Solow on Friedman
By David Henderson
I promised recently that I would post on Robert Solow’s views on Friedman once I had got over the shock. I am now over the shock.
Because Solow’s piece is quite brief, I won’t try to summarize it here. Instead, I’ll point out the main thing that is lacking: evidence. And the evidence I know of goes almost entirely the other way. (I’ll explain the “almost” shortly.)
Start with Solow’s second paragraph:
There was of course the person: Milton was an ideologue, a True Believer, not given to skepticism or self-doubt. There are many of those, but he was an ideologue equipped with a very sharp and quick mind. And, what is not the same thing, he was a superb debater and a happy warrior: relentless, plausible, tactical, convincing, good with an audience, always smiling. (When we argued, he would often say: “Bob, I don’t understand you.” What he meant was: “How can you be so stupid?” But he would not say that.)
I agree that Milton was an ideologue. Solow and I might have different views about the meaning of that word. An ideologue is, of course, a person who has an ideology. And what is an ideology? Cue Webster’s:
a: a systematic body of concepts especially about human life or culture
b : a manner or the content of thinking characteristic of an individual, group, or culture
c : the integrated assertions, theories and aims that constitute a sociopolitical program
By that definition, I’m an ideologue–and so, likely, is Solow. So that’s not the real issue. The real issue is the next phrase: “a True Believer.” That term was invented by Eric Hoffer in a book by the same title. I recommend the book. Read it and I think that, if you know much about Milton Friedman, you’ll know that he was not that. Solow and I have no disagreement about Milton’s awesome debating skills.
What about “not given to skepticism or self-doubt?” Score one for Solow–for the “short run” Milton Friedman. I had been around Milton countless times–in conversations and in audiences–and I never saw evidence of self-doubt. Indeed, in one of my first publications in economics, published in a 1982 Fraser Institute book, I took on his view, expressed in a Newsweek column, that President Carter’s “real wage insurance” proposal was a form of wage and price controls in which the penalties for violations were spelled out. I had written Milton a letter arguing the opposite, but he didn’t budge. That’s why I wrote the paper. So in the short run, Milton didn’t have doubts. That makes him pretty similar to, I don’t know, almost everyone. I do recall, though, that when I sent him a draft of the paper, he didn’t disagree.
But now take a look at the very long run. During World War II and for a few years after, Milton was a Keynesian. Not just in the sense that he thought aggregate demand was important but in the sense that he thought fiscal policy was the important lever for government to pull to influence the economy. Indeed, one of his early contributions was a 1943 book, with Carl Shoup and Ruth Mack, titled Taxing to Prevent Inflation. He advocated what the book’s title suggests. You can’t get much more Keynesian fiscalist than that.
Yet Milton Friedman changed. He became the most prominent and articulate advocate of the view that monetary policy, not fiscal policy, was what mattered. Why did he change? I think it was the evidence, which he and Anna J. Schwartz gathered through the 1950s. That led to their 1963 book, A Monetary History of the United States, 1867-1960. In my Reason review of his and Rose Friedman’s autobiography, Two Lucky People, I pointed out that my biggest disappointment was that he didn’t tell the reader how he switched from being a strong Keynesian to being a strong monetarist. When I later ran into him at a Hoover dinner, he told me that many people had been disappointed by that but that his switch was very gradual. So, however quickly or slowly he changed his views, he did change them. Not as quickly as John Maynard Keynes, whom Solow seems to admire (I’m not sure here–read the Solow passage on Keynes and see what you think) for how quickly he changed his views. But he did change them slowly as evidence accumulated.
Here’s what I found to be the shocking part of Solow’s article:
The second part of my response to the question is that I’m glad there is no Milton Friedman anywhere on the political-economy spectrum today. I think that Milton Friedmans are bad for economics and bad for society. Fruitless debates with talented (near-)extremists waste a lot of everyone’s time that could have been spent more constructively, either in research or in arguing about policy issues in a more pragmatic way. I suppose that such debates also help to clarify implicit assumptions and shady arguments, but I think that is a small benefit compared with the cost in sheer hassle.
Do you notice what’s missing? Solow doesn’t tell us what the “fruitless” debates were. The main debates I can think of between Friedman and many of the rest of the profession were about three things: (1) the relative potence of fiscal and monetary policy, (2) whether the Phillips curve trade-off between inflation and unemployment presented policy-makers with a stable menu of choices, and (3) whether inflation is “everywhere and always a monetary phenomenon.” Solow thought fiscal policy was more potent and, in his classic 1960 article co-authored with Paul Samuelson, argued that the Phillips curve gave policy makers a “menu.” (The Samuelson-Solow article is more nuanced than I remembered. It’s not clear how stable they thought the menu was. What is clear is that they never even hinted that the long-run Phillips curve was vertical.) Friedman thought monetary policy was more potent and argued that the long-run Phillips curve was vertical. Friedman argued that changes in the growth rate of the money supply were the main cause of changes in inflation. Guess who won on all three.
And even if you think Friedman didn’t win, the debates were still debates worth having. There was nothing fruitless about them.
One thing more re the “fruitless” debate. I first met Bob Solow when he came to the University of Western Ontario in about February of 1972, when I was taking a year of advanced undergrad economics there. Students were encouraged to visit him and I did so. We talked for about 30 to 40 minutes. I found him very likable. I felt so comfortable with him that I went a little too far. I asked him why Paul Samuelson was so nasty. Solow got a little defensive and said that Samuelson was his best friend. So here’s what his best friend was quoted saying about Friedman in a Time article on Friedman in the 1960s:
To keep the fish that they carried on long journeys lively and fresh, sea captains used to introduce an eel into the barrel. In the economics profession, Milton Friedman is that eel.
As Da Ali G would say, “Respect.”