Defending Milton Friedman

The Wall Street Journal's Stephen Moore offers a nice defense of economist Milton Friedman against many of the recent attacks on Friedman's ideas and legacy:

At academic conferences it has been open season on Friedman and his philosophy of limited government. Joseph Stiglitz, a Nobel Prize winner, says that Friedman's "Chicago School bears the blame for providing a seeming intellectual foundation" for the now presumably discredited "idea that markets are self-adjusting and the best role for government is to do nothing." University of Texas economist James Galbraith is even more dismissive: "The inability of Friedman's successors to say anything useful about what's happening in financial markets today means their influence is finished," he says. And pop author Naomi Klein says triumphantly: "What we are seeing with the crash on Wall Street . . . should be for Friedmanism what the fall of the Berlin Wall was for authoritarian communism: an indictment of ideology." One left-wing group is even distributing posters in Washington and other cities that proclaim: "Milton Friedman: Proud Father of Global Misery."

The myth that the stock-market collapse was due to a failure of Friedman's principles could hardly be more easily refuted. No one was more critical of the Bush spending and debt binge than Friedman. The massive run up in money and easy credit that facilitated the housing and credit bubbles was precisely the foolishness that Friedman spent a lifetime warning against.

Rest here.

For the definitive case against Naomi Klein's anti-Friedman screed, look no further than Johan Norberg's "Defaming Milton Friedman." And for a detailed account of Friedman's many accomplishments, see Brian Doherty's "The Life and Times of Milton Friedman."

Comments

[Marshall Gill]

Thomas Sowell was taught by Friedman at Chicago. He has the best quote in regard to free market economics.

People who are very aware that they have more knowledge than the average person are often very unaware that they do not have one-tenth of the knowledge of all of the average persons put together. In this situation, for the intelligentsia to impose their notions on ordinary people is essentially to impose ignorance on knowledge.

[Warty]

I offended a lefty bookstore owner the other day by informing him that Naomi Klein was a clueless twat. I offended him even more when I asked him if he had this in stock.

[Billy!]

I never got why the recent economic troubles refute Friedman, capitalism, etc. Even assuming that we indeed had the unregulated anarcho-capitalist economy some lefties claim (which we didn't). Has any serious advocate of laissez faire et. al. ever said there won't be the occasional crisis? I kind of assumed that came with the territory of capitalism (or pretty much any other human endeavor).

[Pro Libertate]

History has been a long repetition of the theme of government taking things from people and telling those people what to do and how to live. The modern era had been the success it has been due to the fact that government controls have been weaker than they have been in the past. However, the more the government sucks away our wealth and intervenes in our lives, the more we're apt to return to the old, vicious cycle.

We haven't ever had a totally free market, and what we've had in the last few decades has been, for the most part, highly regulated and heavily taxed. Attacking laissez faire or "deregulation" is tossing out an intentional red herring.

[Barry Loberfeld]

FROM "Modern Liberalism at Wit's End":

As for Friedman, he was by no means declaring (at the very beginning of Capitalism and Freedom) that "economic freedom" is the supreme value irrespective of its "practical effects" on people's lives; rather, it is not only "an end in itself," but "also an indispensable means toward the achievement of political freedom" (emphasis added). He rejected further the false dichotomy between freedom and "material welfare," and libertarians today reject in turn that between morality and practicality -- fundamentally, I would contend, between ethics and economics. That's because the two sciences are studying merely different aspects of the same reality, the same nature -- human nature. They can no more conflict than physics and chemistry. It is a "deeper belief" (explicit or implicit) in some standard of morality that determines both "intended goals" and the means to achieve them. As one liberal conscious of the need to account for the morality-practicality nexus, Kuttner subtitled another book False Choices Between Prosperity and Social Justice. Now, as to which ethic -- individual freedom or "social justice" -- truly coexists with economic abundance, one answer has long been clear: the contrast between the pro-prosperity Old Left and the pro-austerity New Left and its fellow travelers (e.g., affluence foe John Kenneth Galbraith, the Salieri of economics, now so irrelevant as to not even merit a mention from Chait). Here the supporters of "bigger government" continued to "back" it despite the demonstration of its actual relation to "growth."

[Warren]

The facts have never been a hindrance to the elite maintaining their hold on power.

[robc]

After the recent housing crash, how can anyone argue that markets arent self-adjusting?

[Friedman]

"Only government can take perfectly good paper, cover it with perfectly good ink and make the combination worthless."

[MNG]

"Attacking laissez faire or "deregulation" is tossing out an intentional red herring."

Pro L
I do think it makes sense for a person to reason like this:
1. There is all this talk about de-regulation, market friendly policies, and such being passed
2. Then something bad economically happens
3. The stuff in number one must have caused it, so I don't want to further move in that direction

Look, I'm not saying this is iron clad reasoning, but it's reasonable. If the things that were dressed up as pro-market reforms and de-regulation and were paraded down the street for all to see and wonder at were actually increases in government intervention, then pro-market types such as yourself have the people who missrepresented what they were doing to blame far more than the folks who now don't want any more of what they were told they were getting...In other words, Phil Gramm et al are more at fault than numnuts like Naomi Klein et al.

[MNG]

"In this situation, for the intelligentsia to impose their notions on ordinary people is essentially to impose ignorance on knowledge."

The problem with this is that the followers of the Chicago School all too publicly went to country after country essentially, well, imposing their notions on the ordinary people of those nations (re-writing their economic institutions and structure)...

[MNG]

Nevertheless I cannot understand the lefty hate of Friedman. He seemed like a very gentle, humane man who wanted nothing more than to expand freedom and well being. He was certainly more moderate and pragmatic than many libertarian thinkers. And while certain Chicago School influenced advice and policy in nations may not have had the best results, it's not like they resulted in the institution of tyrannical oppressive governments or mass starvation. To single this and him out for so much hate is bizarre to say the least...

[Pro Libertate]

MNG,

What deregulation was there? I was in financial services when this supposed deregulation occurred. The meme is almost total B.S., especially because it ignores the many increases in regulation that occurred in the same period.

[Gabe]

Friedman's most important contribution is a atrocity. The withholding tax has helped increase the ability of the government to grow and now look at the size of the monstrosity!

We will not cure our ills until Friedman's idea of having the government withhold money from our paychecks is finally taken to the dump. How many people have been killed due to this unprecedented plunder of the fed? we will never know, but it should be an extra chapter in the black book of communism.

[Shannon Love]

MNG,

The problem with this is that the followers of the Chicago School all too publicly went to country after country essentially, well, imposing their notions on the ordinary people of those nations (re-writing their economic institutions and structure)...

Yes, that is true. The Chicago School is noted for its incredible military powers. I usually doesn't take more than a half a dozen Chicago School ninja economist to overthrow the government of your average 3rd world country.

[JW]

MNG--If you would be so kind, please list for us the regulations that were "deregulated" that "caused this mess."

Thanks!

[Isaac Bartram]

"Chicago School bears the blame for providing a seeming intellectual foundation" for the now presumably discredited "idea that markets are self-adjusting and the best role for government is to do nothing."

After the recent housing crash, how can anyone argue that markets arent self-adjusting?

Well, the notion that any adjustment that "I don't like" or that is less than beneficial to some market actor is a "market failure" is widespread.

Even Nobel laureates in Economics believe it apparently.

From everything I've ever read by Milton Friedman, the meltdown in housing, mortgage markets etc is exactly what he would have expected from the policies that the Fed and the Congress were pursuing.

[JW]

In other words, Phil Gramm et al are more at fault than numnuts like Naomi Klein et al.

Professional hit liars like Naomi Klien are far worse than any politicians' work. Laws can be changed and damage mitigated through the electoral process and/or the courts.

Lies as she tells take on lives of their own as their are repeated by the gullible lefties who tut-tut about them at cocktail parties and who then spin out similar theories about how "deregulation" caused a financial collapse that was, in reality, caused by central banks' open spigots and perverse market incentives introduced via government actions.

[alan]

The problem with this is that the followers of the Chicago School all too publicly went to country after country essentially, well, imposing their notions on the ordinary people of those nations (re-writing their economic institutions and structure)...

If you were to substitute 'the IMF and World Bank' there where you have 'the Chicago School', you would have an actual factual statement.

[Shannon Love]

Leftist always claim that the economic crisis du jour indicates the failure of the free market. Embedded in the assertion is the unstated premise that if leftist ran everything, we would never have economic crises. This in turn reveals the leftist's wildly exaggerated sense of their own understanding of the economy and everything else.

The left's critique of Friedman in this context is especially silly because I'm pretty sure setting up giant government sponsored enterprises to buy up half the residential mortgages in the country thereby distort the markets assessment of risk, isn't a plan that Friedman would have come up with.

The left doesn't actually have an developed system of thought regarding the economy. They can't actually explain why the real world political process will systematically make better decisions than the free-market. Instead, they simply point to any reversals in the real economy, regardless of cause, and then assert that in their imaginations, leftist politicians could have done better.

It's hard to argue against people's imagination. You end up with a discussion much like two D&D geeks arguing over whether a dwarf with a +10 axe could take an Elf with a vorpal sword.

[Isaac Bartram]

I also tend to get upset when I hear the old "Milton Friedman was an advisor to Pinochet" story repeated.

But I have on occasion, when the old chestnut is repeated by some lefty, come back with "Well, of course, Milton Friedman was an advisor to Richard Nixon and he (Nixon) didn't pay any attention to him, either."

Look, the "Chicago Boys" that tried to reform Chile managed to make some important reforms (that succeeding leftist governments have kept in place) but just as in any regime they were mostly ignored by the political power structure when it found policies were not to their advantage.

[JW]

Issac--And Nixon went to China! Tienanmen Square is all Friedman's fault!

It's like a new game has been invented: "The 2 Degrees of Separation of Milton Fridman." Point to any hardship in the world, economic or otherwise, and then exclaim how it's all the fault of Milton Friedman's work (or the free market--that works too). Bonus points if you can state the exact opposite of what MF believed or said and still pin it on him.

[NAL]

The problem for lefties with markets is that they indeed do correct. That means it's up to each individual to always be prepared for a correction (saving, investing, training, networking, and plain old sucking it up and doing without a lot of things). Lefties don't like to leave anything up to the individual.

[Xeones]

Ultimately, i predict that the Obama administration's multifarious cockups will vindicate Friedman, but pretty much nobody will be paying attention.

Gabe: Paycheck withholding is a terrible, sucky idea, but the man led the committee that ended the draft, so i consider that a wash as far as freedom goes.

[Isaac Bartram]

Furthermore, Friedman acknowledged that witholding was a bad idea. He was young and he was asked to submit a solution to a purely technical problem. Later in life as his ideas evolved he realized how flawed it was.

Oh, and yeah, Thomas Jefferson owned slaves.

I'm not sure where this perfect world that some people seem to imagine is. But in the one I live in, even the brightest and most well meaning people have flaws and make mistakes that they later regret.

[Isaac Bartram]

Lefties don't like to leave anything up to the individual.

Well, to try to be completely fair, it is my opinion that they carry to the extreme a very common human feeling, viz, they don't like to see people in distress or trouble. And they simply don't believe that individuals will make all the right choices needed to stay out of trouble. Hence the need for the enlightened betters to make the decisions necessary to remove all risk of having any distress or harm come to anyone.

One of the things that distinguish libertarians from such types is that they realize that such an overarching regime is a fools errand that will manage to bring even greater misery to even more people in the end.

I mean, exactly what "deregulation" and "laissez-faire" led to the stagflation of the seventies?

[R C Dean]

The problem for lefties with markets is that they indeed do correct.

Indeed, its the corrections that the lefties can't stand. They seem to prefer the leveraged chaos of regime change and system collapse to market cycles.

[Hazel Meade]

Well, to try to be completely fair, it is my opinion that they carry to the extreme a very common human feeling, viz, they don't like to see people in distress or trouble. And they simply don't believe that individuals will make all the right choices needed to stay out of trouble. Hence the need for the enlightened betters to make the decisions necessary to remove all risk of having any distress or harm come to anyone.

One of the things that distinguish libertarians from such types is that they realize that such an overarching regime is a fools errand that will manage to bring even greater misery to even more people in the end.

FTW.
Ultimately, the best way to help people is to teach them to be self-reliant.

The slow implosion of GM is kind of an illustration of the left's policies. You start off with something intended to provide job security and old-age pensions. But it gradually evolves until you get to the point where it's basically a welfare program. Right now, every UAW worker is basically a glorified welfare recipient. They aren't doing jobs that are productive and necessary any more. They are building cars that people don't need or want, and then getting the government to support their paychekcs when they can't sell them.

[Hazel Meade]

Hit send to soon ...

So basically now the UAW need to have the rug yanked out from under it before they'll get off the dole.

And most of those pensioners are going to end up with nothing, sooner rather than later. And they won't have planned for it, because they were given the false expectation that GM would be around forever.

From the perspective of old age pensions, the whole thing is a huge illustration of why you should ALWAYS save for your own retirement. NEVER expect a pension fund managed by a company or the state to be around for you.

Hence, the observation that trying to set up systems that eliminate risk and harm ultimately results in more misery is dead on accurate.

The whole effort to try to provide social security for people and company pensions funds is going to end this way. Tens of millions of retirees are going to end up with no retirement savings because they counted on social security and/or a company pension plan.

I wouldn't be surprised if the 401 (k) system foubnd a way to implode as well.

[MNG]

Pro L
http://en.wikipedia.org/wiki/Commodity_Futures_Modernization_Act_of_2000
http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act
Decisions by the SEC and such

All were sold as pro market deregulation.

[MNG]

Look, you can't have your cake and eat it too (unless you eat it and shit it out and then eat it again, I hope none of you find that appealing). Pro-Marketers often trumpet the positive results of "de-regulation" in, say, the airline or trucking industry while pointing to much ballyhoo-ed "de-regulation" like the CMFA that are linked to negative results and saying "well, of course, that wasn't REAL de-regulation!" It's safe to say that the de-regulation of the airlines an trucking industry weren't total de-regulations, and there were an increase in regulations in those industries in other areas, etc., so I guess you guys will agree to not point to them as successes, eh?

[Marshall Gill]

The problem with this is that the followers of the Chicago School all too publicly went to country after country essentially, well, imposing their notions on the ordinary people of those nations (re-writing their economic institutions and structure)

Hmm, let's see. Allowing individuals to make their own decisions is "imposing their notions"? Kind of like how those damn abolisionists imposed their notions upon slaves?

I am never ceased to be amazed when a Leftist argues against the "imposition of Liberty".

Since you fail to understand the meaning of the word "impose" here is a bit of help. In no Free market economy is anyone prevented from setting up socialist economies. They do prevent the Socialist from imposing their ideas upon others but nothing prevents them from practicing collectivism on an individual level. True, most Socialists mean "Socialism for thee and not for me" but nothing prevents them from putting their money where there collective mouths are. Of course, the only way to pave the Road to Utopia is with the Iron Fist.

[FTG]

MNG,
[...]If the things that were dressed up as pro-market reforms and de-regulation and were paraded down the street for all to see and wonder at were actually increases in government intervention, then pro-market types such as yourself have the people who misrepresented what they were doing to blame far more than the folks who now don't want any more of what they were told they were getting...

The people that misconstrued these as "market friendly" reforms were the bureaucrats themselves. The Austrian Economists (like Rothbard) saw them for what they were and were not fooled.

In other words, Phil Gramm et al are more at fault [than the likes of] Naomi Klein[...]

From the "they should have known better", Naomi Klein could have called these reforms for what they were, instead of continuing to tout them as free market reforms. She is just as guilty of misconstruing these reforms as the bureaucrats that approved them.

[Pro Libertate]

And mostly weren't deregulation. I dealt with GLB both in-house and in private practice. Most of the loosening of regulations weren't taken advantage of, and even that law imposeth where it tooketh away. For instance, the GLB privacy provisions were new regulations. And the regulators often resisted anything that took their regulatory authority away, so don't read too much into those laws. I only wish they HAD been truly deregulatory.

I don't pretend that a completely deregulated environment would be perfect, and I'm not sure I want totally unregulated commerce. But you have no idea how hard it is to do perfectly legitimate business when the government attempts to intervene, control, and second-guess everything you do. How much does that cost consumers in the end? Why are politically motivated decisions better than the decisions made by businesses and by consumers? What wealth has the government produced?

You're leaving out, of course, all of the new regulatory schemes--the additions to the Fair Credit Reporting Act, Sarbanes-Oxley, USA Patriot, the predatory lending legislation of various stripes, etc., etc., etc.

[FTG]

MNG,
Pro-Marketers often trumpet the positive results of "deregulation" in, say, the airline or trucking industry[...]

Maybe they do this because these industries WERE deregulated (actually, they enjoyed reduced regulation). Also, don't forget the long distance service deregulation that brought a reduction in long-distance communication prices. Before the telephone deregulation, calling someone long distance was a bank-breaker deal for many.

[...]while pointing to much ballyhoo-ed "deregulation" like the CMFA that are linked to negative results and saying "well, of course, that wasn't REAL de-regulation!"

Maybe they say this about the CMFA because it WASN'T deregulation, not because it was misconstrued.

[MNG]

"Allowing individuals to make their own decisions is "imposing their notions"?"

Marshall, however you want to read it those advisors came into nations and told them what to do (or if it makes you feel better what to "undo"). They advocated changes in governmental and economic structures and practices.

"The Austrian Economists (like Rothbard) saw them for what they were and were not fooled."

Then they should have yelled louder. Really. Besides, I'm pretty sure Murray Rothbard did not denounce the passing of the CMFA, as he had been dead for five years (unless you can talk to the dead and he told you so).

Pro L
You work in that field and I don't, so I'm going to defer to you. My point is that they were loudly sold as pro-market de-regulation. When problems followed them it was only natural that people were going to have a sour taste about anything else sold as pro market deregulation.

I will say that while I'm sure regulation costs consumers (because the costs are passed on), they are usually (or lets say ideally) put in place to protect them too.

[MNG]

But FTG, in the examples you note there were tons of regulation left over, and there were additional regulations just as Pro L has noted added. Do you see how it can appear that you are just calling every thing that was hailed as deregulation that worked "real deregulation" and everything that was hailed as deregulation that did not work as "deregulation." Both seem to have webbed feet, down, and quack....

[MNG]

Were Austrian economists loudly denouncing things like the CMFA when they were being debated? If so, were they saying "these don't go far enough" or "this is really more regulation?" Because if we can only tell "real" deregulation from "false" deregulation by the results, then, well, that's begging the question big time doncha know...

[FTG]

Pro Libertate,
I don't pretend that a completely deregulated environment would be perfect, and I'm not sure I want totally unregulated commerce.

A completely deregulated environment would be as perfect as man can be... which means it wouldn't. But people do strive for perfection when left alone.

There is nothing to fear about unregulated commerce; the lack of "regulation" would only mean less moral hazards and more vigilance by buyers and sellers. Even with regulations and oversights, it was easy to fool many into a Ponzi scheme - think of how more difficult it would have been for the fraudulent to entice people if the veneer of respectability and oversight taken for granted by the existence of the SEC was suddenly gone.

[mike]

I'm not as familiar with CFMA, but GLBA imposed huge regulatory burdens on financial institutions. In fact, the enforcement mechanisms used by banks and regulators for GLBA are in some cases being used by the banks to enforce the restrictions on customers using their credit cards on international gambling sites.

[JB]

Leftists are stupid fucks. I look forward to their demise.

[Pro Libertate]

MNG,

I think they were intended to serve that purpose, but you know what they say about intentions. The problem was that a lot of restrictions and new regulations were thrown into these bills. And, in the end, the regulators responsible for implementing enabling regulations were less than cooperative.

When I was in private practice, I was surprised that more Financial Holding Companies weren't formed (allowed by GLB for companies involved in all sorts of financial activities--insurance, securities, banking, etc.), but I think that had to do with reality vs. theory.

[MNG]

"Leftists are stupid fucks. I look forward to their demise."

And certainly in their place people like JB will build a world where beautifully simple grunts and pointing replace all the fancy talk of those stupid fuck leftists...

[FTG]

MNG,
Then they [The Austrian Economists] should have yelled louder.

How loud would it have to be to satisfy you, MNG? They did enough.

But FTG, in the examples you note there were tons of regulation left over[...]Do you see how it can appear that you are just calling every thing that was hailed as deregulation that worked "real deregulation" and everything that was hailed as deregulation that did not work as "deregulation."

MNG, whatever the results from deregulation being looked at indicates how far the "deregulation" went. If I were strangling a woman with pantyhose and then switch to a cord and call it "de-strangling", I would be lying or misconstruing the case. Instead, if I ease my stranglehold and let the woman breathe, it would be a different matter. It is the same with deregulation that lets industry breathe versus deregulation that's akin to a simple change of strangling materials.

[MNG]

"more vigilance by buyers and sellers"

Imagine how not only financial transactions, but life in general would be paralyzed by such unmitigated bullshit. There's a trade you could make, but maybe those involved are operating on inside information, maybe not, so you just don't make it. You could put your money into this or that, but there's no FDIC or whatever so you don't. You don't buy any food or drugs from anyone you don't know very, very well, because you don't want your kids to be poisoned by some dude trying to turn a quick buck.

It would be like Hell on earth, and have all the "liberty" of living on an island of cannibals...*

*Hey, us non-libertarians can have fun with hyperbole too!

[MNG]

"whatever the results from deregulation being looked at indicates how far the "deregulation" went"

FTG, I've implored you in the past to look into the fallacy of begging the question...It seemed you chose to ignore my advice. Sigh.

Deregulation produces better results.
How do you know if deregulation actually occurred in a given situation.
Why, look at whether the results were good or not. If they were, it was actually deregulation!

"They did enough."

Please provide citations, before or during the CFMA debate, of this.

[MNG]

"think of how more difficult it would have been for ]thugs] to [rob, assault and rape] people if the veneer of [safety] and [assistance] taken for granted by the existence of the [police] was suddenly gone."

Fixed that for you FTG.

BTW, that's a little argument by analogy into an argument ad absurdum for ya. Those are both worth checking out as well 😉

[robc]

MNG,

Sarbanes-Oxley occurred after the "deregulations" you mention so that would go on the top of the blame stack for those that like to do that kind of thing. No cutsies to lower in the stack.

[MNG]

If we got rid of the police then certainly people would become more vigilant in their actions.

But I don't think that would be an overall good thing.

Ditto for the SEC, FDA, and many other government regulations and actors.

[MNG]

I see your point robc, but of course those folks would just do what you guys do and claim that Sarbanes-Oxley "didn't go far enough!" 🙂

[JW]

Deregulation produces better results.
How do you know if deregulation actually occurred in a given situation.
Why, look at whether the results were good or not. If they were, it was actually deregulation!

I'll give you an example:

In Maryland in 1999, they passed "energy de-regulation." They made it legal for outside companies to compete for electricity consumers with the state utility, BG&E. Sounds great, right?

Oh, and they fixed prices at 1993 rates. For the next 8 years. So, when the price control expired in 2007, we had rate increases on the order of 72%. Overnight. Gosh, that was fun.

Tell me how exactly that is de-regulation and why any outside electrical producer would want to try and compete with the incumbent utility in that environment, all the while they lose money.

[robc]

MNG,

The difference is, they would be wrong. Plus, when it comes to deregulation, I dont make a utilitarian argument. I dont give a flying fuck whether it makes the economy better or worse, just whether we are freer or not.

So, for me, deregulation is easy to judge.

[Isaac Bartram]

Whatever the merits or demerits of any deregulation (or whatever) it looks to me like loose credit at the Fed and decisions bused on political incentives rather than financial ones at Fannie and Freddy had far more to do with this meltdown.

Face it. It was a bad idea to give people loans they couldn't repay to people to buy houses they couldn't afford.

There really is a bigger problem here and that is the sense of entitlement that led people to believe they could create these kind of hazards and get away with it. In the end no amount of regulation could have stopped that because people just get around the regs with enough compliance to look good.

[Hazel Meade]

MNG,

Most libertarians posit that some non-state mechanism would emerge to tell reputable businesses from disreputable ones.

Word-of-mouth can be very effective in a deregulated environment. Reputations become much more important.

But there would probably also be non-state certifications like the Kosher food, and dental association stamps.
Amazingly, the FDA doesn't test toothpaste for effectiveness. Instead, market forces ensure that people without the ADA stamp don't get much business.

Now, suppose that we actually had a national agency that ensured that anything sold as toothpaste actually fought cavities. I'd be willing to bet you'd be saying that if this agency didn't exist, there would be no way to know who to buy toothpaste from and it would make life a living hell.

[robc]

MNG,

Also, also, no one here is arguing those certain reregulations didnt go far enough, they are arguing they didnt go in the correct direction at all. SOX clearly increased regulation, no one argues otherwise.

[robc]

I agree with Isaac.

If everyone on either side would just join together in burning down the FED, instead of blaming regs/deregs that had little to nothing to do with it, we could create a better world. A Fed-less world.

Its not often I wish for the return of Andy Jackson.

[robc]

Hazel,

Yeah, how do jews know what food to eat without the government telling them what is Kosher or not? How can that possibly work?

[MNG]

JW
You, er, miss the point.

If you want to say that deregulation has certain empirical results, then it must be defined in such a way that in a given situation that could be falsifiable. If I define "real" deregulation as deregulation that produces positive empirical results then of course "real" deregulation ALWAYS leads to positive empirical results. But I've also wasted everyone's time.

You have to have a way to identify deregulation that is apart from whether it produced success or not. Then you take any alleged instance of deregulation and, apart from its success, see if it fits with what we are calling deregulation. THEN you can look to see if most or all of the things that we identified as "real" deregulation actually produced positive results.

See?

But of course, most of this is neither here nor there, as my main point was that whatever deregulation ACTUALLY is, some of the provisions which seem implicated in our current mess were loudly called deregulation, hence people are untrustworthy of those things. Of course they may be wrong, that was never my point...

[MNG]

"Face it. It was a bad idea to give people loans they couldn't repay to people to buy houses they couldn't afford."

I know, I know, I agree! I wish all those private actors had not voluntarily done that so much in the recent past!

Hazel
Certifying something as effective and certifying it not to kill you are two different things...If the dental association is wrong or not, I could care less and would probably not know until decades later.

robc

"no one here is arguing those certain reregulations didnt go far enough"

No, they are arguing, just like lefties and Sarbanes-Oxley, that the deregulation efforts did not "really de-regulate".

[MNG]

Hazel
There were private associations that were supposed to assess the risks of much of the futures that went bad. They had their reputations and hence bottom lines on the line, so they had all the usual libertarian motivations to do the right thing and rate the risk honestly and correctly.

How'd that work out?

[Alberta Libertarian]

Agreed, we better setup moral hazard so it'll never happen again.

[Hazel Meade]

The "deregulation caused this" argument really is pretty flimsy. It pretty much amounts to "Well, they started selling these derivatives, and then they all went crazy with greed!" and ends there.

I've yet to hear a lucid explanation of why regulating the selling of derivatives would have changed anything in the market dynamic, or how regulators could have predicted which derivatives would turn out to cause systemic risks.

I mean, if anyone knew that these derivatives were going to be worthless, they would short them. Some did bet that way and won.

But if government could predict the market, then it could make money trading stocks.
Obviously, the best analysts on Wall Street don't do that great a job predicting market trends, so I don't see how some federal regulator is going to do better.

This idea that effective regulation could prevent these crisis necessarily presupposes that the government can predict the effects of market trends better than market actors themselves. But it's hard enough to pick stocks, so why would we think they can pick out what's going to cause a "systemic risk"?

What will happen is that regulators will simply be in a constant flail attempting to guess what the market is going to do next. They'll be no better at it than anyone, but their decisions will be politicized and backed by force.

[robc]

MNG,

I have never heard a lefty say that SOX didnt regulate.

Speaking of which, if the certain changes were sold as dereg and SOX was sold as reg (regardless of whether they were) why is anyone who believed the sales pitch blaming the deregulation when the regulation occurred last?

Dont answer for yourself, answer for these hypothetical people that believe the sales pitches.

[Hazel Meade]

There were private associations that were supposed to assess the risks of much of the futures that went bad. They had their reputations and hence bottom lines on the line, so they had all the usual libertarian motivations to do the right thing and rate the risk honestly and correctly.

The ratings agencies, you mean. And if the ratings agencies were state actors, what difference would that have made?

Why do you think that state actors are going to be better at assessing risk than private actors?

[robc]

How'd that work out?

Worked fine. Those that screwed up got screwed. Those that didnt, didnt.

Ask John Paulson. He judged the risk properly. Ka Ching!!!

[JB]

MNG, keep deluding yourself.

[JW]

JW
You, er, miss the point.

Nah, at best I chose a poor pull-quote.

Mine was in response to your post about "real regualtion."

All too often, as was in the case of California energy deregulation in 2006(?), is that just becasue proponents call something "deregulatory" doesn't make it so.

Putting on a sheet does not make one a ghost.

You have to have a way to identify deregulation that is apart from whether it produced success or not.

OK. Did it remove barriers to competition? Did it remove price controls? Were the actions done to put all actors under the same rule or did it favor one over others by establishing one company's product or operations as the standard? Did it actually remove regulations without putting new ones in its place? Or was it all smoke and mirrors and the intention was to create the illusion of deregulation?

If anything, as was the case in MD, it appears that the electricity deregulation was done either through incompetence or intentionally to discredit the concept of deregulation (passed by a Democrat-controlled legislature and signed by a Democrat governor). You can't have mandatory price controls in place and be deregulated.

[d.a. harley]

Poor conservatives, still busy defending the indefensible: Iraq war, Milton Friedman, Ronald Reagan, God, heterosexual marriage, American soldiers are heroes. Why are they such a backwards lot? Silly conservatives. Oh, well. They make me smile.

Toodle-oo!

[Brandybuck]

The free market is not perfect, and thus must be rejected in favor of centralized government control. After all, no centralized government program has ever been imperfect.

[Sean W. Malone]

Poor d.a. harley, still busy confusing libertarians with conservatives and thinking that Milton Friedman had anything to do with the Iraq War (which he strongly opposed) or "heterosexual marriage" laws. Dumbass d.a. harley. Oh, well. He makes me think he's an idiot.

Toodle-oo!

PS. Here's me: Defending Uncle Milty again at Mises

[Graphite]

MNG,

Frank Shostak is one prominent Austrian economist who has basically argued that, if you insist on having a central bank shoving liquidity down the market's throat, and a federal government handing out cheap mortgage credit and deposit guarantees like candy, then thoroughly deregulating the financial sector is probably

Of course, the relevance any of that has to "laissez faire" and "free markets" is exactly zero.

The Fed is not yet on the table for Serious People who Seriously Discuss These Serious Matters, but given some more time to create even greater monetary havoc, I think it will be.

[Graphite]

Sorry, that second paragraph above should end, "is probably a recipe for disaster."

[d.a. harley]

Silly Sean, couldn't understand I wasn't blaming Milty Friedman for the Iraq war or heterosexual marriage laws. I was merely including him among a list of subjects about which conservatives can't seem to bring themselves to face the truth, bless their hearts.

But he did manage to correctly spell dumbass and idiot. Good boy.

Libertarians: aren't they like conservatives only slightly less dull?

[JW]

Dear d.a.--Thank you for your applying for the position of blog troll here at Hit & Run.

Unfortunately, we have no open positions of troll open at this time. Should one open up in the future, we will be sure to contact you.

Again, thank you for your interest and we wish you the best of luck in your search.

[d.a. harley]

Dear JW, goodness, the way you write I'd have to guess you're at least partially retarded:

"Thank you for your applying for the position..."

"we have no open positions of troll open"

Bless your retarded little heart. You keep trying and you'll get out a coherent sentence some day.

[JW]

Gosh d. a., you go right ahead and keep on thinking that you matter. I'd be more concerned about writing comments that lack not only depth, but even the most basic intelligence.

Have a nice life, fucktard.

[Kreel Sarloo]

"I was merely including him among a list of subjects about which conservatives can't seem to bring themselves to face the truth,..."

And exactly what "truth" is it that conservatives* are supposed to be bringing themselves to face in regards to Milton Friedman, d.a. harley?

I don't really expect a reply, or if one was forthcoming it would probably be as content free as the original.

*Of which there are but a rew on this board. And something that Friedman never referred to himself as.

[Rev Dr E Buzz]

What can a lefty come up with that explains this.

http://research.stlouisfed.org/fred2/series/MULT

[mbt]

hi,
everybody, take your time and a little bit. srytdrture6u