Economics Nobel Prize winner Paul Krugman compares Economics Nobel Prize winner Milton Friedman with Economics Nobel Prize winner Paul Samuelson on just how free the free market can be. There is more wrong in Krugman’s analysis than you can shake a stick at. Let me list at least some of the errors. (There are too many to be explored in this op ed; wait until my book on this comes out for the full story!).
Yes, Milton Friedman did indeed want to divert the U.S. economy in the direction of more economic freedom. However, he was no radical libertarian- certainly not to the degree to which Krugman gives him credit. Friedman wanted to retain the Fed (albeit constrained to his 3% rule), keep antitrust legislation (but curtail it somewhat), and uphold the welfare system (his negative income tax proposal). He bitterly rejected the gold standard; he had a television series entitled “Free to Choose.” Yet, whenever people were “free to choose,” they chose gold (and sometimes silver). He espoused the “market failure” doctrine which included externalities and public goods (his neighborhood effects). On the other hand, he was an avid supporter of laissez faire capitalism, bless him, when it came to minimum wages, unions, rent control, occupational licensure, free trade and much, much more.
Samuelson, Krugman to the contrary notwithstanding, did not support the free market at all. Rather, he favored the economic system of the then USSR. In his textbook, he infamously claimed that the economic system of that country was so superior to ours that it would eventually overtake the United States. That’s how free the free market can be? Well, maybe it is, Krugman style. According to the latter: “Certainly nobody told Paul Samuelson that he was engaged in a fight for capitalism’s soul.” It is good that no one did, because he was engaged in no such fight. Instead, the fight he was engaged in was on the very opposite side; promoting communism.
Sayeth Krugman: “Friedman, on the other hand, was very much a political animal; pretty much everything he did was aimed at restoring Gilded Age-style unrestrained capitalism.” What about his work on the consumption function, the permanent income hypothesis, the role of profits in the free society, his monumental work on banking? Indeed, he pretty much founded an entire school of thought, “monetarism” all on his lonesome, with numerous articles in the top research journals. “Unrestrained capitalism” and Milton Friedman? One can hardly help laughing.
Here is another gem: “… it’s hard to avoid the sense that Friedman viewed his professional research, excellent though some of it was, as a sort of loss leader for his political advocacy — a way to establish his academic bona fides and hence add credibility to his free-market crusade.” It’s hard? Try harder. This is the sort of motive-mongering that Friedman opposed all throughout his career. Krugman offers not a shred of evidence in support of this wild-eyed contention. Just because Friedman’s (and Anna Schwartz’s) A Monetary History of the United States, 1867-1960 concluded that the Great Depression was caused by Fed mismanagement by no means serves as evidence that “it was also clearly intended to strike a blow against activist government.” Rather, these authors just let the chips fall where they may; they allowed the evidence to pretty much speak for itself. If economic research demonstrates that minimum wages increase unemployment for the unskilled, is the scholarship underlying it to be called into question because it has political implications? That would appear to be Krugman’s fallacious conclusion. In the view of Krugman: “… a number of economists had looked closely at Friedman’s arguments about the Great Depression, and found them wanting.” This is mere name calling.
Krugman is a serious man. He is an economist. He won a Nobel prize in this discipline. He is a columnist for the prestigious New York Times. And we have just fallen down the rabbit hole. We live in a psychedelic universe, where two plus two no longer equals four.
Samuelson, Paul A., Economics, New York: McGraw Hill, 8th ed., 1970, p. 193
Samuelson Paul. 1961. Fifth ed. Economics. New York: McGraw Hill, p. 830
Samuelson Paul. 1985. Twelfth ed. Economics. New York: McGraw Hill, p. 837
Skousen, Mark. 1997. “The Perseverance of Paul Samuelson’s Economics,” Journal of Economic Perspectives 11:2, Spring, 137-152. “The fifth edition of Samuelson’s Economics (1961), page 830 shows a graph indicating that the gap between the U. S. and the USSR was narrowing and possibly even disappearing at some point in the future. You would have to look at the graph to see when he predicted it might cross over and surpass the U. S. In the 12th edition (1985), p. 837, Samuelson showed a table declaring that, between 1928 and 1983, the Soviet Union had grown at a remarkable 4.9% annual growth rate, higher than that of the US, UK, Germany and Japan! I cite this information in my book, “The Making of Modern Economics” (M. E. Sharpe, 2001), p. 416. Also, I cite this information in my article, “The Perseverance of Paul Samuelson’s Economics,” Journal of Economic Perspectives 11:2 (spring), 137-52. Samuelson (1961, 830) depicts a convergence between the economies of the U.S. and the U.S.S.R. He claims (1985, 837) that between 1928 and 1983, the growth rate for the Soviet Union was a remarkable 4.9% per year, higher than that for the U.S.
Walter E. Block is Harold E. Wirth Eminent Scholar Endowed Chair and Professor of Economics at Loyola University New Orleans
READER COMMENTS
Mark Z
Aug 27 2021 at 3:23pm
“it’s hard to avoid the sense that Friedman viewed his professional research, excellent though some of it was, as a sort of loss leader for his political advocacy”
This, coming from Paul Krugman, a man who, since winning his Nobel prize, has devoted nearly his entire career to partisan political blogging, is just precious.
John R. Samborski
Aug 27 2021 at 8:07pm
How can you fail to mention that in a textbook authored by Paul Samuelson and Nordhouse it says that the USSR is proof that socialism can survive and even thrive. The textbook came out shortly before the USSR imploded.
Jon Murphy
Aug 27 2021 at 9:21pm
He does mention that. 3rd paragraph.
Neel Chamilall
Aug 28 2021 at 9:45am
Professor Block, thanks for this post.
You write:”However, he [Milton Friedman] was no radical libertarian- certainly not to the degree to which Krugman gives him credit.” You should have mentioned your very interesting exchange of letters with Friedman on this issue (as published in the Journal of Libertarian Studies)! I really enjoyed reading this exchange of letters.
As for Paul Krugman himself, you say that he is a serious person. I would add that he is also a very intelligent person…and a provocateur. He is way too intelligent to believe in some of the things he writes! It’s often sheer provocation. (See also his article “Who was Milton Friedman?” published in the New York Review of Books.)
Neel Chamilall
Aug 28 2021 at 9:47am
May I add that Paul Samuelson wrote a very elogious column in Newsweek when Milton Friedman was awarded the Nobel Prize in economics!
Henri Hein
Aug 28 2021 at 1:28pm
Thanks Neel. I also recommend the Econtalk episode with Wapshott. It’s about the Samuelson-Friedman debates.
Robert Tetlow
Aug 28 2021 at 5:40pm
Thanks for this interesting blog post. I’ll look forward to seeing your book. Of course the authoritative history of Milton Friedman’s economic thinking was penned, just last year, in two volumes, by my collegue Ed Nelson. https://books.google.com/books/about/Milton_Friedman_and_Economic_Debate_in_t.html?id=BSL_DwAAQBAJ&source=kp_book_description.
That work doesn’t cover Friedman’s political views or popular writing. That there was nonetheless enough material for two volumes, and only coveting up to 1972, is insteucti e on whether Friedman’s academic work could be properly considered a loss leader for his politics.
Neel Chamilall
Aug 29 2021 at 1:10am
Thank you, Henry. I will listen to Russ’s podcast with Wapshott.
I meant “eulogistic column”, not “elogious column”. Sorry for this.
Justin Merritt
Aug 29 2021 at 12:35pm
I just happened to watch an interview with Friedman from 1999 on Uncommon Knowledge (link). In it he said, “I have always been in favor of abolishing the Fed.”
Infovores
Sep 2 2021 at 12:12am
Time stamp?
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