Friedman Hearts Pinochet

Today would have been Milton Friedman’s 100th birthday and, predictably, people on the internet are stumbling over themselves to give rapturous applause. 

In his Nobel lecture, Friedman famously claimed that it was possible to do value-free economics. However, Friedman’s own experience in the policy realm either disproves that claim, or shows Friedman to have had some truly perverse moral values. In “Friedman, Positive Economics, and the Chicago Boys,” Eric Schliesser (Gent) explains the problems with Friedman’s methodology, in part through the lens of his disastrous “shock treatment” advocacy as an adviser to the dictator of Chile:

In this paper I investigate two denials in Milton Friedman’s Nobel Lecture (1976). The first is [i] the denial that ‘Economics and its fellow social sciences’ ought to be ‘regarded more nearly as branches of philosophy.’ The second is [ii] the denial that economics is ‘enmeshed with values at the outset because they deal with human behaviour’. I show that Friedman’s appeal to his methodology in the Nobel lecture fails on conceptual grounds internal to Friedman’s methodology. Moreover, I show that the failure is related to a broader systematic problem: when properly understood, Friedman’s methodology shows that positive economics is (in a non-trivial sense) enmeshed in values. In order to account for Friedman’s overreaching, I turn to the charged social context regarding Friedman’s purported involvement with the Chicago Boys, who were then serving Chilean Dictator Pinochet. I conclude by explaining why I re-open the old chestnut of values in positive science. The episode allows me to raise a question of fundamental import about the relationship between expertise and society.

If you’re not familiar with that historical episode, the gist is that, after the people of Chile democratically elected a leader whose left-of-center policies alarmed the libertarian Cold Warriors, Washington supported a fascist coup to overthrow that democracy, led by a general named Augusto Pinochet. Pinochet devastated Chile through open military oppression but also through radical economic policies suggested by Milton Friedman and his “Chicago Boys” (and let’s not forget Hayek, who was also supportive).

It is possible to celebrate a person’s academic and intellectual achievements while also rejecting their stunted values and personal failings. Sometimes, the latter call the former into doubt.


3 Comments For This Post

  1. isomorphismes Says:

    So I find the “value-free” reference on page 2 of http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/1976/friedman-lecture.pdf but he only says “Value-free economics would be a good thing” and “I argued that it’s possible elsewhere” (The Methodology of Positive Economics [http://www.ppge.ufrgs.br/giacomo/arquivos/eco02036/friedman-1966.pdf]).

    In WP’s words on TWPE:

    The most basic counsel of this essay is to respect John Neville Keynes’s distinction between positive and normative economics, what is vs. what ought to be in economic matters.[1] The essay sets out an epistemological program for Friedman’s own research.

    The essay argues that economics as science should be free of normative judgments for it to be respected as objective and to inform normative economics

    Back to the pseudo-dynamite lecture, MF on page 2 says he will go on to discuss the Phillips Curve.

    If I can get my hand up fast enough I’ll be the first to agree that it’s very hard, probably impossible, to price something in an objective or value-neutral way. Even if we leave the world of retail and say we’re deciding how much building a dam “should” cost, I think there will still be fudge factors and levers to pull, room to manoeuvre and inevitably human parties negotiating over the final number.

    The econ 101 justification I would give for the irradicable existence of fudge factors is how does the surplus get split into producer surplus and consumer surplus? Even on the CME where the bids are all listed “publicly” we still don’t know the “real” supply or demand curve because of strategic bidding, not everyone on Earth being in the market, “maybe if Q were a little bit different it would significantly affect the price’ (Jacobians, slack vectors, convexity), and more reasons I’m not thinking of at the moment.

    But is it theoretically possible to make value-neutral economic judgements? This is what’s so great (one hopes) about Pareto comparisons. If you could somehow, theoretically, get a really truly utilitarian measure of whatever “utility” is (and if that thing is like we speculate it to be), then doing +1 to somebody without making anyone else envious or harming anyone else would, in theory, be a value-neutral improvement.

    Now find me some Pareto-comparable choices irl? I don’t know if I’ve ever seen one.

  2. isomorphismes Says:

    fwiw, imho the appeal to “Washington consensus” or Latin America is just an oblique way of attacking the Chicago school. I think it’s better to face TCS/MF head on.

  3. Jared Woodard Says:

    I think Schliesser’s point is that if you approach economics with some thick moral concepts about what constitutes a good life, then that has implications for policy? Like a) the “revealed preferences” given in market transactions are already shaped by institutional context, something you’ve written about before, and even if they weren’t b) some preferences are actually better than others.

    There’s no generic utility, at best there are some categories of utilities that contribute more or less and in different ways toward becoming a fulfilled person (aka Aristotelian virtues), and if instead we conduct policy so as to treat every preference as equal, we end up with institutions that easily descend toward the basest preferences. I don’t know if I believe any of that, but it’s an interesting view that doesn’t get represented these days except by social conservatives.

    I agree w/ your second comment.

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