our one saving grace is that this is true.

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