Friedman on "Greed," Markets, and Politics

Best to not reply to muirgeo. Trolls don't learn anything, because their only intent is to get attention.

Ben,

There's an easy way to not see posts by certain people: scroll to the bottom of a post and if it's by someone you'd rather ignore, then keep scrolling.

As for the other thing: Maybe someday there will be a Godwin's Law about Mui... like there is about that dude that ruled Germany sometime between fifty and one-hundred years ago.

I would strongly value the option to block seeing posts by certain users. Seperately, I would value the option to block the viewing of posts that mention certain words. Words like 'Muirgeo'.

Russ, Don, is this something that can be set up?

The look on Phil's face was priceless. The blank stare that turns to righteous indignation when he realizes Freidman's making fun of his beloved Dictatorship of the Proletariat. Muirgeo has that same righteous indignation when he starts screaming, "Stop trying to confuse me with facts, you child! Just give me your money! I WANT IT! NOW!!!

quack quack quack...

Speaking of Muirgeo: David, you asked Muirgeo a question. If you've read this blog for more than a week, then you should know by now that Muirgeo, like Phil Donohue, doesn't answer questions. That blank stare on Donohue's face should explain "why?" for both of them.

I don't know what else to say, except for "pwned".

Reader's Digest once published an anecdote from an immigrant from the USSR. They had been shown The Grapes of Wrath to illustrate how bad the situation was for the workers in the U.S.

The author of the anecdote related how the viewers were that these destitute people in the movie actually had a truck(!) with which they could travel elsewhere.

As and escapee of an alternative economic system (soviet communism), I would argue that the worst of the GD is the best that this alternative economic system had to offer.

Indeed, I remember when the first McDonalds opened in Moscow and people stood in lines for hours to buy a cheeseburger. Imagine if Sizzler Steak House had been there.

Simon Clark wrote "If workers won't work for $10 an hour, then the firm must either lose workers or increase wages." Note also that "working" is not just a binary either/or thing: what quality of work are you getting? I was just reading the first chapter of _The Age of Abundance_, and it mentions that "during World War I, absenteeism rates of 10 percent or more were typical for many industries." That's not conclusive, but I take it as at least suggestive evidence that around that time, at the ordinary price paid for labor, an employer could expect a generous helping of friction mixed in. If finding and retaining workers willing to be more reliable required paying twice as much per hour, then for a complicated manufacturing process using expensive equipment, it might be worth it for that aspect of labor quality alone.

Of course, that mightn't stop someone from raising wages out of rational self-interest and then claiming to have done it out of selfless generosity. To quote David Friedman: "Adam Smith, in a famous passage, commented that the conceit of doing business for the public good was one not very common among businessmen, and that but a few words were sufficient to dissuade them from it. George Stigler wrote somewhere that Smith would have put us even more in his debt if he had bothered to write down what those few words were."

I've only skim read this topic, so here's just a few things I spotted as I scrolled down:

"Then again, some Libertarians, seem to have a similar one about how the modern standard living is/are 'bread and circuses'. As if to say the people of the 1800s lived in a time that was harder but it was honest."

Obviously I can't speak for other libertarians but if you had been talking about me I'd say you've probably misunderstood. I talk about bread and circuses in relation to what governments do (welfare, state funded art etc) but I don't mean to say that our standard of living is lower than in the past. Far from it, today even the poorest people in Britain and the United States are often better off than the richest people in the past. I can't abide the gloominess of media types insisting that we have less free time and higher living costs and more stressful lives. Working from dusk 'till dawn ploughing fields all day and dying of pox at 23 is a crappy life. Having two cars, a house, a pool, air conditioning, working 9 to 5 and spending an hour in traffic in car that didn't even exist a few years ago ain't too shabby. Perhaps you've had a different experience, but to my mind libertarians are usually very aware of this and quite frustrated with the romanticising of peasant life and the harking back to the good old days when people had a job for life but couldn't afford shoes.

"Capitalism, as I understand it, refers to an economic system based upon the private ownership of capital. Do you see anything about "greed" in that? Was Henry Ford greedy when he doubled the minimum wage he paid his workers?"

Yes, Henry Ford was greedy. Ok so it's possible that in this specific case Mr. Ford was just being charitable, I didn't know the man, but in general when a business increases wages it is not out of benevolance but out of greed. If workers won't work for $10 an hour, then the firm must either lose workers or increase wages. If doubling wages produces a more than doubling of productivity, then the employer will double wages. You don't eat your dinner because the shop you bought the ingredients from is run by a kindly man who wants to do good in the world, you eat your dinner because the man (or woman or plurals) who owns the shop is greedy and in the course of pursuing his greed in a society where it is prohibited to steal, defraud etc, he must provide a demanded service and so do what we might describe as 'good' in the world, in this case the provision of your dinner.

"If widespread poverty cannot occur in capitalist societies, then what exactly was the "Great Depression"?"

A disastrous result of incompetent monetary policy on the part of the United States Federal Reserve.

"Is anyone here in favor of the "good old days" of child labor or even slavery?"

Slavery is something which often comes up in this kind of debate and it reflects a common misunderstanding of free markets. A free market does not mean "do anything you like" it means "do anything you like so long as you don't stop anyone else doing what they like." Enslaving someone necessarily stops the person being enslaved from doing what they want. Slavery is not a part of freedom or free markets.

Furthermore, the worst of the GD is certainly better than the worst that alternative economic systems deliver.

As and escapee of an alternative economic system (soviet communism), I would argue that the worst of the GD is the best that this alternative economic system had to offer. Poverty is bad. But knowing that there is no alternative to it, there never will be and constantly worrying about yourself and your family being randomly picked up and either shot or sent to a gulag is, IMO, worse than the worst of the Great Depression.

To the person who wrote that communism "takes care of the people" in return for taking their liberty, he's correct. Communism "takes care" of people much the same way exterminators "take care" of a pest problem.

Greed. I hate it when a rational argument about capitalism swerves to incorporate the word.

Lust, Gluttony, Greed, Sloth, Wrath, Envy, Pride. Those are the seven deadly sins.

I love my Wife. Am I Lustful?

I eat 2 square meals a day, am I Gluttonous?


I like to relax on Sundays. Am I Slothful?

I reject the metrics where Capitalism = Greed any more than my dinner tonight of leftover meatloaf = gluttony. In the US where we are arguably free, we have the option to eat as much as we want. While a few have issues with their weight, at what point does it become Gluttony? Surely, there is a higher standard for this deadly sin than just eating or even just being fat.

So, if 300M Americans can practice eating 3 times a day without gluttony why does a discussion about capitalism always get pinned on this Greed debate? Capitalism is spontaneous when freedom is present. That doesn't make greed the logical end result.

The Capitalism = Greed argument is as logically bent as Fire = Death. I like fire, I think it is the world's most versitile tool. Why then don't our resident socialist accuse me of wanting to burn villages, women and children?

BAH! Morality happens in the hearts and minds of people, it happens in "HOW" they use capitalism not "THAT" they use capitalism.

It seems incoherent to blame capitalism for the level of unemployment in the Great Depression when the government was acting to hold wages artificially high and to impose non-wage costs and liabilities (like mandated job security). This was a clear pattern first under Hoover semi-formally, then under FDR formally and vigorously (minimum wages and various NRA stuff). Without the government's labor-market interventions, there were enough other things wrong in the early 1930s that it could still have been a miserable period for labor, but the likely symptom would be broadly falling wages, not wages successfully propped up in some cases while high unemployment persisted elsewhere. Blaming free markets for the unemployment in the depression seems like blaming free markets for the gas lines in the Nixon administration: markets wouldn't've magically made the underlying problem go away, but the expected symptom wouldn't've been unemployment or queueing.

Were the governmental interventions in the Depression strong enough to explain what happened? I dunno for sure, and I admit that I've read plenty of histories which implicitly assumed they were in fact negligible. But... I have also read analyses which implicitly assume zoning has a negligible impact on affordable low-end housing near work, and Hernando de Soto has made a celebrated career out of showing how colossally inappropriate it has been to implicitly assume interventions in business formation in the Third World are negligible. Thus, I am inclined to think that reports which implicitly assume that interventions are too weak to have a downside worth measuring or mentioning (but, often, still strong enough to have an important upside! so it's win/win!) are not strong evidence that the interventions were too weak to have a big downside.

The existence of a big downside doesn't suffice to show that the interventions were a net bad idea, of course. Perhaps in the absence of the labor market interventions, you could argue that something worse than 20% unemployment would've happened. This is not just an academic possibility: e.g. in labor markets in Europe, people can and sometimes do make coherent arguments that the persistently high levels of unemployment associated with their vigorous NRA-style interventions in the labor market (and with, sometimes, variously-Keynesian other interventions in the economy) are an acceptable downside for social benefits like suppressing some kinds of inequality and/or boosting the political power of official labor organizations. (And for that matter, some people who were influential in the 1930s did make coherent price-worth-paying arguments, sometimes with goals that have been energetically forgotten by those who continue to honor the arguers. E.g., "of all the ways of dealing with these unfortunate parasites, the most ruinous is to allow them unrestrictedly to compete as wage earners," from Sidney Webb, "The Economic Theory of a Legal Minimum Wage," quoted by Thomas C. Leonard in his creepy "More Merciful and Not Less Effective" history.)

Let me see...Who should I trust on an economic issue: a mere nobel prize winner or a comedian talking about economics?

But, lest Muirgeo still think he's correct:

Carlin complains about dumb people running up debt. This is dumb behavior, but what would Carlin have us do? Let the person deal with the problem he/she created, or simply force he/she not to spend money or use credit?

Carlin also has a ringing indictment of education in America. I think he's right. But I'm willing to bet he was thinking of public schools when he was speaking...


Last, he goes on some crazy rant about "owners" and how they "lobby for what they want" and have bought out every level of government. He makes my argument for me (the one from above that was never responded to) about how people in government are simply people, with all the normal faults. If the problem is people corrupting and buying government power, Muirgeo, why not reduce what they are attracted to?

Re: Ben

Thanks for the kind words. You did a much better job explaining my thoughts than I did. I was wondering if you might be available for a midterm on Thursday...

Eh. Sorry muirgeo, that Carlin guy sounds like a bit of a conspiracy theorist. Then again, some Libertarians, seem to have a similar one about how the modern standard living is/are 'bread and circuses'. As if to say the people of the 1800s lived in a time that was harder but it was honest.

What is more, the ideas behind the constitution took a long time to evolve and were influenced by a great many conflicting sources.

"I understand emergent order......it didn't write the constitution. Men did. "

Actually, the constitution is a very good example of emergent order. Did you read about the constitutional debates?

No one architect managed to get his way, no one single planner was responsible.

I think that you do not understand emergent order at all...

Sorry but George Carlin is far closer to the truth then Friedman.

Unit,

I understand emergent order......it didn't write the constitution. Men did.

Muirgeo:

"Well regulated capitalism is what we have and what keeps greed in check."


I disagree simply because the regulators behind what you say are also mere mortals, whose self-interest is no less than that of others.


What keeps greed in check is the balancing forces of the market. For example, a company obviously cannot charge as much for a service as it would like, because no one would be willing to pay them that much. Consumers cannot get goods and services for free, even though they would like to do so, being self-interested and wanting to maximize their material well-being.


People fail to see outcomes and instead look at motivation. Capitalism channels self-interest and forces those who wish to be the most successful to please others in order to be so.

Eh. Strictly speaking there's no such thing as slavery. It's not the fault of an employer that a worker has a little bargaining power and seems to a lot of work for little pay. It's just market forces. 'Slavery' is really a term to get attention. Socialists use the term 'wage slavery' to annoy free-market types. Libertarians use the term 'tax-slavery' to irk non-Libertarians.

The word greed has too strong a negative connotation in popular usage. Shecky is right that even Friedman found himself talking around it. Better to put greed in its place.

Greed is the desire for "unearned" wealth. As the desire for "earned" wealth is in no way negative, it must be separated from the definition of greed. Once this is done we can apply the word to the parasites - where it belongs.

Again, Muirgeo, free markets do exist. The existance of the parasite proves the existance of the host. And Unit has it exactly right on emergent order.

Shecky, I see what you're saying and I think you're right.

I believe Friedman's exact response is: 1) greed motivates people in all systems; 2) capitalism is the one system that harnesses it and allows people to escape poverty. Point 1 is what you are saying, but point 2 takes it an important step further. Friedman is not saying greed is good or bad, he is taking it as a given. He then points to the system that makes best use of it.

James, I think that's a reasonable take on things, and if there is room for debate it is around whether government interference and incompetence is an unavoidable aspect of capitalism and democracy.

But there is the wider question of whether the Great Depression really informs us on the merit of capitalism. For one thing, they are infrequent. Most people alive today have not lived through such a severe economic recession. Furthermore, the worst of the GD is certainly better than the worst that alternative economic systems deliver. In addition, it appears the causes of the GD have been understood and lessons learned, and it seems unlikely another recession like that will occur, and certainly not for the same reasons.

So, coming back to the original point, widespread poverty is not a feature of capitalist society, and its near eradication is an extraordinary achievement that has not been repeated in other systems.

Your second post is hilarious James.

RE: Unit's comment

Mr. Unit is of course referring to the great economist Cafe. Cafe based his theory on observations of the spontaneous emergence of coffee shops all across the country.

"Does he some how believe our market system organized itself?" - Muirgeo

Yes. It's called emergent order. There's a pretty extensive literature on the subject and was explored by a Nobel laureate whose name, I'm gonna give you a hint, is embedded somewhere in this blog's name...

Correct me if I'm wrong, but I thought that conventional economic wisdom about the Great Depression is that it was a typical--if worse than usual--recession exacerbated by the mismanagement of the money supply and protectionist tariffs. In other words, while the recession that started the Great Depression may have been a result of capitalism (in that the business cycle inherently has fluctuations) the Depression itself was heavily influenced by the hamhanded use of power by government institutions (i.e. the Federal Reserve and Congress).

As such, it isn't proper to cite the Great Depression as an example of the "failure" of capitalism. Rather, it's a profound example of the power of the government to undermine what free enterprise produced.

But I could be totally off base.

Friedman's brief comments provided a reasonable response to Donahue's questions. I can forgive Friedman for not providing the perfect disquisition on the relative morality and efficiency of capitalism in those 90 seconds.

he was responding to the implicit assumption by the interviewer that greed is not present in other systems, or that its effects are more virtuous there. He pointed out they are not.

I don't think that was the implicit assumption. The interviewer's assumption was that greed causes problems in other systems (and presumably our own). To which Friedman's simple reply is sort of "but they all do it, even commies", and tiptoes around the idea that greed is good. That part of the argument is fundamentally weak, and anyone around here making such an argument for any topic would be called on it.

Of course, he goes on to make a more nuanced argument in favor of greed, without using the word. Which is nice, but I suspect a direct defense of greed may have lost the audience.

Greed according to Milton runs everything, communism, capitalism as well as individuals. So it's not a defining character of capitalism. His claim is that greed is somehow best left to its own as in free market capitalism. But he's obviously wrong. Free-market capitalism doesn't exist. Well regulated capitalism is what we have and what keeps greed in check. That's what keeps communism in check and fascist like the current administration.

"just tell me, where in the world are you going to find these angels who are going to organize society for use." Friedman

Absolute rubbish....the people organized society. Does he some how believe our market system organized itself? This society is not successful because of greed or free markets. It's successful because people acted as check and balances against the excesses of greed and unregulated markets.

Shecky, he was responding to the implicit assumption by the interviewer that greed is not present in other systems, or that its effects are more virtuous there. He pointed out they are not.

If anything, I think this is one of the weakest clips I've seen of Friedman. Not that I disagree with what he says. It seems he's dancing around the issue of greed to avoid making some kind of faux pas, by making a "communists and Nazis do it too" type of argument. Perhaps he simply was tailoring his explanations to fit the audience. But that kind of deflection comes off as some kind of weak apologetics that would leave me unimpressed if used by the likes of Boudreaux or Roberts.

David---If you watch some of the other Friedman videos on this link, you'll see that Friedman believed in individual freedom, constrained by the rule of law. He opposed the use of force except in very limited circumstances. He never would have considered the Confederate States "free traders," nor the Abolitionists "protectionists."

What amuses me is Graf's belief that unchecked capitalism leads us to "abomination" and his claim that he is a capitalist!

Get some optimism David!

I unfortunately followed the link of Boris_j above and listen to Noam Chomsky's incoherent rambling. At one point he brings up a slave-owner argument that "it is better to own people than to rent them, because you end up taking care of them". Chomsky rightly thinks that this is despicable. So he is, unintentionally, making an argument for capitalism on moral grounds, because the communist regimes of Cuba, for example, do enslave their population. Yes they might say that they "take care" of the people, but the people has no choice. I would have never thought that Chomsky actually agrees with Friedman's motto: Free to choose!

David,

A couple of thoughts;

1. The depression was a short period of decline during a very long period of growth brought about by free market capitalism. It was a shock precisely because expectations had grown so dramatically.

2. The closest thing we have to slavery under free market capitalism is that many workers are forced to labor for the government for the first 2 or 3 days out of every workweek.

Graf, be consistent. If you're going to compare the worst case scenario under capitalism, then kindly do so in non-capitalist societies. 25% unemployment is bad; millions dead in famines or state-directed mass murder is considerably worse.

How can greed be channeled into productive avenues if the corporation owes no responsibility (short of not breaking the law), but to make stockholders as much money as possible?

A fair question with a straightforward if obvious answer: provided government limits itself to enforcing the rule of law, freedom produces competition via entry from other self interested parties. As large, powerful and self-interested as Microsoft, Toyota and Boeing are, they do not have the ability to increase the value of their business to shareholders by doubling their prices tomorrow. Even these companies are constrained by consumers' ability to go elsewhere.

Since slavery can maximize profits by reducing the cost of labor to a minimum, on whose side would Friedman have been during the Civil War?

Friedman was an advocate for individual liberty, not cost minimization. Slavery is self-evidently inconsistent with liberty. Friedman was also an advocate for the rule of law, and that too is inconsistent with slavery.

The basic mistake you are making is to conflate profit maximisation with limited access to economic and political freedom. The most casual observation across time or countries tells you this is untrue.

My point is that if you agree with Friedman then in the long-term (decades), greed will undo the good done

You only make that statement, I assume, because you believe the experiment hasn't been run. But actually something like it was run in the 18th and 19th centuries, and far from going backwards a massive economic expansion and improvement in living standards occurred during that time of economic freedom.

"How can greed be channeled into productive avenues if the corporation owes no responsibility (short of not breaking the law), but to make stockholders as much money as possible?"

I suppose that you were able to post that because people provided you with a computer, software, and web access out of a sense of charity. Or were those benefits provided to you because Microsoft and others were compelled to do so?

Its been a while since I took a history class and who knows what is being taught in schools these days, but I recall that slavery was a government sanctioned institution.

Whops, sory. Wrong link. This one is ok.

Here's a video that makes you kind of realize how "good" the arguments for capitalism are: Is Capitalism Making Life Better?

I think it also answers the question of which side Friedman would've taken if he lived in the time of slavery.

If widespread poverty cannot occur in capitalist societies, then what exactly was the "Great Depression"?

Friedman may have argued in favor of freedom, but how can that freedom be maintained if greed and self-interest rule a society? Those with the money, power and self-interest can subvert the government to their own benefit.

Please understand that I am a capitalist, but I do not subscribe to Friedman's vision of capitalism.

How can greed be channeled into productive avenues if the corporation owes no responsibility (short of not breaking the law), but to make stockholders as much money as possible? At one time, slavery was legal. Since slavery can maximize profits by reducing the cost of labor to a minimum, on whose side would Friedman have been during the Civil War? The side of the free traders (CSA) or the protectionists (Lincoln)?

My point is that if you agree with Friedman then in the long-term (decades), greed will undo the good done and leave us in a state where an abomination like communism starts to sound like a good thing.

Graf, as Friedman says, extreme widespread poverty does not occur in capitalist societies.

Friedman did not say greed is good, he said it is unavoidable.

David Graf---Milton Friedman never argued that slavery was a permissible element of capitalism. Friedman believed in freedom. He realized that men are inherently self interested, but that capitalism channeled that self interest more fairly and productively than any other system.

The best 2 minute video I have seen in a long time, perhaps ever. Great, great piece. Thank you for the link.

Among communicators of ideas, some are bad, some and good, and then there is Milton Friedman, standing head and shoulders above them all.

Capitalism, as I understand it, refers to an economic system based upon the private ownership of capital. Do you see anything about "greed" in that? Was Henry Ford greedy when he doubled the minimum wage he paid his workers?

Greed as a motivation brings about Enrons, stock scandals and treating people as a means to an end in a world without a moral vision. At the extreme, you can wind up with the kind of society that gave Charles Dickens so much material for his novels.

Is anyone here in favor of the "good old days" of child labor or even slavery? If Friedman is right that capitalism is simply another way of saying that "greed is good", then it's hard to come up with a good argument against either practice.

When you're great, you're great.

The complete bewilderment on the face of Phil Donahue when confronted with the superior wisdom and intellect of Milton Friedman is quite remarkable.