Ron Paul dedicates his most recent book, End the Fed, to a host of free-market economists. Curiously absent from this list is Milton Friedman, arguably the greatest free-market economist of the last century. A quick glance at Paul’s favorite websites reveals why: Milton Friedman is a statist, and if you disagree, so are you.
To those familiar with conservative and libertarian thought, this notion should come as a bit of a shock. Milton Friedman wrote volumes in defense of capitalism and individual rights. He was largely responsible for destroying the Keynesian consensus in the early 1970’s, and his accurate prediction of stagflation — plus his effective solutions — swung the economics profession decidedly rightward. His greatest achievement might have been A Monetary History of the United States (coauthored with Anna Schwartz), a book that convinced economists that the Federal Reserve — not the market — caused the Great Depression. An impressive resume to any liberty lover, but to Paul’s beloved Austrian school, Milton is only marginally better than Marx.
Why? The stated ground of disagreement is economic: The Austrians blame banks, and especially central banks for creating business cycles. Banks create credit, and credit creates booms and busts. Friedman, along with most modern economists, accepts a role for central banks in countering business cycles.
But the stated ground reveals a more fundamental difference in outlook than in temperament. Friedman was practical. He wanted to reform modern government, not fulminate against it. Rather than denounce public education, he devised school vouchers. He favored a guaranteed annual income because he accepted that poverty had become a public concern.
The original Austrian school shared much of Friedman’s worldliness. But the Ron Paul Austrians are much more influenced by the conspiracy-minded Murray Rothbard than the sophisticated Friedrich Hayek. Rothbard’s primary contributions to economics are defenses of the thoughts of his and Hayek’s mentor, Ludwig von Mises, and his argument that loose monetary policy during the 1920s caused the Great Depression. But he’s better known for an insistence on ideological purity, a project that led him to convert many of the modern Austrians to “pure” libertarianism: capitalist anarchy.
This makes Rothbard an opponent of Friedman and — it must be said — of Hayek, too. To an anarchist, an acceptance of even minimal government is shortsighted at best or statist at worst. This outlook allows for easy and simplistic solutions. What to do about the economy? Simple: eliminate all government programs. Education reform? Eliminate all government. Energy? Eliminate all government. Monetary policy? End the Fed! (Eliminate all government.)
All this would matter little if not for the influence of Ron Paul. No economist considers Rothbard’s ideas more authoritative than Friedman’s. In 1984, when asked to name two living economists he most admired, Hayek looked outside the Austrian tradition and cited Armen Alchian and George Stigler, two men both associated with Friedman’s Chicago School. But thanks to Paul, young conservatives read End the Fed, focus on Rothbard not Friedman, and obsess over a central bank’s proclivity to lead the nation to war instead of participating meaningfully in the public discourse.
Such participation is possible. Robert Barro, a Harvard economist, credibly argues that the Keynesian stimulus doesn’t work as well as the Paul Krugmans of the world suppose. But Barro also shows a willingness to concede TARP’s merits, and because of this, Paul’s minions will undoubtedly label him a statist and discard his ideas if they ever take hold.
Milton Friedman is a giant, and needs no defense. But conservatism desperately needs defense from an ideology that labels Friedman a statist. If we can’t muster it, the ideas of Rothbard may come to dominate conservative solutions to the nation’s problems. Americans will rightly reject those solutions, and the real statism – Washington’s policies on healthcare and the economy — will continue marching on.