Wall Street Journal: “Was Milton Friedman a Secret Admirer of Keynes?”

by Don Boudreaux on April 14, 2022

in Archived writings, Economics, Great Depression, Myths and Fallacies

In the August 4th, 2012, print edition of the Wall Street Journal I defended Milton Friedman against some of those persons – such as Paul Krugman – who misunderstood his work. (I’d not until now – see just below – shared the entire text of this essay in full at Cafe Hayek.)


Was Milton Friedman a Secret Admirer of Keynes?
Liberals misread the great free-market scholar in order to hijack his legacy.

By Donald J. Boudreaux
Updated Aug. 3, 2012 7:03 pm ET

With the possible exception of Adam Smith, no person in history is more widely recognized as ably championing free markets than Milton Friedman. Justly so: For more than 60 years until his death in 2006, he pressed the case for capitalism and freedom with impeccable scholarship, good cheer, impressive vigor and unmatched clarity.

Despite his clarity, there are a handful of people whose inability or unwillingness to grasp Friedman’s arguments leads them to misrepresent his writings and policy recommendations.

Consider British journalist Nicholas Wapshott. He used the occasion of the 100th anniversary of Friedman’s birth (July 31) to claim, in the Daily Beast, that Friedman’s attitude toward government was much closer to that of pro-interventionist John Maynard Keynes than to that of Keynes’s famous free-market opponent, Friedrich A. Hayek.

Mr. Wapshott says that Friedman really was quite sanguine about a large and constitutionally unrestrained state, based on the alleged contents of a supposedly “lost” essay by Friedman. Contrary to the naive Hayek—who worried that power concentrated in big government inevitably corrupts politicians and invites its own misuse—Mr. Wapshott says, the essay (which was originally published in 1989) shows Friedman believed “that big government is not evil so long as it is honestly administered.” He adds that the essay “calls into question whether those today who rail against the size of the state are blaming the system when they should be rooting out corrupt politicians and public officials instead.”

So Milton Friedman was really a good-government progressive? No.

Friedman’s essay, “John Maynard Keynes,” was never lost. The original article, first published in German translation in a volume of commentaries on Keynes’s “General Theory,” was translated and republished in 1997 by the Richmond Federal Reserve Bank in its quarterly magazine, and it is readily available on the bank’s website.

The essay shows beyond a shadow of doubt what Friedman really thought about Keynes’s views on government: “I conclude that Keynes’s political bequest has done far more harm than his economic bequest and this for two reasons. First, whatever the economic analysis, benevolent dictatorship is likely sooner or later to lead to a totalitarian society. Second, Keynes’s economic theories appealed to a group far broader than economists primarily because of their link to his political approach.”

Friedman here articulates concerns long expressed by Hayek in the latter’s 1944 book, “The Road to Serfdom,” that big government of the sort that Keynes demanded is poisonous to freedom and prosperity. He saw clearly that Keynes’s “political bequest” was so dangerous that no amount of rooting out of corrupt officials would prevent a government armed with unlimited discretionary economic power from becoming tyrannical.

There’s an even more egregious misrepresentation of Friedman, this one by Paul Krugman, the economist and New York Times columnist. A few months after Friedman’s death in November 2006, Mr. Krugman penned an essay in the New York Review of Books, “Who Was Milton Friedman,” accusing him of being “intellectually dishonest.” He doubled down on this charge in a letter to the editor of the New York Review responding to critics of the essay.

The dishonesty, in Mr. Krugman’s telling, consists in an alleged contradiction. On one hand, Friedman the scholar claimed in his famous “Monetary History of the United States” that the Great Depression was worsened by the Fed’s failure to keep the money supply from falling. But, on the other hand, Friedman the public figure claimed that the Depression likely would have been far less severe in the absence of the Fed. “I’m sorry,” Mr. Krugman wrote in the letter, “but those are contradictory positions.”

Mr. Krugman’s charge is silly. Friedman understood that, without the Federal Reserve, private bank-clearinghouse associations—market institutions that were displaced by the Fed—would likely have prevented the money supply from collapsing and, hence, might well have kept the depression from becoming “great.” But Friedman also understood that the Fed, having substituted its own technocratic discretion for the market adjustments of clearinghouses, then had a responsibility to manage the money supply properly. It failed to do so. Friedman (and his co-author Anna Schwartz) properly criticized the Fed for this terrible failure.

Friedman’s argument here is no more contradictory or dishonest than would be the argument of, say, a physician who, having unsuccessfully warned a patient not to rely for medical care upon a witch doctor, points to the witch doctor’s failure to administer appropriate mouth-to-mouth resuscitation as the cause of the patient’s death.

Milton Friedman combined soaring academic credentials with a remarkable virtuosity at explaining to the public why free markets are economically and ethically superior to even well-intentioned government plans and regulations. He was throughout his long life and career a special target of those who would preserve what he and his wife, Rose, called “the tyranny of the status quo.” This status quo consists of interest groups, bureaucrats and politicians who—with help from cheerleaders in the media and the academy—use government to enlarge their own pocketbooks and to stroke their own egos, all at the expense of the general public.

If Friedman was secretly upbeat about powerful government or, worse, misleading the public, then the voice of one of history’s greatest advocates of free markets would be silenced. In fact, Milton Friedman’s advocacy of free markets was as principled, consistent and honest as it was brilliant.

Mr. Boudreaux is professor of economics at George Mason University and author of “Hypocrites and Half-Wits” (Free To Choose Press, 2012).

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