Happy Birthday, Uncle Milty!

Robert Tagorda reminds us that one of the greatest champions of liberty, Milton Friedman, turns 91 today. Best wishes, Prof. Friedman, and many happy returns. (Go here for a great 1995 Reason interview with him.)

As is common among libertarians, Friedman holds a special place in my intellectual development.

And in my heart because he, like those other great Americans James Gandolfini, Calista Flockhart, Mr. Magoo, and Reason's own Tim Cavanaugh and Cathy Young, graduated from Rutgers (as did I), a really fine school that also teaches its students clear lessons about the ills of centralized, state-supported bureaucracy.

Comments

[Anonymous]

how long before some paleo starts ranting here about how ole Uncle Milty is the anti-libertarian devil incarnate?

[Neil Block]

Comment by Anon @ 3.25: Pre-Emptive Hit and Run Strike.

[matt]

Well, while I do respect Friedman I will be happy to bash him for his support of centralized banking. He attacked the gold standard and I think advocated a fixed inflation rate, both positions seem quite anti-libertarian to me.

[Chuck Divine]

Rutgers and the good old RU Screw certainly are an excellent preparation for life in DC. As
Rutgers Club of DC webmaster, I should know.

[Bosta T. Paddy]

"... Friedman made his views looking forward, in contrast to our current hindsight."

Oh, Yeah?

Then how come he didn't "look forward" to the CONFISCATORY INCOME TAXATION mess he's saddled us with today. (Milton Friedman was the primary author of this form of theft.)

[Ray]

matt,

You don't understand macroeconomics or US History.

The income tax came about when Milty was a child and the previous system of a gold standard was, as has been pointed out, susceptible to the ups and downs of any commodity market. The most dangerous part of that was the ability for one or two nefarious types to corner the market and cause untold mayhem.

As for a centralized banking system; a system in which each state issues its own currency, sets its own regulations and so on is inherently an unstable one and would (and did at one time) inhibit interstate trade and thus national trade.

Libertarians are supposed to be for the individualistic principles this country was founded upon. This doesn't mean absolutely no centralization (national defense, an efficient banking system etc) but that rights and regulations in general fall to the smallest local community by default and only ascend to the federal level as each case demands.

[Rick Barton]

"how long before some paleo starts ranting here about how ole Uncle Milty is the anti-libertarian devil incarnate?"

Not gonna happen because "Uncle Milty" ISN'T and there are plenty of neocons who ARE anti-libertaran for the paleos to focus on. Happy birthday Milton Friedman!

[matt]

I must have missed the part of the Constitution calling for an "efficient banking system."

Gold, before it was monopolized by the government, served as the medium of exchange because that's what the free market demanded. Almost everyone agreed that gold was valuable so it served as the medium of exchange. Unlike today, the market created money, not the government. The Fed pumps out money eroding savings and imposing the relatively hidden tax of inflation on everyone but particularly those who save. It creates artificial booms by flooding the economy wiht easy money, follow by recessions like were in now.

[matt]

And even though i am an econ major, no i don't understand macroeconomics.

[Ray]

matt,

Sorry, I attributed that bosta guy's remarks to you (Friedman being responsible for the income tax et al).

First of all, the gold standard and centralized banking are not one in the same. Secondly, gold does not provide for a more stable economy nor do I recall the constitution calling explicity for a gold standard so your "constitutional" point on that is mute.

If you will recall, history is replete with huge boom and bust cycles well before our centralized banking system came to be. Furthermore, these cycles were much longer lasting and much more destructive. No opinion there, only historical fact.

Still in recession? No, not by any commonly accepted standards in the private or public sector. The economy grew at a 2.4% pace for this past quarter, that's front page news and it's not the first quarter of growth so you're flunking your major.

And your major doesn't really matter. As you know, for every Friedman there is a Galbraith and for every wet behind the ears econ major who thinks the gold standard will fix the boom-bust cycle, there's a smart aleck stock broker who knows his trade from more than just a text book. Not that I actually think my profession means anything as I know plenty of economically retarded brokers but you did bring it up.

[Anonymous]

I didn't mean to advocate a government gold standard, what I advocated was letting the market decide what is to be used as a medium of exchange and in the past it was gold.

And if you take the government defense spending out of the 2.4% then the growth rate is only .7%. I would say that's not too promising. Here's the link: http://www.ombwatch.org/budget/weblog/archives/000020.html

[matt]

whoops, last post was mine

[Ray]

Taking the defense spending out of it is not realistic number one, and number two, .7 may be slow but it is still not a recession. You'll hear people bemoan the lagging unemployment but that has to happen. We essentially hired too many people during times of plenty and it's time to trim the fat.

A government controlled currency is not a bad idea. I don't know what you've gleaned from history that tells you that an unregulated, universally accepted form of currency is a bad thing but the economy used to be much more easily wrecked. Recessions were more destructive and long lasting and fraud was rampant and on and on.

What would happen if states had sole control over their currency, eventually, a semi-universal currency would evolve among the states. But, and this is important, separate states would find ways of manipulating their dollar and states like CA could blackmail the rest of us or Mississippi could drag the rest of us down. Confederacies only work on paper.

Bottom line is to control the boom-bust cycle. While I don't think our banking system is perfect, like national defense, I think it definitely falls into one of the few categories of a national issue.

[fredH]

Bosta:

Let's see. The constitutional amendment authorizing the income tax was passed about the time that Friedman was born if my math is correct. He's a very bright man, but I doubt that he was brilliant enough as an infant to formulate the income tax.

[Russ D]

Isn't the gold standard essentially centralized banking anyway? The countries with the most gold resources are South Africa and Russia. There's two super-stable countries for ya!

The free market generally determines the de facto standard, which presently appears to be oil.

The nicest thing about Friedman is he always seems to be willing to keep his mind open and admit flaws in his thinking. I wish I was as unstubborn.

[fredH]

Russ D:

Probably the best illustration that a gold standard doesn't yield stability is 16th century Spain, where the influx of large quantities of gold looted from Mexico and Peru caused severe price inflation.

[Plutarck]

So if Spain loots Mexico and Peru again, or if Mexico and Peru loot Spain, we're screwed.

😀

[fredH]

Clever riposte, Plutarck. However, it doesn't address the general problem with a gold (or any other commodity) based exchange standard. The whole system can be thrown off kilter by the sudden appearance of a new supply of the commodity. What if we reverted to the gold standard, and the next year a huge new, easily mined gold deposit were found?

[matt]

I'm not sure exactly what you're saying Ray but let me put my arugument like this: Libertarians should favor the free market over government meddling. Money should be treated no differently than any other good, the less government interference the better. I thought libertarians were supposed to be against centralization and govenrment monopolies.

[matt]

Obviously we're getting nowhere here, so i'll end on this:

The biggest depression in US history occured in the 1930's and was largely the fault of the central bank. If it is a central bank's job to "control" the business cycle as you claim how come they have yet figure it out after 90 years of existence? The problem is the fed is the cause of the boom/bust cycle. It creates artificial demand by pumping large quantities of money into the economy and then after a period of expansion (like the mid to late 90's) reality sets back in and the "belt tightening" begins.

[Bosta T. Paddy]

(Sorry, I was away on business. Else I would've responded sooner.)

I thought surely one of you guys would know better than to gloss over the relationship between Milton Friedman and CONFISCATORY INCOME TAXATION.

Of course he was an infant when the rules were established, FredH, but that wasn't my point. I thought you'd pick up on the fact that when the laws were enacted, income taxation was but a very small percentage of income (about 3 or 4%.)

But because Roosevelt got us into WWII and was looking for a way to finance his schemes, it was Friedman who suggested to Roosevelt to establish a ?temporary? Payroll Tax (we didn?t have a payroll tax before WWII) and to greatly increase income taxation as a whole -- all for a "good cause," don't you know? ? Hence an easy sell.

It is that suggestion on Friedman's part that made taxation unpalatable, going forward. Because even after the war was over, the ?temporary? payroll tax was not rescinded (surprise!) and the higher rates weren?t just maintained, they?ve been steadily increasing ever since (another surprise?)

Friedman himself admitted, years later, that he regretted having suggested the ?temporary payroll tax? idea to Roosevelt.

Your turn.