Economics

Iceland Yesterday, Iceland Today, Iceland Forever…Ruined by Milton Friedman

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Among the growing attempts to smear Milton Friedman as the "proud father of global misery," Iris Erlingsdottir over at the Huffington Post has accused Friedman of a) having once spoken in Iceland, over 24 years ago and b) telling me and Reason magazine in 1995 that Iceland was his vision of anarcho-libertarian paradise. Thus, its recent economic collapse has Nobel fingerprints all over it.

Jeff Miller at "The Trunk" blog called her to task effectively on this. I guess one shouldn't necessarily expect Erlingsdottir to be hep enough to somewhat obscure libertarian intellectual talking points to know, but she should have checked before using it as the basis of a smear, since even in her own storytelling terms it makes no sense whatever for Friedman to have said this in 1995. But she fails to realize that when Friedman said this to me:

I would like to be a zero-government libertarian [but] I don't think it's a feasible social structure. I look over history, and outside of perhaps Iceland, where else can you find any historical examples of that kind of a system developing?

…he was referring, as per some of the work of his anarchist son David, to Iceland in the 10th through 13th century. See both David Friedman's and Roderick Long's discussion of olde-timey Iceland's medieval bonafides.

Modern Iceland certainly has lots of crappy decisions by genuine market actors partly to blame for their problems. But it's hard to say a country with over 50 percent M3 inflation leading up to the crackup, and over 20 percent annual such growth pretty solidly for at least the past five years, is some sort of Friedmanite monetary growth rate paradise.

Michael Lewis in Vanity Fair engages in some good old-fashioned Iceland-bashing in his explanation of the crisis. He more or less argues that once you get to know these strange, superstitious, inbred, reckless, pushy, aggressive, sexually screwy freakazoids, you'd understand one should never let them get anywhere near international financial matters. Best Lewis line on Icelanders? "They have a feral streak in them, like a horse that's just pretending to be broken." Not to get all Icelandic Anti-Defamation League on Lewis here, but really? You have to read the whole thing to get the full sense of exactly how much he thinks it was the people, not the system, to blame.

Lewis does, though, tip his hat to the value of free-market mechanisms, crediting Iceland's use of a version of privatized fishing quotas as helping them get rich in the past couple of decades. Ronald Bailey wrote of the benefits of such privatized fishing quotas for Reason Online back in 2005.