Re-considering Milton Friedman

The New York Times’s pop-philosophy blog, The Stone, has a new post up on why conservatives should re-read Milton Friedman. There are two important themes in this post: 1) a common misconception about the relationship between markets and morality and 2) a common game of “gotcha” that critics of markets often play with market advocates.

First, Gary Gutting, the post’s author, observes that Friedman places side-constraints on how firms and individuals may act in a free-enterprise system–maximize your goals, but don’t collude with, defraud, or coerce others. But Gutting draws a curious inference from the existence of these constraints:

This qualification acknowledges a key restriction on the maximization of profit. More important, it commits Friedman to the principle that there can be restraints on the capitalist system that are not self-imposed but rather imposed by the society that employs this system for its own purposes…. It follows that, on Friedman’s own account, capitalism is not an economic system that operates independently of the political system in which it is embedded. It is a creature of that system, which has goals (of morality and social responsibility, for example) that go beyond the profitable exchange of goods

In other words, Gutting argues that side-constraints both are necessarily exogenous to market processes (“not self-imposed) and an artifact of government (“imposed by the society that employs this system for its own purposes”).

Concerning his first point, Gutting misunderstands the relation of constraints to business activity. The constitutive feature of business isn’t “maximizing profit”–criminal enterprises do that–but consensual  exchange. And if we unpack what “consensual exchange” requires, we see that it includes at least some constraints such as disclosure of relevant information and non-coercion.

It also doesn’t follow that these constraints are what Gutting calls “social” values. These constraints instead seem to reflect the interest of the individual parties to the exchange, not a social aggregation. A social entity isn’t an existential condition for the authority of these values–rather, each and every one of us intuitively has the authority to demand non-deception and non-coercion.

Second, if Gutting really thinks Friedman’s thought provides common ground for us to argue about economic policy, Gutting should be prepared to honestly reconsider his own views rather than play “gotcha!” with Friedman’s students. Gutting observes that Friedman supported a negative income tax, but Friedman also criticized the minimum wage for its unintended harms to the poor, objected to paternalistic regulation, and opposed tuition subsidies for higher education. It’s not clear to me that conservatives have more to learn from re-reading Friedman than Gutting himself does.

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