Beyond Self-Interest
Free to Choose: A Personal Statement.
by Milton and Rose Friedman.
Harcourt Brace Jovanovich. 338 pp. $9.95.
Milton Friedman is the economist my intellectual mentors warned me against. The censors of the Left always spoke his name in a certain way: an ideologue, trapped in abstractions, out of touch with reality—dangerous, too. So it surprised me to encounter Milton Friedman, the man, on television in his recent series on PBS called, like the book he has written with his wife, Free to Choose. He is smaller and looks far more vulnerable than I had expected. There is about him none of the hauteur of John Kenneth Galbraith. Friedman’s English retains traces of the accents of working-class New York; he strives for plainness and street sense.
The ten television programs are fun. They are at times even startling, since those of us who grew up in the democratic-socialist tradition have not often had to confront an effective champion of capitalism. Arguing as the viewer must with Friedman is not like arguing with the Chamber of Commerce. In tone of voice, intellectual bent, and style of argument, Milton Friedman seems like “one of us.” Where did he—or we—go wrong? Watching Friedman on television was, for me, a sort of journey of self-criticism.
As engaging as the television shows are, the book that accompanies them is more difficult. The Friedmans do not write with the elegance or wit of Professor Galbraith, and they load chapter after chapter, like freight cars, with heavy burdens of fact. The statistics they offer are fascinating, since they usually challenge the conventional wisdom and one has to linger over them to absorb them, but this makes the book slow going. Reading the Friedmans is not a free lunch. Perhaps for this reason, among others, some critics on the Left have voiced the hope that not many people will read the book; unfortunately for them, Free to Choose—like William Simon’s untouted A Time for Truth two years ago—is assaulting the top of the best-seller lists.
The ten chapters of the book follow exactly the outline of the ten television shows. The Friedmans begin with “The Power of the Market” and then discuss each of the major problems of political economy faced by our nation and others: controls, the monetary crisis, security, equality, the schools, consumers, workers, and inflation. They conclude with a chapter reflecting on “the new tide” in political economy.
Milton Friedman’s thought is coherent and consistent, so that much depends on the power of his premises. As it turns out, they are a little different from their conventional definition. “The key insight of Adam Smith’s Wealth of Nations,” in Friedman’s view,
is misleadingly simple: if an exchange between two parties is voluntary, it will not take place unless both believe they will benefit from it. Most economic fallacies derive from the neglect of this simple insight, from the tendency to assume that there is a fixed pie, that one party can gain only at the expense of another.
Not only a few economic fallacies, entire schools of political economy are based on a denial of this “simple insight.” One is drawn to consider it more closely.
Friedman does not argue that economic decisions are made in the best of all possible worlds. Nobody has “purely” voluntary choices; in the real world, every economic agent is constrained by his own resources and by circumstances beyond his control. In any given transaction, some agents have more freedom to choose than others. For example, an employer offering jobs in circumstances of massive unemployment has more freedom to choose which workers to hire than workers have freedom to choose which jobs to accept. In the real world, moreover, both employers and labor pools migrate; they have freedom to choose places. But no one is perfectly free.
In Friedman’s view, however, the “zero-sum game” school of political economy misses the factor of growth. It is true that shares in economic growth are not equally distributed, and that some gain more than others. Still, real growth has vindicated the promises of democracy by raising the living standards of all, not only of productive workers but also of the poor and the unemployed. Such growth has the further effect that the children of the poor, better nourished and better educated, have opportunities to leapfrog into higher circles, generating some real circulation of elites. While various income groups over time may not differ much in their proportional share of national income or national wealth, individuals within cohorts rise (and fall) from one level to another. Such events are possible because growth generates mobility, dynamism, and structural change in opportunities. A “no-growth” economy, by contrast, tends to freeze individuals in place.
Marxists like to argue that markets, especially labor markets, are only “formally” free; in reality, they say, workers remain “wage slaves” and are treated like “commodities.” Some commodities. Workers have proven to be far from inert masses. They migrate, organize, take jobs and quit them, seize opportunities to improve their condition, upgrade their skills, treat the economy as a ladder, and (in good proportion) educate their children to surpass their own attainments. At least, they do these things where markets are free and economies dynamic. Without question, workers have less “freedom to choose” than investors or employers. But it is more than patronizing—it is plainly wrong—to imagine that they value economic freedom less than their “betters.” Many of us can recognize Friedman’s point in the differential histories of members of our own (poor, working-class) families.
Max Weber once said that it is a “kindergarten” notion to think that capitalism introduced self-interest, acquisitiveness, and greed into the world. Such qualities are universal among humans in every political economy, including socialist economies. Friedman points out that the “self-interest” identified by-Adam Smith is a cut or two above the “acquisitiveness” which socialists like R. H. Tawney believe to be the mainspring of capitalism:
Economics has been berated for allegedly drawing far-reaching conclusions from a wholly unrealistic “economic man” who is little more than a calculating machine, responding only to monetary stimuli. That is a great mistake. Self-interest is not myopic selfishness. It is whatever it is that interests the participants, whatever they value, whatever goals they pursue. The scientist seeking to advance the frontiers of his discipline, the missionary seeking to convert infidels to the true faith, the philanthropist seeking to bring comfort to the needy—all are pursuing their interests, as they see them, as they judge them by their own values.
The mainspring of the market system, for Friedman, is not self-interest, narrowly conceived, but rational self-interest, as determined by rational individuals choosing for themselves.
Finally, there is Friedman’s consistent and constant emphasis on the individual. It is this insistence that most marks Friedman as a “liberal” thinker, before liberalism (in the 1930’s) came to be thought of as “collectivist liberalism.” Friedman is by no means a conservative of the school of Edmund Burke, who in the 18th century denounced the acid erosions which he saw the free market and the free individual pouring upon the organic connectedness of traditional community life. Burke celebrated the rationality of tradition; Friedman celebrates the free choices of the rational individual. Friedman, as Capitalism and Freedom (1962) already made clear, stands in an intermediate position between conservatives like Burke, Churchill, Russell Kirk, T.S. Eliot, etc., and “collectivist liberals” like Roosevelt, John Dewey, Galbraith, etc.
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Two features in Friedman’s thought seem to me inadequate.
First, although he does see that political freedom and economic freedom are indissolubly connected in the world of fact (if not in the world of logic)—and this is a tremendously important insight—he misses the extent to which the economic system is only one-third of the entire social system he means to defend. Besides its economic component, this system has both a political component and a moral-cultural component. One cannot understand the behavior of Americans without grasping the many ways in which these three nourish, guide, and restrain one another.
Friedman is right to argue that in practice there can be no real political freedoms or moral-cultural freedoms if human beings are not free to make their own economic choices about their labor, earnings, investments, and purchases. As Marx might say (with quite different intentions), economic realities underlie both political and moral-cultural possibilities. But those who care about economic liberties must at the same time see that these can be maintained only through political liberties and moral-cultural liberties.
As an economist, Friedman tends to see the other two systems chiefly from the perspective of the economic system. Yet, despite himself, he has been led in recent years to become an effective activist in political struggles to safeguard what he loves. His foray into public television indicates, as well, that he now sees the necessity of becoming engaged in the struggle over ideas, over culture. But his theoretical framework remains too far tilted toward one pole to permit him to describe this threefold system as a whole.
Thus, for example, in defending the economic autonomy of the corporation, Friedman is inclined to assign to it minimal responsibilities in the political and cultural spheres. But if economic liberties can survive only in certain political systems and under certain moral-cultural presuppositions, then economic agencies like corporations cannot escape non-economic obligations. Their responsibilities to society are larger, in the real world, than the chaste logic of economic automony envisages.
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The mention of society brings me to the second inadequate feature in Friedman’s thought—the fact that he relies too heavily on an abstract notion of the individual. To my mind, the most important features of capitalism are its social structures. To begin with, there are the virtues on which a capitalist system depends—habits of hard work, reliability, cooperativeness, risk, a zest for independence and self-reliance, and the like. While these habits are practiced by individuals, they are taught by culture and transmitted by society.
Then there are the economic practices of families, by which, often enough, some individuals (usually in the older generation) sacrifice their own consumption so that others (usually their children) can attain the sorts of education and experience that will improve the economic well-being of the family as a whole. Classical economists often talk as if rational self-interest were centered in the self. The human reality is far more often family centered.
If the single greatest emphasis of capitalism is on the corporation, this too is more a social reality than a domain of rugged individualism. Corporate behavior is, if anything, difficult for rugged individualists; it is often faulted for being excessively other-directed, conformist, and bureaucratic. On the other side, for many workers today (on the line as in the office), there is greater camaraderie, fellowship, and social life at work than they find at home.
Finally, the market itself is a social organism. Many critics of the market see it as impersonal, alienating, interested only in the “cash nexus.” Friedman is right to turn these criticisms upside-down in order to give credit to the market for its refusal to respect persons and for its inner imperative to treat all comers equally and without regard to religion, ethnicity, race, or class. But the impersonality of the market also makes it an equalizer, a teacher of tolerance, a way out of the ghettos of the past. Wherever the market goes—as into the American South after World War II—the ancient forms of organic connectedness, whose qualities were celebrated by Edmund Burke, must yield to new forms of openness, mobility, and tolerance.
By the very clarity of his logic, Milton Friedman forces us to break with much of the conventional wisdom with which we grew up. At the same time, he invites us to take a larger—a more social, communal, inclusive—view of the system in which we live than he has yet done himself.
