The Romance of Economics

Monday, October 30, 2006
this is an image

This past summer, Tunku Varadarajan of the Wall Street Journal sat down with Milton Friedman and his wife of 68 years, Rose. A portrait of two fine minds and one splendid romance.

One doesn’t interview a man like Milton Friedman—the Nobel laureate in economics in 1976 and among the five or six most consequential thinkers of the twentieth century—without doing some assiduous homework.

So I gathered his books—reading some, rereading others—and made pages and pages of notes. I also e-mailed several intellectual heavyweights, asking them what they might enquire of Friedman—now 94 years of age—if they had him cornered at a cocktail party. Replies flooded back. “Inflation targeting,” wrote a (marginally) younger Nobel economist. “Education,” said another Nobel laureate. “Does the recent record of spending with a Republican president and Congress make him reconsider his support for the party?” wrote a man who, until a while ago, worked on economic policy in the White House. “Is there something distinctly difficult for capitalism in the Islamic world?” wondered a Middle East scholar. “What music does he listen to?” a Democratic political economist mused, unpredictably. More predictably, a big-cheese blogger was “dying” to know whether “Milton reads blogs—and will he ever write one?”

this is an image

Everyone had a question—and many had more than one (an economist in Chicago had ten). For Milton Friedman is everyone’s idea of an American oracle, an American sage.

Sages, of course, have their oddities, and the interview—at Friedman’s surprisingly petite office at the Hoover Institution, on the campus of Stanford University—got off to a surreal beginning. By his desk hangs a map of Belize—one of those stylized souvenirs made of cloth, embroidered to catch the eye. Why, I asked him, did he have a map of Belize on his wall? Friedman turned, looked at the object, and said: “I don’t know. I really don’t know.” Not a good start to the interview, some might say; so I asked, by way of an icebreaker, whether he was keeping well. “Oh, yes!” was the spirited reply. “But my wife has gone through a session of shingles, and she’s not quite through it.” Here, he paused, and asked: “Have you had shingles yet?”

Saved by the Belle

Maladies behind us, we moved to economics, and here I made a reflexive apology for not being an economist myself. “You mean you’re not a trained economist,” was Friedman’s comeback. “I have found, over a long time, that some people are natural economists. They don’t take a course, but they understand—the principles seem obvious to them. Other people may have Ph.D.s in economics, but they’re not economists. They don’t think like an economist. Strange, but true.”

If the Friedmans could invite Milton’s favorite economists (dead or alive) to dinner, who’d be invited? Adam Smith, Alfred Marshall, John Maynard Keynes, and George Stigler.

Was Keynes a “natural economist”? “Oh, yes, sure! Keynes was a great economist. In every discipline, progress comes from people who make hypotheses, most of which turn out to be wrong, but all of which ultimately point to the right answer. Now Keynes, in The General Theory of Employment, Interest and Money, set forth a hypothesis that was a beautiful one, and it really altered the shape of economics. But it turned out that it was a wrong hypothesis. That doesn’t mean that he wasn’t a great man!”

It cannot be said of too many economists that they “altered the shape of economics.” Would Friedman say—modesty aside—that he was one of them? A long silence ensued—modesty, clearly, was hard to put aside—before he mumbled, as if squeezing words out of himself, “Er . . . very hard to say. . . .” And then he was saved by the belle: The door opened, and in walked Rose, his wife, bringing a waft of panache into the drab office, her impact enhanced by a beautiful mink coat—worn, it should be said, on a late afternoon when it was 80 degrees outside. “It will be very cold tonight,” she forecast with a shiver. The Friedmans were dining al fresco that night—along with 1,200 others at the Stanford Quad—and Rose had come prepared for the mercury to plummet to, oh, the low 60s. “It’s a crazy time to have a dinner outside!”

this is an image

Mrs. Friedman settled herself in a chair, her eyes twinkling, and my questioning resumed. If they were to throw a small dinner party—indoors!—for Mr. Friedman’s favorite economists (dead or alive), who’d be invited? Gone was his tongue-tiedness of a moment ago, as he reeled off this answer: “Dead or alive, it’s clear that Adam Smith would be No. 1. Alfred Marshall would be No. 2. John Maynard Keynes would be No. 3. And George Stigler would be No. 4. George was one of our closest friends.” (Here, Mrs. Friedman, also an economist of distinction, noted sorrowfully that “it’s hard to believe that George is dead.”)

Had it helped their marriage—now in its 68th year—that they are both economists? Rose (nodding affirmatively): “Uh-unh. But I don’t argue with him . . . very much.” Milton (guffawing): “Don’t believe her! She does her share of arguing. . . .” Rose (interrupting): “. . . and I’m not competitive, so I haven’t tried to compete with you.” Milton (uxoriously): “She’s been very helpful in all of my work. There’s nothing I’ve written that she hasn’t gone over first.”

Some people are natural economists. They don’t take a course, but the principles seem obvious to them. Other people may have Ph.D.s in economics, but they’re not economists. They don’t think like an economist.

The spark between the Friedmans is clear, and rather touching. So I’m tempted to ask whether there is a romantic side to economics, in the way there is to history or to philosophy. “Is there a romantic side to economics?” Mr. Friedman repeats after me, sounding incredulous, and then chuckling. “No, I don’t think so. There’s a romantic side to economics in the same way there’s a romantic side to physics. Fundamentally, economics is a science, like physics, like chemistry. . . . It’s a science about how human beings organize their cooperative activities.” Was that his preferred definition of economics? “Well, the standard definition is the study of how a society organizes its resources. In that sense, it’s not particularly romantic.”

The Melting Pot

Is immigration, I asked—especially illegal immigration—good for the economy or bad? “It’s neither one nor the other,” Mr. Friedman replied. “But it’s good for freedom. In principle, you ought to have completely open immigration. But with the welfare state it’s really not possible to do that.
. . . She’s an immigrant,” he added, pointing to his wife. “She came in just before World War I.” (Rose—smiling gently: “I was two years old.”) “If there were no welfare state,” he continued, “you could have open immigration, because everybody would be responsible for himself.” Was he suggesting that one can’t have immigration reform without welfare reform? “No, you can have immigration reform, but you can’t have open immigration without largely the elimination of welfare.

“At the moment I oppose unlimited immigration. I think much of the opposition to immigration is of that kind—because it’s a fundamental tenet of the American view that immigration is good, that there would be no United States if there had not been immigration. Of course, there are many things that are easier now for immigrants than there used to be. . . .”

Did he mean there was much less pressure to integrate now than there used to be? Milton: “I’m not sure that’s true . . .” Rose (speaking simultaneously): “That’s the unfortunate thing. . . .” Milton: “But I don’t think it’s true. . . .” Rose: “Oh, I think it is! That’s one of the problems, when immigrants come across and want to remain Mexican.” Milton: “Oh, but they came in the past and wanted to be Italian, and be Jewish. . . .” Rose: “No they didn’t. The ones that did went back.” Mrs. Friedman, I was learning, often had the last word.

The Power of the Market

With Mr. Friedman, personal questions are often inextricable from the currents of history. How did he cope, I ask, with the great opposition to his views in and out of the economics profession during much of his active career? And how does it feel to have gone from being a person reviled in certain quarters as evil, to one revered across the world?

Had it helped their marriage that they are both economists? Rose (nodding affirmatively): “Uh-unh. But I don’t argue with him . . . very much.” Milton (guffawing): “Don’t believe her! She does her share of arguing.”

Milton (suppressing a laugh): “I don’t think I was ever regarded as ‘evil.’” Rose (alluding to the protests that followed him everywhere, especially after he gave economic advice to the Pinochet regime): “It was very difficult to go to the colleges. . . .” Milton: “I remember a fellow who came to see me from Harvard or somewhere . . . he wanted to see ‘that devil from the West’!” Rose: “Harvard probably still feels that way!”

this is an image

Here, Mr. Friedman explains “the story of the postwar period” in the United States. “In 1945–46, intellectual opinion was almost entirely collectivist. But practice was free market. Government was spending something like 20–25 percent of national income. But the ideas of people were all for more government. And so from 1945 to 1980, you had a period of galloping socialism. Government started expanding and expanding and expanding.” Mr. Friedman stopped, as if deciding whether to use the word expanding a fourth time, before continuing: “And government spending went from 20 percent to 40 percent of national income.

“But what was happening in the economy was producing a reverse movement in opinion. Now people could see, as government started to regulate more, the bad effects of government involvement. And intellectual opinion began to move away from socialism toward capitalism. That, in my view, was why Ronald Reagan was able to get elected in 1980.” I noted, here, that Mr. Friedman, too, had some role to play in this shift in opinion. He was, characteristically, reluctant to take any credit. “I think we have a tendency to attribute much too much importance to our own words. People saw what was happening. They wouldn’t have read my Newsweek columns and books if the facts on the ground hadn’t been the way they were.” (Rose: “Oh, don’t be so modest!”)

Does it disappoint Mr. Friedman that the Bush administration hasn’t been able to roll back spending? “Yes,” he said. “But let’s go back a moment. During the 1990s, you had the combination that is best for holding down spending. A Democrat in the White House and Republicans controlling Congress. That’s what produced the surpluses at the end of the Clinton era, and during the whole of that era there was a trend for spending to come down. Then the Republicans come in, and they’ve been in the desert, and so you have a burst of spending in the first Bush term. And he refuses to veto anything, so he doesn’t exercise any real influence on cutting down spending. In 2008, you may very well get a Democratic president”—(Rose, interjecting: “God forbid!”)—“and if you can keep a Republican House and Senate, you’ll get back to a combination that will reduce spending.”

Mr. Friedman here shifted focus. “What’s really killed the Republican Party isn’t spending, it’s Iraq. As it happens, I was opposed to going into Iraq from the beginning. I think it was a mistake, for the simple reason that I do not believe the United States of America ought to be involved in aggression.” Mrs. Friedman—listening to her husband with an ear cocked—was now muttering darkly.

Milton: “Huh? What?” Rose: “This was not aggression!” Milton (exasperatedly): “It was aggression. Of course it was!” Rose: “You count it as aggression if it’s against the people, not against the monster who’s ruling them. We don’t agree. This is the first thing to come along in our lives, of the deep things, that we don’t agree on. We have disagreed on little things, obviously—such as, I don’t want to go out to dinner, he wants to go out—but big issues, this is the first one!” Milton: “But, having said that, once we went in to Iraq, it seems to me very important that we make a success of it.” Rose: “And we will!”

Mrs. Friedman, you will note, had the last word.