It should be no surprise to most here that I’m a strident fan of Milton Friedman and that his passing was quite a bit more than a garden variety celeb obit for me. While I’m a geek of rather high proportions, there are quite a few of us for whom the loss left an almost personal hollowness. 
“The current danger is that India will stretch into centuries what took other countries only decades” – Milton Friedman, 1963Because he called San Francisco home, I actually had the honor of seeing Uncle Milt speak in person about 2 years ago at a benefit gala for a thinktank I’m a contributor to.
And earlier this spring, I had another opportunity to see Milton & Rose Friedman in person at the unveiling of a PBS documentary on his life and times. At the time, I implored several friends to join me with the argument that “at 94, homey ain’t gonna be around too much longer – see him while you can.” Unfortunately, a bout of flu kept Friedman from joining us that evening (Rose did, however make it) and alas, my words were sadly prophetic.
Interestingly, at that event, Gary Becker was on tap for Milton & Rose’s intro. In nearly any other context, Becker’s own Nobel Prize would have garnered him a headline act. But given Friedman’s ginormous stature, Becker’s intro speech was instead somewhat rudely met with idle chatter from the back of the banquet hall. You’d think scoring a Nobel prize would earn a little more respect – apparently not so when you’re between an audience and the Friedman’s.
‘Tis the curse of the passage of a generation that we take for granted previous, hard fought accomplishments – both material and intellectual. In its extreme, we just assume that he world we see around us had to be rather than recgonize the role of volition, creativity, and intellectual accomplishment which enabled it to be.
In Friedman, India, and recent economic history, we see all this wrapped up in a neat tidy little package. So much that seems obvious now was contrarian then. And so many of the arguments we use to excuse and ignore the outcome of disastrous policy was plainly predicted and evident decades ago.
For the SM crew, one of the most striking and relevant pieces of Friedman’s massive body of work was an article written in 1963 after a series of official and not-so-official trips to India to gauge its economic climate [Friedman’s essay on India in 1963.pdf (66 KB) – thanks for the doc Prashant!]. The treatise is classic Friedman – simple, direct language that is both approachable by non-economists and simultaneously sophisticated & rigorous enough for the most seasoned policy makers. It’s ominous thesis, written all those years ago, is proof of the power of a few percentage points of compounded growth and a real world forecast of economic crisis –“India lacks none of the basic requisites for economic growth … comparable to that which occurred in Japan after the Meiji restoration” – Uncle Milt
Even at the officially estimated 1 1/2 percent per year growth in per capita output, it would take over a century of steady growth at that rate for India to reach the current level of per capita income in Japan, and well over three centuries to reach the current level of per capita income in the United States. The current danger is that India will stretch into centuries what took other countries decades.
Count Friedman as one of the fiercest opponents of the so-called Hindu Rate of Growth. In describing his hopes and dreams for the teeming throngs of Desi’s, Friedman had high expectations and decidedly first world aspirations for the subcontinent –
I am myself still persuaded, as I was in 1955, that India lacks none of the basic requisites for economic growth except a proper economic policy. I believe that drastic, but technically feasible, changes in economic policy-the substitution of a freely floating exchange rate for the present fixed rate and elimination of the exchange controls, import restrictions, and export subsidies designed to prop up the present rate; and a similar policy of substituting the free market for direct controls in the domestic economic scene-could release an enormous reservoir of energy and drive and produce a dramatic acceleration of economic growth in India comparable to that which occurred in Japan after the Meiji restoration.
The great untapped resource of technical and scientific knowledge available to India for the taking is the economic equivalent of the untapped continent available to the United States 150 years ago. – Friedman, 1955
The problem connecting this potential with reality, of course, was a disastrous intellectual climate which drove equally disastrous economic policy –
When India attained its independence, it was strongly socialist in its orientation, its intellectual atmosphere having been shaped largely by Harold Laski of the London School of Economics and his fellow Fabians. In the initial decade after independence, a series of left-wing advisers, including Oskar Lange and Michael Kalecki from Poland, and Nicholas Kaldorand John Strachey from Britain, visited India.
…The intellectual climate of opinion about economic policy is almost wholly adverse to any changes in the direction that seems to me required.There is a deadening uniformity of opinion in India, particularly among economists, about issues of economic policy. In talks to and with students and teachers of economics at a number of universities, personnel of the planning commission, economists in the civil service, financial journalists, and businessmen, I encountered again and again the same stereotyped responses expressed often in precisely the same words. It was as if they were repeating a catechism, learned by rote, and believed in as a matter of faith. And this was equally so when the responses were patently contradicted by empirical evidence as when they were supported by the evidence or at least not contradicted.
The remainder of his article is a series of examples of just how much entrepreneural energy was waiting to be unleashed and just how badly it was being held back by an intelligentsia obsessed with top down economic planning. For example, the following bit demonstrates the utter impotence of external policy tools like aid and directed investment in truly influencing growth rates –
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Pacific Research Institute – Sept 2004: My glimpse of Milton & Rose Friedman in Real Life |
…the years after independence saw a great inflow of resources from abroad. External assistance during the decade spanning the first two Five Year Plans averaged about 11/2 per cent of national income, which means that it provided something like a fifth of net investment; and external assistance was disproportionately concentrated in the Second Five Year Plan period, when it amounted to about 2 1/2 per cent of national income or to over a fourth of net investment. On that score alone, growth should have accelerated during the Second Five Year Plan rather than apparently slowing down a bit.
Got that? It takes a serious economic basket case to take in twice as much money as last time around and convert it into roughly half the growth. Usually this sort of calculus is the domain of “diminishing marginal returns” for cutting edge development, not the deep “come from behind” that characterized India of the era. Or how about here, where Milton describes a supply chain disaster of Randian proportions –
Some of the entrepreneurs at Ludhiana estimated that an eighth to a quarter of their working time was being spent on either getting allocations or finding ways to acquire the materials they needed by more devious channels.
Presumably, the people’s representatives in charge of these “allocations” were there to ensure that higher, social justice needs were being met as material was directed towards the benefit of the broader community of stakeholders. At the minimum they were needed to protect India’s rich body of social tradition in the face of rapacious, Western capitalism. Or something like that. At least at first. Blech.
Reading the article it’s impressive to observe Friedman’s knowledge of and respect for the texture of India, the role of the diaspora & how it could shape it’s unique growth path forward. Here are a few excerpts from the nearly dozen snippets in the PDF –
The hope for India lies not in the exceptional Tatas or similar giants, but precisely in the hole-in-the-wall firms, in the small- and medium-size enterprisesWhat is the reason for the disappointingly slow rate of growth? One frequently heard explanation is that it reflects the social institutions of India, the nature of the Indian people, the climatic conditions in which they live. Religious taboos, the caste system, a fatalistic philosophy are said to imprison the society in a strait jacket of custom and tradition….These factors may have some relevance in explaining the present low level of income in India, but I believe they have almost none in explaining the low rate of growth.…[Post-Partition,] The Punjabis have doubled the average agricultural yield in the area in which they resettled, and have besides been among the most enterprising, active, and dynamic business groups in India. The Bengali have had great difficulties in resettling, many of them are still in government resettlement camps some 15 years after partition, and they have been a drain on the country rather than a source of growth.
…One reason why westerners so often feel that enterprise and entrepreneurial capacity is lacking in India is because they look at India with expectations derived from the advanced countries of the West. They think in terms of the large, modern corporations, of General Motors, General Electric, and other industrial giants. But it was not firms like this that produced the Industrial revolution; they are, if anything, its end products. The hope for India lies not in the exceptional Tatas or similar giants, but precisely in the hole-in-the-wall firms, in the small- and medium-size enterprises, in Ludhiana, not Jamshedpur; in the millions of small entrepreneurs who line the streets of every city with their sometimes minuscule shops and workshops.
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Moreso than his Nobel-prize winning papers, “Capitalism And Freedom” is widely considered Friedman’s Magnum Opus |
The Achilles heel of the Indian economy at the moment is the artificial and unrealistic exchange rate… It will, I fear, take a major political or economic crisis to produce a substantial change in the course on which India is now set in economic policy, and I am not at all optimistic that such a crisis if it occurs, will produce a shift toward greater freedom rather than toward greater authoritarianism.
For privileged folks today, it’s actually sorta hard to envision just how real the forces of authoritarianism were back in the day. Just imagine if India’s currency crisis had hit, not in 1991 but instead a decade prior — before the fall of the Berlin Wall & with it, much of the Soviet intellectual ediface. The answer to the crisis could have just as easily been more government to save us rather than less… For contemporaries of Friedman’s work, memories of the role of economic crises leading to Nazi Germany, the Soviet Union, Red China, and to a lesser extent authoritarian Chile, Argentina, Bolivia, and so on burned fresh.
Thankfully, history rolled a different way and Uncle Milt was able to watch, approvingly, as the economic reforms of ’91 were enacted. In a new forward written in 2000 he had the following to say –
I have been in India only once since our 1963 trip. That was in 1979 when we filmed briefly in India in connection with our television programme ‘Free to Choose’. Nevertheless, I have tried to follow from a distance the economic developments within India. I continue to be impressed by India’s enormous potential and depressed by the contrast between that potential and the minimal progress that has been achieved in the forty-five years since I was first in India. The latest decade shows more signs of change. India may finally be on the way to realizing its potential. If so, it will be a blessing for the people of India and for the world as a whole.
I leave you with the following video that’s been widely circulated on the blogosphere since Uncle Milt’s death. Depending on your proclivities, it either has everything or nothing to do with India. Either way, it’s a highly entertaining and educational experience & a tribute to a man of great ideas –
Yes! that’s what India needs badly. Freedom of expression. Stop banning books and movies for reasons of sensitivity.
Vinay– Sorry, I think I didn’t clarify what I was saying. I agree that the further you go along in reducing infant mortality, the harder it gets–that’s logical. (and to those who doubt my knowledge of economics, I am aware of the law of diminishing returns) I just don’t think you can quantify the effort it takes. I concede that the point I was trying to make with the infant mortality figures was flawed, but I do not concede your point that the opposite is true.
Quizman, I think the main point of HM, condescending or not, is quite pertinent, and his frustration is quite understandable.
It is important to have a grasp of facts, and the analyses, and the ideas, before one comments on public policy that affects millions.
In these matters, dialectic can only go so far; I mostly subscribe to Schopenhauer’s view of dialectic seeking not truth but affirmation. As such, unlike Plato who viewed it on par with logic (analysis) he viewed it as largely irrelevant to truth, and on par with sophistry.
A nominal look at the many blog discussions involving economics corroborate this.
About 3/4 of a percent of Indians are moving above the World Bank’s absolute poverty standard. About 29% of Indians live in absolute poverty.
56% of Indian children suffer from chronic malnourishment (in comparison to 10% of China).
There is very uneven development: Punjab and Harayana have absolute poverty rates comparable to Turkey and Mexico respectively.
Kerala has several indicators at first world levels.
But the caste-ridden Hindi belt is one of the most impoverished places on the planet.
The South is generally doing better than the North.
If the disparities between regions increases, will the more prosperous resent a siphoning of their hard won resources to the lagging states?
No, I am just applying a basic principle of Economics. Basically, in most large-scale systems, marginal costs tend to increase while marginal benefits tend to reduce. Most non-economists have difficulty understanding this concept of marginal economics, but it’s really quite simple : it’s easy to get low hanging fruits while subsequent benefits require more efforts and higher productivity.
Intuitively you can understand it in this particular situaiton by analyzing what the root causes of infant mortality are and what it takes to address them. Clearly, the final target is 0 as you can’t go below a rate of zero. The gains in infant mortality are coming from factors such as: – Conquering higher cost diseases – Paretns becoming more knowledgeable – Parents being able to afford treatment
Don’t want to go off-topic too much, but you can see the effect of the principle in each of the cases. For example, say for the sake of argument that in 1970’s all infant mortality was accounted for due to dying from smallpox, polio and thelessamia (sp?), consider what will happen in 1990s. Since polio and smallpox have been practically eradicated by the 90’s, you can see that from 1990’s onwards any further reduction in infant mortality can only come from conquering harder-and-costlier to cure diseases like thelassamia. Similar reasoning can be applied to other causes of infant mortality as well. For example, those sections of the population that see reduced infant mortality due to increased income do not tend to relapse into higher infant mortality, so the next reduction of infant mortality that can be attributed to income increase hast to, perforce, come from people who are even poorere, less skilled, living in more remote areas etc – which is more expensive to do compared to the previous lot.
This was a large factor behind the unrest in Punjab in the 80’s.
This was a large factor behind the unrest in Punjab in the 80’s.
Punjab is now slowly picking up within the framework of global economy. Chandigarh is the 4th top most BPO city after Bangalore, Delhi, and Hyderabad.
However, I think Punjab almost missed the train, even though it had “westernized” cities like Chandigarh, and close proximity to Delhi.
One has to give full credit to AP and Karnataka to be spear heading the changes in India.
desitude: Fantastic question. Gurcharan Das opines: I am going to suggest we begin by imagining a map of India. I don’t know how many of you can picture a map of India. It’s basically an upside-down triangle. You connect the north city of Kanpur with Chennai, which is Madras, and one of the theses of my book is that 50 percent of the people west of that line will turn middleclass by 2020. And it will take another 20 years before the same thing will happen east of the line.
The effect of that? I believe you will see the equivalent of Mexifornia in ‘developed’ states in India. i.e. large scale migration. Also as someone pointed out, the migration of Biharis to Punjab and the diversion of wealth from there to other states nearby was one of the causes of unrest.
It’ll be hard to separate “chance spearheading” from “visionary spearheading” by AP and Karnataka though. Individual states don’t have power and incentives to attract business and industry, I am indicating towards more centralist system of government in India.
Does anyone know if each state has its own personal income tax in addition to the fedral income tax in India?
Quizman, Major migration into punjab was post unrest, diversion of resources from punjab that Amitabh mentioned was presumably done by the government.
Point of your comment is probably still valid
Does anyone know if each state has its own personal income tax in addition to the fedral income tax in India?
Through sales and utility taxes in various states for India, like in Texas in USA. Even though sales tax in India is pretty dicey.
If you looked @ The Economist in 1999-2000, there would be full page ads by Karnataka and AP Government for BPO work. Y2K work spread a good word about Bangalore through word of mouth.
I realize this is a simplified hypothetical, but the eradication of smallpox took large-scale, expensive, governmental and international intervention. It was not a low-cost solution. My point is that you can’t quantify the effort that goes into reducing each contributor to infant mortality unless you actually have the figures to prove it. Unless you can provide the numbers for how much the government spent on reducing infant mortality per contributing factor, you can’t see where you are on the curve.
(I am familiar with the law of diminishing returns and I would argue that it’s intuitive even to a non-economist)
In a free market economy, the harder-to-eradicate and rarer diseases might never be cured because there would be no financial incentive to develop cures. It’s interesting that you mention thalassemia because drugs that treat this disease have “orphan drug” status.
One final point–polio has not been eradicated. The number of polio cases in India has increased 10 fold since last year.
One final point–polio has not been eradicated. The number of polio cases in India has increased 10 fold since last year.
That is very hot button issue about resurgence of polio in India.
It is mostly confined to certain states in India, and certain communities i.e. link to poverty.
Right now, Maulvis (Islamic clergies) go door to door with health workers to convince parents for immunization. There is rumor in rural parts of northen India that polio vaccination is a grand scheme by GOI to make Muslim people sterile.
Please do google, there hazaar (thousand) articles on it.
There already is a resentment to that affect. 1. The southern cities are getting flooded by northerners looking for opportunities leading to growing resentment among the local population. 2. The parliament is representative and ends up giving more seats to regions having population explosions (read UP and Bihar) 3. Productive states are having to support non-productive states. This also holds for urban vs. rural areas.
I’m pretty sure the South resents the North for this very reason. Its getting very difficult to reconcile an increasing progressive, economically vibrant South with the Cow Belt.
If anything, this makes my argument even stronger : the market era not only produced the same %age results in the face of increasingly harder marginal benefits, but it also did it with presumably less intervention by the government which would’ve used state power and resources. Ergo, the market era was a lot more productive in solving the problem : it accomplished the results with less power and resources and solved harder problems.
I thought you just said that the law of diminishing returns is intuitively obvious. I am not defending my thesis against you, but just pointing out an obvious flaw in your logic. It chafes me because this is the kind of arguments that I have to deal with day in and day out with people who are blinded by socialist nonsense. If anything, the burden of proof is on you to show why something that is based on soun dprinciples and is intuitively obvious would not stand up to quant scrutiny.
Again, as HM suggested in #91, please educate yourself. Read Friedman – he’s the guy advocating school vouchers, for example. I am not a market fundamentalist and neither was Friedman. WE are all familiar with examples of market failure. The Friedman solution, just as in the case of school vouchers, is to boost individuals’ purchasing power to access such products and services. If you saw the video interview, he agrees with the do-gooders’ objectives as we all live in a compassionate society and we all want to help our less fortunate brethren. He (and I) are only fighting against the idiotic policy solutions that are thrown at us by the statists.
Think about it : the real problem is that a poor parent cannot access good education or rare drug for their child. What’s the solution thrown by statists? A monopoloised system of public schools ruled by unions that inflict incompetent teachers on the very same poor parents. Why? Because that creates a supportive constituency for the statists. AS GB Shaw observed wryly, a government that robs Peter to pay Paul can always count upon the support of Paul.
According to Friedman, this is morally bankrupt. Basing his solutions on the premise of freedom to choose, Friedman would much rather support a system in which the state was out of the education market, but poor parents will get vouchers so that they can access the best possible educaiton for their children. There is no reason why this cannot work in other similar cases. The results of voucher systems have been uniformly successful and the biggest supporters of voucher systems are poor black parents wherever they have been implemented. See Illionois, for example.
Increasing indivdiual’s freedom to choose by boosting their purchasing power to access essential products and services vs. making them dependent upon the incompetent and the inefficient sucking at mama government’s teats that perpetuate the statists’ power – you decide what is more right.
No, actually, the problem is that drug companies would not create the drugs to cure rare diseases if governments did not create incentives for them to do, which would not happen in a free market economy. I didn’t make this up–the orphan drugs example is often used as an argument against free market economics. Giving parents vouchers wouldn’t help if the drugs just didn’t exist.
It’s ironic that you’re quoting Shaw, an ardent socialist.
Sigh : you are assuming that the non-existence of drugs is, a priori, a non-changeable fait accompli in perpetuity. Let me spell it out : giving the parents sufficient purchasing power creates a market for these drugs and hence the financial incentive for drug producers.
Cheap ad hominieum shot, but hey, I am willing to be educated from anyone’s wisdom regardless of what ideology they subscribe to – are you?
Gujjubhai, I don’t think the debate is about a choice between statist economies a la the license raj or the Soviet model and a ‘market’ economy. It is about the role of the state and what and how much should it do. Given the current economic conditions in India, there is quite a bit where the state has a role to play. The long term growth that is required to raise purchasing power will still leave a lot of people suffering in the interim, that is presuming we can achieve the levels of prosperity required. In the case of healthcare, for example, there are quite a few states that heavily subsidise it (by taxing the relatively wealthy of course). India’s experience was completely different because the state did not have the revenue (and perhaps the will) to look after healthcare, busy as it was selling insurance, banking services and what not. I’m not saying that’s the only model that would work, but there are plenty of examples where it does.
Economist Atanu Dey has some interesting points on Milton Friedman, and the original memo by MF to GOI in 1955
Absolutely as little as possible. Never ever allow the state to be involved in production of anything or controlling the operation of a free market through mechaisms like quota allocations etc. Zero discretionary power for politicans and bureaucrats.
The only legitimate role for the state, as Friedman points out, is to protect individual freedoms and ensuring the operation of a free market system. This will include stuff like anti-competition and monopoly prevention, regulation of markets through agencies such as the SEC and CFTC to ensure a level-playing field etc. Fire the Goddamn Planning Commission in India, for f’ sake. Any compassionate helping of the less fortunate must be done by directly assisted, targeted increase in their purchasing power.
Oh yes, BTW, HM brother: I feel your pain, Macaca. I get tired and irritated explaining basic economic principles to people who hold grand, sweeping views on social policy without any understanding of the underlying economics. Unfortunately, that pretty well describes 90% of the population and their votes ultimately endorse the brain-dead policies that we live under. As I learnt more and more econs, I was gripped with intense sadness and depression about the state of the Indian society and everything that was going on. In the history of this planet, never has there been such a colossal waste of human talent and inflicting of needless suffering. We have outdone ourselves in achieving the highest possible levels of misery. The tragedy is that this was all done by just a few idiots like Nehru and Mahalanobis – if the levers of power in India were held by the likes of Patel, Shenoy and Minoo Masani, then we would’ve charted a spectacular course in history. That is why I personally consider Nehru to be the worst perpetrator of crimes against humanity in history.
Don’t mean to threadjack – I will not be debating this post anymore. Over and out. You all Macacas and Macacinis have fun and please read economics.
I too am done with this conversation. Despite being accused of the above, I’ll rest easy knowing that I’m in good company.
I won’t be taking the theories of a man who says things like “I have often said that the most anti-negro law on the books of this land is the minimum wage rate [This is from the video link above]” too seriously, unfortunately places like the WB, IMF etc.. have taken this seriiously. Of course, maybe I am undereducated on the topic of economics – but there is a problem when someone fails to address existing SOCIAL IMBALANCES and perpetuates wide-sweeping generalizations to try apply them to economics. I am very surprised that no one (this being a desi blog) has even mentioned Amartya Sen (also a Nobel winner) and his works. His work kinda pulls apart “CONSERVATIVE” economics and the dominant free market views of the developing world.
Things like existing racial/gender/social/caste/colonial imbalances, from what I know, are grossly overlooked in Friedman’s work, and as we now know – these things play a huge part in development, especially that of the developing and social world.
Come on, you don’t believe a Fundamentalist Christian who says things like “We’re all born sinners and have to rid ourselves of sing”, yet people believed Friedman when he says things along similar lines even in the link above. Sweeping generalizations and unsubstantiated ‘facts’ aren’t ‘facts’… they’re misguided ‘principles’ based on a faulty belief system, and Friedman’s doing the same albeit for different reasons.
Al beruni (#95):
(italics mine)
AND
amaun (#69)
The reason I have been appealing for more rigour in the comments on this post is because what the Friedman enthusiasts have been saying here can be mistaken by the “less government is better” brigade as encouragement of their culture/region-specific viewpoint. While “big government” is bad, a country like India still doesn’t have as big a government as is required to provide governance. In that sense, I have to grant Al beruni his point about socialist planning needlessly taking government where it should not go. But more on that below. Now, I want to point out that when I disputed Anindo’s anecdote, this: “The government determined whether you had legitimate reasons/background to buy a scooter,” was a large part of what I was disputing — hence my raising the issue of telephones. Whether or not scooters took 3 months, or 1 year, to deliver is besides thepoint. Amaun please note: my lower-middle-class family got possession of its first scooter in 3 months… so talking about scooters etc. is not going to edify this conversation. However, I do not wish that statements like the italicised one above (which is nonsense) get a free pass; statements like these are exactly the sorts of caricatures that people like Grover Norquist use to discredit the idea of government per se.
As to my views about the size of government. India and its problems are too complex to be resolved by the libertarian “less government is better” mantra. A good case in point is the story of the rise of dairy cooperatives in India. This is why, Al beruni, I wish to object to your characterization of “Mother Dairy” as an example of where the government should not go. A quick reading of the circle of ideas represented by the names Verghese Kurien, the National Dairy Development Board (NDDB), and Mother Dairy, will reveal that Mother Dairy is actually an example of imaginative public-private-governmental cooperation; an example of complex thinking being brought to bear upon complex problems that abound in India. This — in summary — to all you libertarians out there: sorry… but countries like India abound in such complexities that, in many areas of economic concern, the government has to be a key part of the picture: as the NDDB story exemplifies. (That the organs of Indian government are extremely corrupt is, of course, a subject of a whole other debate.)
desishiksaNo, actually, the problem is that drug companies would not create the drugs to cure rare diseases if governments did not create incentives for them to do, which would not happen in a free market economy.
Not true. At U.C. Berkeley, when I was as student, I saw a study done by one of my profs who insisted that pharma companies employ scientists and doctors, who – and socialist types may find this hard to believe – actually endeavour to save lives. The case of Merck pharma is a classic example. Scientists found a cure for river blindness. The economists within Merck found that it was not a profitable market. Did they not manufacture the drug? Au Contraire, the management decided that the loss of morale amongst its employers would be terrible for the stakeholder. Consequently, they gave away the the drug free to African nations. Such examples abound. If you recall, Collins and Porras write about P&G’s distribution of free drugs to Japan after 1945.
Things like existing racial/gender/social/caste/colonial imbalances, from what I know, are grossly overlooked in Friedman’s work
Friedman is not lawyer, feminist or even an anthropologist. He is an economist who wrote for the layman about money and it’s effect on society. His study of economics led him to the correlation between economic and individual freedom. In the long history of mankind the art of governing ourselves is only 200 years old. Overall we have made rapid strides and in all likelihood we shall never revert to a state that existed before. The imbalances that you see in society are, on average, a few thousand years old. What Friedman’s economic work ensured is if I was black I would rather be a black American if I was a woman I would rather be an American woman if I was at the poverty level I would rather be at the American poverty level if I had to live in an erstwhile colonised country I would rather live in America
Amaun: Friedman is not lawyer, feminist or even an anthropologist. He is an economist who wrote for the layman about money and it’s effect on society.
Right, and the hard reality is that “economics” isn’t something that’s somewhere “Way over there” and is fundamentally “SEPARATE” from all these things. Amartya sen takes this head on….
Y’all are living in the 50’s if you are still buying this eco theory. And like I said, it takes one listen to the video clip above to understand – how many of the things Friedman says are ‘assuming he understands law, race and social interactions’. “The minimum wage rate is Anti-Negro”. The funny thing is before he says that he says “the minimum wage rate works against people who DO NOT HAVE WORKING SKILLS”….
That assumes a lot, that assumes that job discrimination isn’t a factor, that blacks had the same oppportunities as whites and it grossly assumes that blacks didn’t have employable skills – when in fact they did, it was the former two that worked against them.
Whatever, y’all need to read more Amartya… 🙂
By your own admission, you haven’t read any of Friedman’s writings other than to view the one video but you nonetheless are an expert on him. Wow.
Actually, Friedman does assume a lot but none of it relates to what you have stated. Most fundamentally, Friedman assumes that the labor market is “competitive” and starting from that presumption, the subsequent economic analysis is correct. However, the assumption that the labor market is “competitive” is a serious one and furthermore, not quite valid as anyone who has taken Econ 101 would tell you. Most recent economic theories of the labor market have relaxed the assumption that this market is competitive and examined its implications.
While it is easy to fault Friedman for his (incorrect) assumption, one should note that much of economic analysis until fairly recently (the last 20-30 years) was based on the assumption of “perfect competition.” Of course, economists knew that this assumption was not quite valid, but nonetheless they used it partly because (i) they believed that the deviations from this extreme assumption were not serious, and (ii) because the tools for dealing with markets which violated the “perfect competition” assumption had not been developed. It is only in the last 20-30 years that these tools have been developed.
I suspect none of this will impress you, so I will simply leave it at that. I will say one thing, though: Friedman was too good an economist to talk through his hat. Even a reading of his “popular” book like “Free to Choose” will make it clear that his arguments were supported by evidence. You could argue that his presumptions and his interpretation of the evidence were invalid, not that they were non-existent.
I will leave with a link to this tribute to Friedman by Brad Delong, himself a very eminent economist and whose own policy recommendations are very different from those espoused by Friedman. Professor DeLong traces the origins of Friedman’s own world view and how they influenced his policy recommendations.
I might not know my Friedman, but you seriously don’t realize how vital such elements are to ‘economic theory’ and again, I would implore all those who aren’t too ‘libertarian'(i.e. granted hyper-individualness without any grander social contexts) to take into consideration the work of Amartya Sen.
Let us see: You don’t know Friedman’s work, but you can criticize him. You don’t know much about “economic theory” but nonetheless you know its flaws. As an economist myself, I can only repeat “Wow” and bow to you. Wonder why the “I don’t know much about art but I know what I like” line is so discredited.
Friedman, a libertarian? Certainly, yes, to the extent he distrusted government interventions and thought they did damage more often than not but that did not make him a libertarian. His viewpoint was much more nuanced. I can only recommend you actually read Professor DeLong to get a better understanding of where Friedman came from. But I suspect all I am going to get is more appeals to Amartya Sen.
I’d like to interject here to compliment you all. I have made it through 2/3rds of the conversation and it is witty, funny, civil and educational. I am actually, good ABCD geek that I am, taking notes on some of it. Yes, you are entitled to make fun of me for this. DJ Drrrrty Punjabi? Hello, this could be for you…..
*I think the real question for me is this: If you feel there must be some government intervention, will that intervention ultimately help or hurt the society? There are downstream effects to government regulation that are difficult to parse at the beginning and become clear only through time. I’m sure some of the socialist policies of the past in India were meant to do good and did some good, but there were downstream effects which were harmful. So, if you are tempted to intervene to provide a benefit, how well can you predict possible adverse effects of a policy meant to help people?
**Kush, thanks for your perspective.
***How is infant mortality measured versus fetal death? Is it standardized from country to country? Infant mortality/fetal deaths is tricky. For instance, older, wealthier mothers could have more problematic pregnancies and subsequent births than some younger mothers who are strictly middle class, while there are different problems with young and/or poor mothers. It’s complicated…..
I guess we’re in the same boat my friend – you being an economist who’s never read Amartya sen… that’s pretty surprising to me as well.
As to bowing down to me, geez thanks, I don’t get that kind of treatment often – so I’ll take it where I can. 😉 I jest.
strangly, i had the same reaction as MD. Great post by Vinod and the comments lived up to the post. i was getting all prepared to jump right in with some various neo-con and classic liberal theories but i got so engrossed with the personal anecodotes and comments by some economists that i found it better to remain a lurker.
carry on.
Really, how do you know I haven’t? So, do tell me, how much of Amartya’s Sen’s copious output – from his Ph.D. dissertation “Choice of Techniques” (approx. 1960) to his classic “Collective choice and individual values” (approx. 1970) to his work on famines (1980s) to his work on the boundary between philosophy and economics examining the nature of a “just” society (1980s, 1990s) to his latest work on the nature of “Indian” identity – not to mention his innumerable articles – have you read? Presumably all of them?
Mea culpa – sorry for having picked up this thread.
Woah…. dude, you’ve got some serious ego-tripping issues right there. Chill! I’m not going to play this game with you anymore, it’s just gotten wayyyy too personal. This is when one says “step away from your computer and relax. I do not know you! you do not know me.” Either way, good luck on your journey of higher learning. PEACE OUT!
Thank you. If I may say so, your tendency to make wild, unsubstantiated statements (“You haven’t read Amartya Sen”) is going to get you in trouble in other contexts too.
To Laal Salaam Take my middle finger salaam. I was in india and I saw mental energy being wasted on silliest crap. And Fuck Yeah Free Markets work. It was your kind that increased the number of handlooms in india after indipendence as well as destroying semi functional loan markets. It is your kind that has kept the agricultural masses unproductively used and gave rise to a corrupt industrial and licensing class. In a free market the efficient producer comes to rise, In a licensed market the licensee and their cronies came to power. PS I have been through licensing procedure in india, Infact when i worked for a TV a TV factory, which on paper was employing 30 people(cause any more than 100 caused the babu\’s to show up and clamp down on firing as you are a MSI not an SSI). I gave up that crap and moved to US(via Russia/West Germany) and I saw in my own industry How the indian governments lal salaam babus destroyed 3 generations. And PS I am not an IIT grad, but a polytech grad from a small village in himachal. In the system in india I could not do crap, In US I was able to accomplish some thing without being in the loop with the government, despite being an immigrant with bad english speaking skill, not being a graduate of an upper echelon university. for all the talk of social mobility you saalamis dont have a clue so as to how it happens Also it was quite interesting none of you laal saalami haramis were protesting when HU was in india? What happened to tollerence for minority ? A genocide in Tibet ? I read nothing from you blokes when iranian head of state was in india? you bastards hosted chavez and still insist that india attend non align movement meetings? None of you let out a pipsqueak when the saudi monarch was in india? Thats a repugnant society where a far greater number of indians worked in exploitative situation(with no chance of being naturalized) and what happened….No protest not a pip out of either your lal munh or you laal gand? When bush was in india(going out of his way in his own party to offer india a fair nuclear deal) you bastards were protesting all over. For all the talk about US being an unjust country how doesnt that compare to your cowtowing to china and all the middle eastern countries.
A big middle finger salute to laal Salaami haraami jo madarchod hain (jo bharat maan ko chood rahen hain vo hain madarchod.)
Regarding Minimum wage being anti negro. It may sound odd now, but 20 years ago it was not as odd sounding. Negro was used more often then. And regarding discrimination against black yes it existed? and it existed due to laws. As far back as the 1950\’s you had advertisements where it said No blacks or jews need apply. It was not due to free market but the lack of it. And when I briefly worked for AT&T bell labs I noticed a +ve discrimination towards blacks after they had lost a lawsuit showing discrimination. I will make an anecdotal remark. It was my observation that all but one black engineers were marginal quality there. where as in all other races they were above average. and the one that was excellent was a jamaican immigrant!…. Real issue in black society is that individuals are not thinking for the longterm. If an individual was he would slug it through college, even when there is discrimination, for it hurts him more in terms of lost oppurtunity to be productive rather than get mired over not making enough.
Also its kind of interesting that this thread seems to be running in a republican/dem party linish kind of behavior. And friedman is a marginal Republican. Infact a guy who ripped Amartya Sens economic arguements especialy when it comes to india was an indian planning commision insider and an ardent freidman supporter who is also a proud Democrat. He did make an appearance in the free to choose series. He is Jagdish Bhagwati. Incidentaly Sen\’s arguementative indian and shows that he has read a lot but not thought a lot. He classified Panini as an afghan. Bull at that time afghanistan was part of proper hindu civilization, and he lived in the border area of afghanistan and punjab. There were 3 other mistakes in sens book( I am glad i did not buy it but read it in a library). He claims that he %age wise the number of hindus after partition in pakistan was same as % of muslims in india. This to mee looks like a delibrate lie.
Ok. This is just pure dissembling and I can’t let it go. Merck did make a profit from Ivermectin, because it was used as a veterinary heartworm medication. One formulation was the world’s most profitable veterinary drug. If not for it’s veterinary use, they almost certainly would NOT have manufactured the drug which was the only cure (at the time at least) for river blindness. The profits from the veterinary use funded the humanitarian use. This is NOT about a drug company just being altruistic, although I applaud any humanitarian goals they had after making their profit.
If not for it’s veterinary use, they almost certainly would NOT have manufactured the drug which was the only cure (at the time at least) for river blindness
The vet use side-effect must be profitable and I have no doubt about that. However, I disagree with the above theory since the story of how it was discovered and sent for free to Africa made it into a popular case study from Harvard Business School. I think it is still taught in some courses (Ethics & Social Responsibility, perhaps).
It’s not a “theory”; ivermectin was developed as a veterinary drug. It is actually used as a case study in medical schools to show how profits often become more important than public health concerns.
Another drug with a similar story is eflornithine, used to treat sleeping sickness. Aventis stopped manufacturing the drug because it wasn’t profitable. They finally agreed to manufacture it again after a several year hiatus but partially because the same chemical is the active ingredient in Vaniqua, a hair-removal medication manufactured by Bristol-Myers-Squibb, who agreed to foot part of the bill for providing the drug for humanitarian use.
I think I am unfortunately now beating a dead horse (veterinary reference unintended) so I give up. I guess this is a good example of how you can a spin a story any way you like, depending on your perspective. Whatever the motive, I’m glad both drugs are being provided for human medical use.
Contrarian view?
It is heartening to note that many Indians(here in India and abroad) recognize and appreciate Friedman for what he was, an economist. He wasn’t the leader of the world. He didn’t implement policies, he worked on economics. And he stands vindicated 50 years on. And this has been a good opportunity to see the socialists coming out of the closet. There are still far too many here in India. We need a larger dose of American mainstream capitalist injections to sideline the socialists and move them to the fringes. Adi Godrej(chairman of the Godrej group) said in a newpaper interview- the government should not be in the business of doing business. And how true this is. It is when govt gets involved, whether in colleges or hospitals or bakeries or oil companies or banks, it uses our taxpayer money to compete against honest companies. Socialists ignore this and prefer to see a larger hand of the govt working in daily society. I say f–k that shit. And articles about 2 year wait for scooters are true. My father’s told me first hand. I’ve experienced the phone connection situation myself, I’ve experienced the pathetic quality of vehicles that were sold prior to 2000.
There is a lot more to Estonia’s economic liberalization than can be put in a few words but I dare the socialists to come forward and put forth their contrarian arguments about that country. China took Friedman’s advice to heart too. Look where it is today. China is more capitalist than capitalist America.
Socialism is not a voluntary endeavour. Those who are dim on Friedman’s published works, just search for “free to choose video” on google. Watch the 10 part series. It’ll be an eye-opener.