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Milton Friedman is still as relevant as he ever was

When President Joe Biden said, in one of his many foolish sayings, that “Milton Friedman isn’t running the show any more”, the hubris of that comment was truly on the Greek tragedy scale. Inflation is almost at 10 per cent on an annualised basis in producer price terms in the US. Consumer price inflation is also high. In the UK, inflation runs hot. Yes, disruptions and energy price spikes are big factors, but these are structural – and ultimately, what causes prices to rise overall is because money loses its purchasing power. (See this decade-old video featuring UK-based investment figure and author Detlev Schlichter.)

Across the developed world and beyond, that loss of purchasing power involves a huge shift in resources from savers to borrowers, with the latter being governments in many cases. Finance ministers won’t admit it, but they want inflation to resolve their fiscal incontinence without having to cut spending or raise taxes.

The late Prof. Friedman pointed this sort of process out many times. Yes, I get that not all aspects of the Quantity Theory of Money hold up, and the “Chicago” school has its disagreements with others, such as the “Vienna” one over money, banking, etc. But the broad point seems to hold that if you print government fiat currencies on a massive scale, eventually inflation will bite. President Biden is unfit for the office he holds for a variety of reasons, and his jeering at one of the great minds of the 20th Century is one of them.

Update: Bank of England slightly raised interest rates today.

23 comments to Milton Friedman is still as relevant as he ever was

  • Paul Marks

    Milton Friedman followed Irving Fisher (Yale rather than Chicago – but his ideas eventually took over Chicago) in holding that the money supply should be increased to keep the “price level” stable. This was the policy of New York Federal Reserve Boss Benjamin Strong in the 1920s – and led to the great boom-bust of the late 1920s. The Great Crash and the Great Depression.

    “But if you do not increase the money supply in line with increases in production, prices will gradually decline over time” – yes indeed, and that is O.K. It is certainly much better than creating a vast Credit Bubble and then desperately trying to save the banks and the Corporations (the “magic circle” of politically connected corporations) dependent on the banks.

    Joseph Biden is at the other end of this argument – he holds that the middle-of-the-road Milton Friedman was wrong because he did not support increasing the money supply REGARDLESS of the “price level”.

    This is nothing to do with the senility of Mr Biden – as he always been like this (which is why I got so irritated at people who thought that Mr Biden was a moderate – he was never anything of the kind). Nor, for once, is anything to do with Marxism – as one can read the works of Dr Karl Marx from cover to cover and never find a word in support of endless Credit Money creation and wild government (and wild Corporate) spending.

    People such as Mr Biden grabbed hold of the doctrines of the late Lord Keynes (J.M. Keynes) because it gave them a “scientific” excuse to do what they wanted to do anyway – in crude language “print and spend”.

    Just about the only sincere belief Mr Biden has is his belief in government spending to “help the poor” – it is his THEOLOGY (yes – theology). The only bit of theology that young Joseph (and he was young once) was interested in was the “Social Teaching” – the idea that government can and should “help the people” via lots of spending.

    And if one can not get “enough” money by taxes how is this spending to be financed? By CREATING MONEY – that is how.

    Mr Biden, and people like him (both government and Corporate) are destroying the United States – and such Founders as Roger Sherman, Thomas Jefferson and John Adams would not be surprised. After all this is just what they predicted would happen – if money was no longer a physical commodity (such as gold or silver) and government spending was unlimited.

    Milton Friedman is sort of the middle point – the middle of the road.

    Between “hard money” men such as Roger Sherman or Thomas Jefferson on the one side – and people like Mr Biden at the other extreme.

    The United States Constitution was written to prevent the “Not Worth Continental” inflation that brought down the old Continental Congress – but as Roger Sherman warned during the Convention, the wording of the Constitution was not tight enough. Eventually Credit Bubble bankers (and their friends in government) would find ways to get round the Constitution of the United States – and they have.

  • Paul Marks

    It should be pointed out that Milton Friedman rejected the idea that Benjamin Strong’s policies were wrong – according to Milton Friedman the problem was not sustaining the Credit Bubble after 1929.

    Well – we are now on that road. Unlimited Credit Money expansion to keep the banks, the Corporations, and GOVERNMENT (local, State and Federal) spending, and spending, and spending….

    This also helps to answer the question of why the “capitalist” banks and corporations are so left wing.

    They are not just left wing because of the far left “education” of their managers – they are left wing because they are not really capitalist at all. They do not depend on Real Savings of cash – they depend on endless Credit Money expansion backed by the government.

    They depend on the Cantillon Effect (named after Richard Cantillon – an Irish economist of some three centuries ago) – they are welfare claimants in thousand Pound suits.

    That is modern “capitalism” – which is not really capitalism at all.

  • Paul Marks

    The Governor of Florida has recently proposed legislation to stop Corporations abusing and persecuting their employees – forcing their employees to undergo Frankfurt School Marxist “Critical Race Theory” training, forcing their employees to regard all white people as inherently evil. And forcing their employees to declare that such things as objective truth, logical thought, and objective moral right-and-wrong are examples of “whiteness” to be exterminated.

    Milton Friedman taught that corporations were politically and culturally neutral (how it is possible for any organisation to be culturally neutral he did not explain – but leave that aside) – so why are capitalist corporations behaving in this disgusting way?

    Because they are NOT capitalist. They are dependent on the flow of Credit Money backed by the government.

    Cantillon Effect – backing the ESG, Environment and Social Governance, code of totalitarian collectivism.

    And the ESG system is coming to Britain – indeed it is already here.

    I heard it being referred to (as matter of course) in a discussion of local government pensions – only a few days ago.

    There was always abuse (there was always Credit Money) – but now the abuse is on such as scale, that the entire system is abuse.

    It must go.

  • Nathan

    Keynes’ statements had two parts:
    1) Save in good times.
    2) Spend in bad times.

    If a politician doesn’t follow the first step, they’re not Keynesian. They’re just spendaholic.

  • Alan Peakall

    Another technical heresy is the idea that stability can be secured by a medium term fiscal policy of maintaining a sustainable deficit – defined as one which keeps public debt constant as a share of GDP. Even if true, it is useless as a guide to policy because, in the real world, it is only by aiming for a budget balanced over the medium term that you will do even as well as that – in the same way that you have to point the prow of a rowing boat upstream in order to get to the nearest point on the opposite bank.

  • Shlomo Maistre

    Friedman is over-rated imo. A very good economist? Sure, but like the Beatles not really one of the GOATs even though often thought to be.

    Hayek, Mises, and Bastiat are the real giants of free market thought, in my opinion.

    But Friedman was great more as a popularizer and marketer for the masses.

  • Paul Marks

    Nathan – that is how Keynes is presented, he was NOT like that in real life.

    J.M. Keynes never suggested cutting domestic government spending – that would have violated the central principle of the British establishment since at least the 1870s “Social Reform”.

    As for the unemployment of the period – that was due to due to GOVERNMENT REGULATIOSN, specifically the pro union laws. It is true that the Pound was artificially overvalued by the FAKE “return to the gold standard” of 1925 (the pretence that the Pound was worth as much gold in 1925 as it was worth in 1914 was absurd – even the Dollar WAS NOT, and that got worse as Benjamin Strong kept producing more and more credit money in the late 1920s) – but that was ended in 1931, the “General Theory” of J.M. Keynes came out in 1936.

    The establishment actually knew that labour market regulations (prop union laws) would increase unemploymnent – for example Winston Churchill, in his Liberal Party days, introduced “Labour Exchanges” after the 1906 Act. They did that because they knew the 1906 Act would, like the 1875 Act (the Disraeli Act), increase unemployment. The Labour Exchanges would not change that – but “Social Reform” was sacred. Winston Churchill was (like almost everyone) shocked when the Liberal minister John Morley started to question Social Reform – it would have been like someone in the Middle Ages questioning Christian theology (Social Reform was the religion of the age – and, basically, it still is).

    For on more on unemployment and economics see W.H. Hutt “The Strike Threat System” and Hunter-Lewis “Where Keynes Went Wrong”.

    The government spending more money is NOT going to help – indeed over the long term (“in the long run we are all dead” is a contemptable “reply” by Keynes) it makes things worse.

  • Fraser Orr

    The problem with Biden’s statement is that he thinks that the laws of economics are the same as the laws on taxes, or the laws on gun control. Congress cannot change the laws of economics.

  • Paul Marks

    Failing to grasp just how much HARM government spending does sees to have been a common failing of British economics – going all the way back to Adam Smith (as far as I know there is no British version of J.B. Say and the other French Liberal economists – in their attack on government spending).

    By the time of Keynes such economists as Pigou (presented as a supporter of Laissez Faire in Keynes’s “General Theory” – Keynes was not actually lying, it was an “in joke” as people knew what Pigou was really like) actually held that people who opposed a “necessary” level of government spending should not be allowed to argue against it. It should be remembered that many of the British establishment (even then) were utilitarians – i.e. they did not believe there were any basic rights AGAINST the state, such things as Freedom of Speech would only be allowed of they were of use, and the Cambridge elite was to decide what was of use. The infamous introduction to the German edition of Keynes’ 1936 “General Theory” springs to mind.

    Rather like the Guardians of Plato – who they so admired.

    By the way – on Oxford (having hit Cambridge).

    P.E. Moore visited Oxford (from the United States – to see T.S. Eliot) in the 1930s and argued that the place was already lost to liberty – that was a bit unfair as I can think of people teaching in Oxford, in various subjectgs, in the 1930s who were pro liberty.

  • Paul Marks

    After the war Keynes famously replied to Hayek’s “The Road To Serfdom” by saying it was true about bad people – but good people could be trusted with such power.

    This reply might seem to be so absurd that it must have been a joke – but it was not a joke. It was a reply perfectly in line with the philosophy taught at the time.

    This is why, for example, Bertrand Russell (a totalitarian collectivist) could call himself a “liberal” or even a “Whig” – as these terms had just come to mean “good person”, they no longer meant standing for private property as a limitation on state power.

    A collectivist regime with Bertrand Russell in charge would be totally different from a collectivist regime with Adolf Hitler or “Lenin” in charge – as Bertrand Russell was a good person.

    They really thought like that – they were that sickening.

    Plato types – Apostles Club. And (in the case of Keynes and others) – Bloomsbury Set.

  • Martin

    Shlomo Maistre – I agree. Friedman, especially as he was allowed to host a TV series like Free to Choose had a big impact as a popular intellectual.

    That said I do wonder if many people become free marketeers, libertarians, etc by reading Friedman anymore? Following the banking crash and era of quantitative easing it has become apparent to a wider audience that at least when it came to banking and money the Chicago school were very statist.

    The views Paul mentions that Friedman had about corporations seem naive even for the time he said them (Not quite as ridiculous as Ayn Rand claiming big business was a persecuted minority mind you). In the age of woke capitalism they look preposterous.

    Although books like Free to Choose are widely available still, unless I’m just simply unaware there doesn’t appear to be an equivalent to the Mises Institute that distributes/promotes Friedman’s works cheaply and/or for free to a popular audience. If I was wanting an introduction to a free market economics school of thought, you can easily get Mises, Rothbard, Hayek etc for pennies if not free via the MI. There’s plenty of positions Rothbard held I don’t agree with and I aren’t an anarcho-capitalist or anything like that. However Rothbard is a very accessible economics writer, wrote prolifically, and in this populist era of Trump Rothbard seems just more relevant than Friedman!

  • James Strong

    ‘but like the Beatles not really one of the GOATs even though often thought to be’

    That’s certainly an ‘interesting’ opinion.

    Any thoughts about Gareth Edwards, Katherine Hepburn, Daley Thompson, William Shakespeare?

  • Shlomo Maistre

    Any thoughts about Gareth Edwards, Katherine Hepburn, Daley Thompson, William Shakespeare?


    I will add, though, that I do not really think highly of the judgement of anyone who considers the Beatles to be the greatest Rock band of all time.

    Such people generally acquire this opinion through a cultural osmosis much as the leaf-tailed gecko camouflages in its surroundings. Sad!!

  • Shlomo Maistre

    Martin – yes, I agree, good points.

    Rothbard and Schumpeter deserve honorable mentions, but personally my top 3 could not be more clear: Mises, Bastiat, and Hayek are the real giants upon whose shoulders we all stand.

  • Shlomo Maistre

    Milton Friedman is sort of the middle point – the middle of the road.

    Between “hard money” men such as Roger Sherman or Thomas Jefferson on the one side – and people like Mr Biden at the other extreme.

    Paul Marks is absolutely correct here.

    I will expand on his point with my own view.

    Milton Friedman is of the Chicago School.

    Keynesian Economics is basically Corporatism. Austrian Economics is real free market economics.

    The Chicago School is basically right in between. The Chicago School is basically a hybrid of some sound free market ideas with some harmful Corporatist ideas.

    The Chicago School is an amalgamation of sound free market principles (private property, free markets in all except money, freedom of contract) with harmful Keynesian corporatism (free printing press money, artificially low interest rates, expanding money supply). As harmful as pure and unadulterated Keynesianism? No.

    The connection that we need to make is about what the Chicago School really is POLITICALLY.

    What the Chicago School is from a political perspective is basically the “most-free-market” sort of economics acceptable to and tolerated by the Establishment central bankers, corporations, lobbyists, Federal Reserve, university system, Fake News Media, and Wall Street.

    Austrian Economics is not tolerated by the Establishment.

    Because Austrian Economics would protect the Middle Class Private Sector Workers from the theft that has robbed them of their livelihoods over many decades. That theft is a little thing called inflation – something Milton Friedman went along with enough to be accepted by academia, media, and the central bankers.

    This is what Milton Friedman (and the whole Chicago School) is politically: a compromise. Mixing orange juice and sewage produces sewage but with enough orange juice people come to believe that there is a fundamental difference. The difference is a matter of degree, not of kind. The money printing of the 1920s that Milton Friedman supported led to the Great Depression, as Paul said.

  • Shlomo Maistre

    The Chicago School is simply a political compromise between on the one hand truth (Austrian Economics) and on the other hand power (Keynesians, Corporations, Lobbyists, Wall Street).

    Martin points out that Friedman: “he was allowed to host a TV series like Free to Choose had a big impact as a popular intellectual”. Allowed to host is exactly the right way to phrase it.


    Friedman was allowed to host a TV series by the Keynesians, Corporations, Lobbyists, Wall Street, and University System. They all propped Friedman up as one of the main faces of intellectual dissent (even though he did not speak against the fundamentals of Keynesianism) while people like Israel Kirzner (people who actually disagreed withe the FUNDAMENTALS of Keynesian Corporatism) got very little mainstream press or attention.

  • Shlomo Maistre

    On second thought, I was in certain ways wrong to say that Friedman was a very good economist.

    Yes in some ways he was, but…. it’s complicated.

    I cannot help but think that celebrating Friedman may do the cause of human liberty more harm than good – at least at this time. The fact is that there is an opportunity cost of celebrating any economist’s work – that is the cost of not celebrating another’s. People have very limited time and energy, especially to devote to these kinds of things.

    The enemies of liberty have long propped up Friedman and were happy to spread his message through their airwaves, mainstream press, and university halls. There were many smart reasons why they did so. They were smart not to prop up or help to spread the message of Israel Kirzner, for example.

    Obviously Friedman supported many good things, but he also supported many bad things – and the bad things he supported is the primary means by which the Middle Class is being robbed of their wealth across the western world today.

    And at this time is what we need a compromise like Friedman?

    At this time of extraordinary inflation theft? At this time as the Corporations, Lobbyists, and Central Bankers are stripping the Middle Class of their livelihoods? At this time as the Wall Street and the Billionaire Class obtain extraordinary wealth largely driven by free money printing of the Federal Reserve and exceptionally low artificial interest rates?

    At this time, I think we need Rothbard, Mises, Kirzner, Bastiat, and Hayek.

    There is no more middle ground.

    Friedman defended free markets of all kinds except for one. He refused to defend free market in money and lending and it’s the absence of this monetary free market that is not only stripping the Middle Class of its livelihoods but driving wealth inequality to extraordinarily massive levels. And that very wealth inequality is being used daily to drum up more support for even more socialism, corporatism, Keynesianism, and collectivism.

    The one type of free market that Friedman did not defend is the market in money and lending. And the absence of a free market in money and lending is what is enabling Wall Street, Lobbyists, Corporations, and Central Bankers to rob Middle Class Workers of their wealth and livelihoods.

    Is it much of a stretch to say that celebrating Milton Friedman is digging a grave for human liberty?

    I’m not sure.

    But I am sure that celebrating the work of Mises, Rothbard, Bastiat, Kirzner, and Hayek would be time better spent.

  • Paul Marks

    Shlomo Maistre has well summed up the political difference (difference in how they are treated) between the Chicago and Austrian Schools of economics.

    The only thing I would add is that Milton Friedman is NOT “propped up” or “spread” by the establishment now – they have moved, and moved in a horrible way.

    For example, today the Economist magazine (the widow into the heart of Corporatism) described legalising home schooling as one of the “eccentric goals” of the President of Brazil.

    Legalising home schooling an “eccentric goal”??????

    And in the same magazine, the insane economic policies of the socialist candidate for President of Chile were described as follows….

    “economists fear that such policies would harm economic growth” – well economic collapse and starvation would indeed “harm economic growth”, but that is a rather mild way of putting it.

    “Free market” publications such as the Economist magazine are very much part of the problem, not the solution.

    Newsweek magazine forced out Milton Friedman whilst he was still alive (and Milton Friedman had replaced the BETTER ECONOMIST Henry Hazlitt at Newsweek), these days the Economist magazine would not tolerate Milton Friedman.

    The establishment have changed over the years – they have got WORSE. Much worse.

  • Shlomo Maistre

    Ah, yes I forgot about Henry Hazlitt!! A terrific economist, way under-appreciated.

    I was not clear about the propping up of Friedman and the spreading of Friedman’s message done by the Establishment being generally a thing of the past. I agree that it is not really being done these days much at all. Not much benefit anymore. With the internet any smart young boy can go to the Mises Institute website and find out what real free market economics is, anyway. Propping up the half-way fake version of free markets in Friedman was mainly beneficial as a way of keeping the true free marketeers like Mises and Kirzner as small in the public consciousness as possible.

    This may be one reason for the far lurch to the Left from the Democrats. With the internet the cat is out of the bag. So they are forced to play for all the marbles – and quickly.

  • Paul Marks

    Yes Shlomo Maistre.

    Newsweek went from allowing Henry Hazlitt (who was also allowed to write for the New York Times in the 1930s – the NYT actually allowed a dissenter to appear on their pages) to write a column (dissenting from the establishment line) – to Milton Friedman (much more “moderate” – less far away from the establishment line).

    Now Newsweek, and the rest, would not allow someone like Milton Friedman to work for them at all – other than to clean the toilets.

    This is how things have changed over time – how they have got worse and worse.

    Now they will not tolerate dissenters at all – we both know what the next step will be. They will move from not wanting to see or hear from us – to wanting to remove us from this world.

    The logical conclusion of “cancel culture”

  • William H. Stoddard

    Shlomo: I don’t feel satisfied with your list, because it omits Jean-Baptiste Say, the economist who pointed out that the only real demand for any product is the supply of other products. (Which Keynes misstated as “supply creates its own demand,” taking in generations of conventional economists who never asked themselves how anyone could have believed something so stupid.) That’s an obvious truth in a barter economy; in a money-based economy it’s still true, but it’s possible to have the illusion that providing more money will increase demand—until, as Kipling wrote, “Though there was plenty of money, there was nothing our money could buy; And the Gods of the Copybook Headings said, “If you don’t work you die.””

  • Paul Marks

    William H. Stoddard.

    J.B. Say, and other French “Liberal School” economists, also grasped that government spending does HARM.

    This is a vitally important fact that British economists, even in the 19th century, seem not to have understood.

    Whether the government spending is financed by taxing, borrowing, or creating money (from nothing), the spending does HARM over time. Economic and social (cultural) HARM.

  • Paul Marks

    One comparison that is made is between New York, which has the highest government spending relative to its economy, and South Dakota – which has the lowest government spending relative to its economy. But a more direct comparison can be made – INSIDE South Dakota.

    The Indian Reservations, such as Pine Ridge, in South Dakota are essentially socialist – the land is communally owned (by Tribal Councils) and the economy of the reservations is dominated by government spending – providing benefits and “free” services (covering health and just about everything else).

    One does not have to go to North Korea or Cuba to observe socialism in practice – just visit Pine Ridge.

    Look at the economy – and look what the collectivism has done, over time, to the society (to the culture).

    By the way…..

    It is now horribly clear that the international establishment (United Nations, World Economic Forum, World Health Organisation….. and on and on) want to make the whole world one vast reservation.

    Collective control of land, government benefits and free services dominating the economy, and every aspect of life controlled by endless edicts.