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This man is warped and always has been.
The Nobel committee has always been impressed by technique and not by common
sense. How many Nobel laureates do you know that advocate wild and
exotic solutions to things? Lorenz gave a speech at the Nobel
committee that said that the answer to everything was posture and that Alexander
technique was the answer to almost everything. Then there was Linus
Pauling and a good idea gone nuts. There are precedents but none
that have effected us as Friedman has. Where are the ones willing to
challenge him? Where are the ones on this list?
Here's your chance for history. Its your profession not
mine. Is it just that he is Horowitz and all of the rest of
you are addicted to his lousy taste because of his octaves? What a
state of affairs we have come to. Keith I am your constituency
for your business. Talk to us in our language. Your
profit margin will go up. Aesthetics is the root of all
thought. Start there. Aesthetics is concerned with the
whole of human perception and not just the local stories and pleasures in
cultural ordinariness. Friedman is an aberration, like Darwin
in his later years or JS Mill before he discovered Wordsworth.
REH
----- Original Message -----
Sent: Saturday, June 07, 2003 5:37
AM
Subject: [Futurework] Freidman has
changed his mind
Some FWers will be interested in the following
interview with Milton Friedman in this FT Weekend
Magazine:
<<<<
FT LUNCH WITH MILTON FRIEDMAN
Simon
London
Hold on to your hats and prepare to be amazed: Milton Friedman
has changed his mind.
"The use of quantity of money as a target has not
been a success," concedes the grand old man of conservative economics. "I'm
not sure I would as of today push it as hard as I once did." Granted, this is
hardly a conversion of Damascene significance. But, heck, it's a start. It
also shows that, at the age of 91, Friedman still has his critical faculties
intact. The man once described as "the most consequential public intellectual
of the post-war era" is still engaged -- and engaging.
We are at the
North Beach Restaurant in San Francisco. While he will be forever linked with
the "Chicago school" of economics, Friedman and Rose, his wife and sometime
co-author, moved to the area in the late 1970s when he retired from
teaching.
The restaurant is only a couple of blocks from Friedman's
home and, it transpires, is a regular haunt. He receives a voluble
welcome.
Those under the age of 40 are probably unaware how
consequential Milton Friedman has been. His mild recantation on monetary
targeting would have caused a sensation - and perhaps saved a lot of grief --
had it been uttered 20 years ago. In the early 1980s, both the US and the UK
set interest rates according to Friedman-style targets for money-supply
growth. The common aim was to bring down inflation without the pain of
recession.
The common outcome, however, was partial success. Inflation
fell, but at enormous cost in terms of unemployment.
The fact that
central banks the world over have given up trying to "fine-tune" economies to
an imaginary perfect pitch is a measure of his wider influence. Money-supply
targets may have been replaced by inflation targets - but the Friedman
influence remains strong.
If this was not enough for one lifetime,
Milton Friedman the polemicist has been at least as influential as Milton
Friedman the economist. His championing of small government, low taxes and
market forces helped set the terms of public policy debate through the 1980s
and beyond.
It comes as no surprise to find he has strong views about
the menu, too. On Friedman's recommendation, I order sand dabs, a flatfish
said to be something of a house speciality. The professor opts for eggplant
and we agree on two green salads to start, with iced water all
round.
Free To Choose, the "personal statement" published with Rose in
1979, closed with the observation that the intellectual climate was shifting
away from collectivism in favour of free market ideology. What has happened in
the 20 years since, I wonder? "The fall of the Berlin Wall, which occurred 10
years after Free to Choose was completed, means that support for socialist,
collectivist forms of social organisation has all but
disappeared...
"On the other hand, anti-collectivism has not meant
anti-big government. In terms of the attitude towards big government, it is
very hard to say that there has been any improvement. There may have been
backsliding." I point out that government spending fell as a proportion of
national income during the 1990s, reversing a long upward trend. Surely this
was a sign of big government in retreat? More a sign of political gridlock in
Washington, he responds, with President Clinton's Democrat White House pitched
against a Republican-controlled Congress.
He adds, with an air of
disappointment, that spending under George W Bush is back on an upward trend.
"The second President Bush appears to have inherited the free-spending
tendencies of the first," he says dismissively. What, then, of the tax cuts
that the president recently signed into law? "His insistence on tax cuts is
good," he concedes. "That is the only real way of bringing pressure on
Congress to hold down spending. In my view, the size of government is
determined much more by how much they can raise in taxes than by any
ideological theory." The entrees arrive very, very hot.
"To go back to your
original question, the tide of public opinion has continued to go against
government. People are as suspicious as ever of government - big or small.
Unfortunately, the slowness with which public opinion affects policy has not
changed."
His favourite example of the mismatch between public opinion
and public policy is school vouchers. Such a scheme, he says, would unleash
market forces in the education sector by giving parents the right to choose
which school their child attends. Funding would be granted in the first
instance to the child, not the school. Schools would then have to compete for
business by raising standards or pleasing parents in other ways.
"There
is no doubt about public opinion," he says, tucking in to his eggplant.
"Everyone knows that the public school system is lousy. The solutions proposed
are all ineffective with one exception: a greater degree of parental choice -
more competition. The majority of the American public is in favour of
child-centred financing. But the teachers unions exercise such strong
political control that it is very, very difficult to make any
progress."
Listening to him it is easy to understand why his formula
appealed to political leaders -- think Margaret Thatcher and Ronald Reagan --
who craved black-and-white answers to complex questions. As well as turning
out academic papers and polemics, Friedman in his prime was also a prolific
producer of newspaper articles. One of his most influential appeared in The
New York Times Magazine circa 1970, arguing that business should keep its nose
out of social affairs and concentrate on maximising returns to
shareholders.
"The only responsibility of companies is to make a
profit," he wrote -- providing thousands of future MBA students with an easy
starting point for essays on the topic of corporate purpose.
This is
one area, I suggest, in which the tide of opinion has surely turned against
him. Recent scandals involving Enron, WorldCom and others have added to the
interest in "business ethics" started in the late 1990s amid growing concern
about environmental degradation and globalisation.
Nonetheless,
Friedman's passion for shareholder primacy remains undiminished. The
fashionable idea that companies should balance the needs of shareholders,
employees, customers, communities and other "stakeholders" strikes him as
wrong-headed.
"The stakeholder notion is a very dangerous notion. It is
a socialist notion. It says that employees are major stakeholders. It is
really a movement towards employee-run enterprises." But what about the claim
that human capital is as important to businesses as financial capital? Surely
employees -- the providers of human capital - should have some say in the way
businesses are run?
His answer is twofold. First, human capital is not
new. The share of wages and earnings in national income has been remarkably
stable through the decades. Second, the best system of corporate governance is
one that provides the best incentives to use capital efficiently. The
self-interest of employees in retaining their jobs will often conflict with
this overriding objective. Besides, shareholders enjoy none of the contractual
protection enjoyed by employees. Thus, they bear the residual risk when a
company fails.
"You want control... in the hands of those who are the
residual recipients because they are the ones with the direct interest in
using the capital of the firm efficiently. How do you like the sand dabs?"
Sand dabs, it turns outs, are a favourite in the Friedman household. Rose's
sand dabs are unmatched even by the North Beach Restaurant.
I ask
whether he has changed his famously sceptical views about European monetary
union. After all, the euro has been around for a couple of years and is, as we
speak, kicking sand in the face of a weak dollar. Surely this suggests that
the European single currency could be a long-term success.
"I've been
wrong so far, so I don't have too much confidence in my view. But I think
within the next 10 to 15 years the eurozone will split apart. The British
government, on balance, should stay out of it." I remark that Friedman the
economist seems less sure of himself these days than his polemicist alter
ego.
After a long pause, he agrees: "You form a philosophy at a certain
stage and for the rest of your life it dominates. On the big issues of policy
I don't think there is anything I've changed my mind
about."
>>>>
Financial Times 6/7 June,
2003
Keith Hudson, 6 Upper Camden Place, Bath, England
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