Informed Speculation

How influential was Milton Friedman? Lawrence Summers, former Harvard head honcho and Treasury Secretary during the Clinton Administration, tells us how influential:

IF John Maynard Keynes was the most influential economist of the first half of the 20th century, then Milton Friedman was the most influential economist of the second half.

Not so long ago, we were all Keynesians. (“I am a Keynesian,” Richard Nixon famously said in 1971.) Equally, any honest Democrat will admit that we are now all Friedmanites. Mr. Friedman, who died last week at 94, never held elected office but he has had more influence on economic policy as it is practiced around the world today than any other modern figure.

I grew up in a family of progressive economists, and Milton Friedman was a devil figure. But over time, as I studied economics myself and as the world evolved, I came to have grudging respect and then great admiration for him and for his ideas. No contemporary economist anywhere on the political spectrum combined Mr. Friedman’s commitment to clarity of thought and argument, to scientifically examining evidence and to identifying policies that will make societies function better.

That’s high praise indeed; high enough, in fact, that I forgive Summers (not that he’s asking) for his defense of ‘progressive’ economic policies:

Milton Friedman and I probably never voted the same way in any election. To my mind, his thinking gave too little weight to considerations of social justice and was far too cynical about the capacity of collective action to make people better off. I believe that some of the great challenges we face today, like rising inequality and global climate change, require that the free market be tempered instead of venerated. And like any economist, I have my list of areas where I believe Mr. Friedman oversimplified or was simply wrong.

Anyone can be wrong, of course, even Friedman…but I find it instructive that every time I hear Summers talk about how ‘progressive’ policies can improve on market outcomes, he never offers any good examples (he did offer one lame example that has been irrelevant for 50 years).

Our biggest challenge on the economic front over the next two years, at a minimum, will be to try to head off this new economic populism at the pass.  It’s probably too late to do anything about the minimum wage hike, but we have to be prepared to fight, hard, to stall the protectionist slant that many of the newly elected Democrats will be bringing to the next Congress. 

It’s not as urgent as our foreign policy challenges (what could be more urgent than the prospect of nuclear terrorism?), but it’s extremely important.  If protectionism takes root, and foreign capital flees, our economy will face the prospect of a severe, prolonged depression…