Inflation and the Reanimation of Dead Ideas

The cover of the July-August edition of The New Republic features an interesting image of a well-known man whom one might not recognize unless one reads the blurb: “The Second Death of Milton Friedman.” On the opposite side of the cover, we read: “The economist died in 2006. And now, his pernicious and reactionary ideas are finally dead, too.”

So much death! And that alarming word “reactionary“ would suggest that Dr. Friedman wanted to take America back to some unsavory past. Egad, and just when things were going so well. But, since huge sectors of the U.S. economy haven’t operated under free-market capitalism for about a century, maybe a little “reaction” is just what the doctor ordered. Why not go all the way back to the late 1800s, when America had some real economic freedom.

TNR’s cover story for its summer edition is by one Zachary D. Carter. Because Mr. Carter’s “The End of Friedmanomics“ is long, and TNR gives a reader only three free reads, if one doesn’t have the time to read it all in a single sitting, then one may want to save it to one’s hard drive (see NOTE below for tips). But since the article is a mite long, the question becomes -- Is it worth one’s time?

Despite disagreeing with his conclusions, this reviewer recommends Carter’s article. Where Carter does well is in his history of Friedman’s career, which went from being a bureaucrat in FDR’s administration to being a feted bona fide celebrity (insofar as economists can be celebrities).

Carter also does a decent job of tracing the evolution of Friedman’s thought, as well as treating some of his pet ideas, like school vouchers, his libertarian positions, and his take on voting: “True democracy, Friedman insisted, was to be found not through the franchise, but the free market, where consumers could express their preferences with their unencumbered wallets.”

Where Carter does less well is in his treatment of inflation and Friedman’s economic philosophy: Monetarism. Carter asserts that: “Friedman’s major theoretical contribution to economics -- the belief that prices rose or fell depending on the money supply -- simply fell apart during the crash of 2008.”

But is that so? Carter fails to provide proof. The seriousness of the 2008 financial meltdown notwithstanding, a better test of Friedman’s ideas on inflation might well be what’s happening right now.

Congress is pumping vast amounts of money into the economy, even paying people not to work, and inflation is worse than it’s been in years. There’s even talk of hyperinflation. The current inflation situation seems like nothing less than a vindication of Friedman.

Perhaps Friedman’s most famous maxim is: “Inflation is always and everywhere a monetary phenomenon.” In July, “President” Joseph R. Biden tried to allay our fears about inflation by asserting: “There’s nobody suggesting there’s unchecked inflation on the way -- no serious economist.”

Notice Biden’s qualifier, “serious.” And Carter also writes that “few serious economists today accept Friedman’s hard divide between economic fact and political reality” (whatever that means). Carter quotes former hedge fund economist Skanda Amarnath: “Whether people openly admit it or not, [Friedman’s] monetary views are no longer included in serious analysis.”

Again, that depends on what the meaning of “serious” is. By “serious,” maybe these guys are referring only to economists who agree with them; economists who don’t agree with them are simply not “serious.” But whether “serious” or not, a lot of practitioners of the “dismal science“ are talking about inflation right now. And the real rate of inflation may be a lot higher than what the government is telling us.

So who is this Zachary D. Carter, and where does he get off sniping at one of America’s great economists? Well, he’s supposedly a “writer in residence” at Omidyar Network and Hewlett Foundation. I didn’t find any info on him at those two websites.

However, Carter does have his very own website, which seems to mainly be a promo for his book. But if one goes down to the bottom, there’s a bit of a bio, and there we learn that Carter studied philosophy and politics in college. We see nothing about a degree in economics. Also, over ten years at HuffPost, Zachary covered, among other things, “the fight over the future of the Democratic Party.” Perhaps Carter isn’t quite as objective as one should be when opining about what is supposedly a science:

When Friedman passed away in 2006, Larry Summers… acknowledged the success of Friedman’s attack on the very legitimacy of public power within his own party. “Any honest Democrat will admit that we are now all Friedmanites,” he declared in The New York Times.

No longer. In the early months of his presidency, Joe Biden has pursued policy ambitions unseen from American leaders since the 1960s. If implemented, the agenda he described in an April 28 address to Congress would transform the country -- slashing poverty, assuaging inequality, reviving the infrastructure that supports daily economic life, and relieving the financial strains that childcare and medical care put on families everywhere. It will cost a lot of money, and so far at least, Biden isn’t letting the price tag intimidate him. “I want to change the paradigm,” he repeated three times at a press conference in March.

In being so enthusiastic about the Biden “presidency,” Carter exposes himself as a left-wing ideologue, a “true believer.” Although his reporting on Friedman’s intellectual evolution and career seems fair and balanced, the deeper one reads into Carter’s article, the more partisan and unreliable it gets. And in his “Act V” and his “Epilogue,” Carter gets his full freak on, becoming “dismissive, even derisive.”

It’s in his interpretations and conclusions that Carter goes wrong. For instance, Carter asserts that “Obama ultimately devoted more political energy to reducing the long-term federal budget deficit than to combating economic inequality.” Notice that Carter doesn’t say that Obama actually reduced the deficit, only that he “devoted energy” to it. The quality of Carter’s article is very mixed, and that’s the very reason I’m recommending it. We all need to be better at separating the wheat from the chaff. Reading Carter’s article can be an exercise in trying to become more alert to slanted rhetoric, some of which can be slyly subtle.

Milton Friedman was a serious economist, so we should ask whether our Mr. Carter really understands him. Friedman was also a mensch, and from what I’ve read a gentleman. One wonders what Friedman would think of Congress’s current spending spree as well as the Federal Reserve’s current money-printing, inflating the money supply. We might also question whether Friedman’s ideas are really as pernicious, reactionary, and dead as Zach Carter claims they are.

NOTE: The way this kid saves articles is by hitting Ctrl P, but instead of sending them to a printer, which I don’t have, I specify in Destination: Save as PDF. Also, in the More settings/Options at the bottom, be sure to leave Headers and Footers unchecked, or the text on the very bottom of each page may get overlaid.

Jon N. Hall of ULTRACON OPINION is a programmer from Kansas City.

Image: MaxPixel

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