Removal vs. Efficiency, and the Forest vs. the Trees
In a slow period at work, I found myself browsing the literature for nothing in particular. In a circuitous route that took me from the Mises Institute website, to Stephan Kinsella’s website, to Leonard Peikoff’s (I find the cult of Rand endlessly fascinating), and back to Kinsella, I landed on a post that challenges the conventional wisdom on Milton Friedman.
As many readers of this blog are aware, Milton Friedman is often championed as a defender of laissez-faire and free markets. He was indeed no such thing. Methodologically, and therefore ultimately in practice, Friedman was deeply flawed. The underpinnings of his political and economic philosophy were no different than those of Keynes.
My methodological arguments against Friedman included his insistence on the validity of “macroeconomics” as a science. I have said it many times, and I will say it again – when you correct your macroeconomic models to take into account all of the possibilities of individual decisionmaking, what you’re left with is quite simply microeconomics. (More properly, “economics.”) However, I have managed to find an article that explains Friedman’s shortcomings far better than I ever could. It is an article by Murray Rothbard, originally published in The Individualist in 1971, entitled “Milton Friedman Unraveled.” Compare Rothbard’s objections to Friedman with mine:
The [disastrous] idea is that there are two sharply separated and independent worlds of economics. On the one hand, there is the “micro” sphere, the world of individual prices determined by the forces of supply and demand. … But, they assert, there is also a separate and distinct sphere of “macro” economics, of economic aggregates of government budget and monetary policy, where there is no possibility or even desirability of a free market. …
In short, Friedmanites as well as Keynesians concede the vital macro sphere to statism as the supposedly necessary framework for the micro-freedom of the free market.
Forty years on (and fifteen years gone), and Rothbard hasn’t aged a bit! But there’s more, and it is of a more practical nature. Many friends of liberty occupy themselves with the political issues of the day rather than ideas. I admit I am susceptible to the bias towards the present (mea culpa!), despite how much I try to make this a forum for ideas.
But in the end it is easy to lose the forest for the trees, and it is easy to see why. In the face of rampant corruption, waste, fraud, and unintended consequences, we may quickly lose sight of the fact that an idea is at their root. There are overriding moral defenses against statism that we need not invoke consequentialism to understand. And so we must constantly determine whether our desire for a smoothly functioning world is actually in furtherance of the ultimate goal of individual freedom.
And I quote again from Rothbard (the “scheme” in question being the guaranteed income floor proposed by George McGovern in his presidential campaign):
In this catastrophic scheme, Milton Friedman has once again been guided by his overwhelming desire not to remove the State from our lives, but to make the State more efficient. He looks around at the patchwork mess of local and state welfare systems, and concludes that all would be more efficient if the whole plan were placed under the federal income tax rubric and everyone were guaranteed a certain income floor. More efficient, perhaps, but also far more disastrous, for the only thing that makes our present welfare system even tolerable is precisely its inefficiency, precisely the fact that in order to get on the dole one has to push one’s way through an unpleasant and chaotic tangle of welfare bureaucracy. The Friedman scheme would make the dole automatic, and thereby give everyone an automatic claim upon production.
I can think of any number of parallels. For example, the tax code is thousands of pages (let’s not even talk about IRS regulations and “voluntary” guidance), but the government has no incentive to simplify. If they did simplify, there would be a far more common understanding of the tax system and increased pressure to even further rationalize it. The administrators of the tax system prefer popular ignorance to the disinfectant of transparency.
Furthermore, the system of tax withholding not only makes government spending and budgeting far freer than it otherwise would be, it spares taxpayers the pain of a lump sum payment. Sparing them this pain means sparing the government pressure to reduce individual tax bills. If you think taxes are low now, just imagine how low they would go if you forced the general public to confront the actual reality of how much is confiscated. (Not coincidentally, Milton Friedman was behind the system of mandatory withholding, being a primary driver of the policy when he worked at the Treasury.)
Ultimately, the question for people in favor of a free society is not how things work, but whether they should at all. I understand the appeal of an incrementalist approach – the chances of the Social Security ponzi scheme disappearing because of an act of Congress are perhaps one in a billion. I expect that its ultimate demise will come from bankruptcy and nothing more. In the meantime, however, what good does it do us to make the system more viable? How does it help to prolong the pain?
By necessity this takes us far beyond the mainstream of current public opinion. I do not see this as a bad thing – remember that long term, the world is run by ideas, not issues.
****January 12th Update. Speaking of missing the forest for the trees, Rep. Chellie Pingree misses the forest, the trees, and everything else due to her head being up her own ass. Check out the article by Peter Suderman at Reason. If these are the types of “issues” that people are seriously debating, then I am very proud to say that I am a man of ideas.