Brad Delong and Austan Goolsbee on Milton Friedman

Two excellent articles about Milton Friedman’s legacy by Brad Delong in Salon.com and my colleague Austan Goolsbee in the New York Times.

Friedman published his first academic paper that I am aware of in 1935, the year my own parents were born. His most important academic work was done before I was born, although his popularizing efforts like the PBS series “Free to Choose” came later. It is amazing to me that he left University of Chicago almost 30 years ago and yet rarely does a day pass when his name is not invoked in some fashion there.

The first time I ever heard of Friedman was in junior high. I wan’t the type to watch PBS at that age, so I knew nothing of Free to Choose. One of my teachers (and still a good friend) named George Leiter had just returned from a cruise. George prided himself on being quite a good ping pong player. So he was quite surprised when a senior citizen barely tall enough to see over the table had repeatedly destroyed him in ping pong. Only after they were done playing did George figure out it was Milton Friedman on the other side of the table. That was my first introduction to Friedman.

Although I got to see him a number of times, only once did I get to witness first hand the Friedman debating prowess he is so known for. A year ago he visited Chicago with his wife Rose and a handful of faculty were having lunch with him at the faculty club (the “Quad Club” as it is known). It was towards the end of lunch. The conversation had been an unusually polite and constrained Q and A session with the young faculty like me asking questions of Friedman. (Partly it was polite because of respect for the great man, but mostly it was polite because the proceedings were being filmed for a documentary. Scrutiny no doubt affects people’s behavior!) The conversation turned to the fact that relatively few economists these days practice the sort of economics that Friedman embraces — what is known as Chicago Price Theory. Chicago Price Theory involves combining simple, basic principles of economics with the analysis of data. Friedman complained bitterly about the fact that the profession had bifurcated into a group of pure theorists who had no contact with data and a group of highly technical econometricians who he felt had lost touch with the facts.

Then my colleague Casey Mulligan offered the first real challenge to Friedman that he faced all day. Casey asked Friedman whether that wasn’t just the market at work — that the fact that the profession had gone in these other directions simply reflected the fact that these other approaches had more value. For someone like Friedman who believes in markets above all else, this was a powerful attack. Friedman had seemed pretty flat all through lunch, but in response to Casey’s words, he sprung to life. His voice changed completely and he began to debate with a ferocity I could not imagine. And he was persuasive, too, in making his case that the profession of economics was far from a free market and thus you could not trust that the path it was on was due to market forces. He argued using precisely the economic principles that have come to be of little interest to most economists, and he was amazingly convincing. Although I didn’t need to be convinced, for me this was just one more example of how powerful these tools are.


snubgodtoh

"Friedman complained bitterly about the fact that the profession had bifurcated into a group of pure theorists who had no contact with data and a group of highly technical econometricians who he felt had lost touch with the facts."

I could not agree more, regression output--no matter the robustness of the technique--is all too often viewed as deus ex machina (in my opinion). I think the gap between theory and econometrics lies in the inapplicability of many of the assumptions of the former to real world scenarios--at least quantifiably so. What is the bridge? I dunno, you tell me. Perhaps in flexible, innovative thought that is persistent and evolving. It seems to me that academics all too often become ensnared in the net that is their first major area of research. Perhaps the gap is simply in the limits of the human brain and the expanses of the two disciplines, imagine a cloned Becker/Klein. I think the head might physically pop off and orbit Uranus.

Read more...

snubgodtoh

Addendum: is perfect competition really possible? And is it really possible to explain all of the variation in a model of dynamic human preferences? I think that the acknowledgment of limitation is worth its weight in gold. Not that it weighs anything but you catch the drift.

synapticmisfires

Dr. Friedman did make a very good point. However, one wonders why the biggest supporter of the free market would be a fixture at a University with such a challenging PHD program, a barrier of entry to the market for the services of economists. Truly, such challenging curriculums reduce the amount of PHD economists, decreasing competition and allowing those with the degree to earn rents through monopoly power.

stavros

What were Friedman's actual arguments or what shape did they take? Also, if you don't want to spoil the documentary, what's the name of the pic. I hear so much about his arguing style, yet, I've never seen it.

snubgodtoh

My mom earned her psychology doctorate 30 yrs ago when she made $100K/yr(+/- 10K). Today she makes less than I do with a master's in econ. and less than a year of experience, and less than my best friend, a GED recipient-union plumber. Why? Labor market saturation (and substitution effect to an extent). When ITT tech and the University of Phoenix start handing out PhD's in economics is when I join a trade union. Conversely, what if U of Chi., MIT, etc. lowered their admission standards? Where would the field be headed--how many laureates are on those two faculties alone? There has to be some amount of cream skimming in fields like economics and physics. If you can't hack the rigor there are plenty of other options, have at it (I did). The only barrier to entry in the labor market for economists is in the tenacity and ability of the potential entrant.

Mark Weinstein

on the econometrician point, I remember Stigler commenting that "the worst thing that ever happened to economics was when a regression became a free good."

predius

Isn't PBS publicly funded? I find it strange that Friedman would accept to work at a place where his tax dollars where spent.

David Peterson

You said it was being recorded for a documentary, is this documentary available anywhere?

snubgodtoh

"Friedman complained bitterly about the fact that the profession had bifurcated into a group of pure theorists who had no contact with data and a group of highly technical econometricians who he felt had lost touch with the facts."

I could not agree more, regression output--no matter the robustness of the technique--is all too often viewed as deus ex machina (in my opinion). I think the gap between theory and econometrics lies in the inapplicability of many of the assumptions of the former to real world scenarios--at least quantifiably so. What is the bridge? I dunno, you tell me. Perhaps in flexible, innovative thought that is persistent and evolving. It seems to me that academics all too often become ensnared in the net that is their first major area of research. Perhaps the gap is simply in the limits of the human brain and the expanses of the two disciplines, imagine a cloned Becker/Klein. I think the head might physically pop off and orbit Uranus.

Read more...

snubgodtoh

Addendum: is perfect competition really possible? And is it really possible to explain all of the variation in a model of dynamic human preferences? I think that the acknowledgment of limitation is worth its weight in gold. Not that it weighs anything but you catch the drift.

synapticmisfires

Dr. Friedman did make a very good point. However, one wonders why the biggest supporter of the free market would be a fixture at a University with such a challenging PHD program, a barrier of entry to the market for the services of economists. Truly, such challenging curriculums reduce the amount of PHD economists, decreasing competition and allowing those with the degree to earn rents through monopoly power.

stavros

What were Friedman's actual arguments or what shape did they take? Also, if you don't want to spoil the documentary, what's the name of the pic. I hear so much about his arguing style, yet, I've never seen it.

snubgodtoh

My mom earned her psychology doctorate 30 yrs ago when she made $100K/yr(+/- 10K). Today she makes less than I do with a master's in econ. and less than a year of experience, and less than my best friend, a GED recipient-union plumber. Why? Labor market saturation (and substitution effect to an extent). When ITT tech and the University of Phoenix start handing out PhD's in economics is when I join a trade union. Conversely, what if U of Chi., MIT, etc. lowered their admission standards? Where would the field be headed--how many laureates are on those two faculties alone? There has to be some amount of cream skimming in fields like economics and physics. If you can't hack the rigor there are plenty of other options, have at it (I did). The only barrier to entry in the labor market for economists is in the tenacity and ability of the potential entrant.

Mark Weinstein

on the econometrician point, I remember Stigler commenting that "the worst thing that ever happened to economics was when a regression became a free good."

predius

Isn't PBS publicly funded? I find it strange that Friedman would accept to work at a place where his tax dollars where spent.

David Peterson

You said it was being recorded for a documentary, is this documentary available anywhere?