Saturday, November 18, 2006

Milton Friedman - A great light is extinguished

Milton Friedman, probably one of the most towering intellectuals of the 20th century died this week at the age of 94. Friedman's laissez-faire policies of economics helped influence the Reagan and Thatcherian revolutions and significantly altered and dimisnishedthe role of the state in economic policy. His ideas were revolutionary and he bravely pushed them long before they were popular. I did not agree completely with his "market is the panacea to all of society's ills" approach but he was more often right rather than wrong.

He visited India in the mid to late 50's at the invitation of Prime Minister Jawharlal Nehru. He was the lone voice that advised Nehru to go with a less interventionist approach to economic policy. Nehru dismissed his ideas and India embarked upon the Soviet style planned economic approach. The results were terrible and resulted in India becoming a laggard amongst most Asian nations until the Manmohan Singh reforms in 1991 pulled it out of its economic tail spin. Who knows where India would be today if Friedman's ideas had been adopted in the 60s? I would think it could have been at least as big as Japan if not bigger.

Friedman's influence in the United States was huge. The New Deal and Great Society programs were direct results of the Keynesian school of economics (the great competitor to Friedman's Monetary School). Keynsians were largely ascendant till the late 70s when Friedman's ideas greatly reduced their prestige. In addition China from roughly 1977 started applying Friedman's ideas and that has greatly contributed to the current economic miracle.

As an Economics student in the early 90s I was fascinated by Friedman. I remembered watching him on a PBS documentary where he used a pencil as an example of how the invisible hand of the market guided and set prices that caused the pencil to come into being. Rubber from Malaysia, Aluminum from Chile, Lead from Africa and Balsa wood from South America all combined to make the pencil. None of the producers knew each other or had direct relationships. However the end result was a useful product sold at a competitive price free of government control. If each individual producer was satisfied then the end consumer was satisfied. It was a simplistic example but a powerful one.

I did not agree with his opinions on minimum wage. I have always believed the market to be efficient but not fair. As a liberal I believe government has some role in the economy and needs to address the inherent injustice that markets sometimes bring. Friedman would have disagreed vehemently with that sentiment.

He was a great man, a shining light and one of the truly great minds of the 20th century. He will be missed but his ideas never forgotten as long as there are individuals who seek liberty and a better life free of undue and unnecessary government influence.


Blogger Smirthi_ladella said...

Very interesting

7:15 PM  

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