Arnold Kling  

A Conversation with Jeffrey Friedman

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Although I missed his appearances at AEI and Cato (videos here and here, respectively), I talked with Jeffrey and his wife, Shterna, in a coffee shop. I did not take any notes. He was in town to talk about his book, Engineering the Financial Crisis, but we did not discuss that. Instead, we mostly talked about our differing paths to libertarianism. His began when he was much younger, and I infer that his views became somewhat more nuanced over the years.

Friedman, who studied philosophy, history, and politics, but not economics, sees the essential insight of Austrian economics to be the fact that people have limited knowledge. Very limited knowledge, in fact, based on differing sources of information and outlook. I would note that the issue of what people know is a source of the division between mainstream and heterodox economics, nearly independent of political orientation. The mainstream views at MIT and Chicago treat information as nearly complete and homogeneous. Yes, there are stylized treatments of asymmetric information and uncertainty, but they are not what I see in (some) heterodox Keynesian or Hayekian thinking.

Friedman also insists on treating ideology as real. The temptation is to reduce ideology--particularly an ideology that differs from your own--to something else. You explain away the other person's beliefs, even as your opponent tries to explain away yours. See one of my favorite topics, the illusion of asymmetric insight.

Friedman winces when I describe progressives as elitist. He sees no elitism in the views of the founding progressive philosophers. He says that if you go back to the first half of the twentieth century, populism and progressivism got along. Only in the last thirty years, when issues like immigration and America's status in the world have become populist hot buttons, have progressives lined up with elites and anti-progressives lined up on the populist side. On the issue of limited government, popular support for conservatives is tepid at best. And the farther you go back in time prior to Ronald Reagan, the more one finds limited government to be the elitist position, rather than the populist one.

Here, I think that David Hackett-Fischer's analysis of American culture, as popularized in Walter Russell Mead's Special Providence, comes to mind. Mead's Jacksonians are the populists. Over the past thirty years, they and the liberal intellectuals have developed an animosity toward one another. But that does not mean that Jacksonians have a permanent ideological commitment to free markets.

I think this view is a pretty discouraging one for libertarians. Note that we tend to take the progressive side on the very issues where progressives are least popular.

However, pushing back a bit, I think that there is something inherently elitist about the progressive project. Agencies like the Fed and the FDA are supposed to be run by experts, not by "the people."

Friedman says that he thinks that too many economists prefer an incentives-based argument (public choice theory) against government intervention to an argument based on the concern that experts are ignorant. This may be where he and I most completely intersect. I think it is difficult to argue for progressive approaches to policy if one is keenly aware of the ignorance of experts and the value of competition in sifting out errors. Instead, I believe that once one takes the view that even experts or organizations can suffer from what he calls "radical ignorance," the consequentialist arguments for exit over voice, and hence for libertarianism, become compelling.

Reader Antonio Foglia recently sent me an essay that includes this great line:


Financial markets are the worst allocators of resources, except for all the others that have been tried.

This variation on Winston Churchill's evaluation of democracy is a good expression of the view that takes ignorance seriously.

This ties in with another topic we discussed, which is the relationship of Jews to libertarianism. Although there are prominent Jewish figures (Rand, Mises, Rothbard, Milton Friedman), to a great extent the libertarian movement and Jews have shunned one another.

This is starkly in contrast with Communism. Ilya Somin wrote recently,


the overrepresentation of Jews in the movement was also caused by at least two specifically Jewish factors. First, communism disproportionately appealed to intellectuals generally. They liked its utopian nature and its seeming logical rigor. While the vast majority of Jews are not professional intellectuals, Jews are disproportionately represented in that group. Any movement that appeals to intellectuals will also tend to have a relatively high proportion of Jewish members.

Emphasis added. What does this say about libertarianism? That it is not intellectual enough to appeal to Jews? Jeffrey Friedman's life mission, embodied in his journal Critical Review, has been to increase the intellectual heft of libertarianism.

Now might be a good time to re-read this post and the essay by Jeffrey and Shterna to which it refers. In their view, too often libertarian economists over-simplify by emphasizing incentives. Intellectuals hear that as a description of a world governed by greed, which suggests that there must be a better way. It would be better for libertarians to emphasize complexity and the relative ignorance of the individual when compared to the process of market evolution.


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CATEGORIES: Political Economy



COMMENTS (21 to date)
Chris writes:

"to a great extent the libertarian movement and Jews have shunned one another."

i would guess that jews form a substantially higher proportion of the libertarian movement than they do society as a whole.

David R. Henderson writes:

Excellent post, Arnold.

John Samples writes:

Indeed, a fine post.

Philo writes:

Note that progressive institutions such as the Fed and the FDA put experts in *commanding* rather than merely *advisory* positions; that is what makes them *elitist*. Even someone with an exaggerated respect for the attainments of experts might have libertarian or populist reservations about handing them coercive power.

Mike Rulle writes:

This question may be a non-sequitur.

You have given some light support or "experimental support" to Scot Sumner's NGDP targeting hypothesis for the Fed. While not attributing Scot's views to you, he appears to assert that a great proportion of our economic troubles has been the result of the Fed being too tight (he does sometimes seem to veer dangerously close to tautology) despite the superficial appearance of easing. The evidence of tightness is low NGDP.

Question. In fiscal and regulatory matters, the commanding heights appear inferior to letting markets act "locally" within a solid framework of rule of law and property rights. How does this square with NGDP targeting which almost has a magic elixir "commanding heights" feel to it? Nothing could be more removed from "local knowledge" than a theory of NGDP given its over arching dominance in Sumner's theory.

Is the answer that we need NGDP as a precondition for any growth oriented economy? That cannot be right.

Taimyoboi writes:
"He sees no elitism in the views of the founding progressive philosophers. He says that if you go back to the first half of the twentieth century, populism and progressivism got along."

I think Jonah Goldberg's book has a different take there. The eugenics movement comes to mind as a counter-example of populism and early progressivism going hand-in-hand.

Mark Little writes:

Yes, great post.

The Jacksonian revolution was indeed populist, but that was long before the Progressives. Populists are no friends to libertarianism, but progressive are worse, and essential elitists.

Reading the post, I was about to cite Goldberg's Liberal Fascism but I see Taimyoboi beat me to it. We see the problems of today and think things must have gone downhill, but the nadir of freedom in the US may well have been at the peak of the progressive movement, with the Wilson administration. (I seem to remember reading a quote from his correspondence that at one point during the Great War even that arch progressive TR expressed fear that he could not be too candid, lest the P.O.'s inspectors read his letter and jail him as a subversive. We can only wish for a modern Harding to campaign for Normalcy, but the current Republican front runner doesn't seem to offer much there.)

James writes:

I don't get Friedman's objection to arguments about incentives. A mountain of evidence supports the view that incentives matter. Why avoid pointing out the implications of this fact?

Jeff writes:
Intellectuals hear that as a description of a world governed by greed, which suggests that there must be a better way. It would be better for libertarians to emphasize complexity and the relative ignorance of the individual when compared to the process of market evolution.

I agree with the first sentence, but not necessarily with the second. Smart, ambitious do-gooders probably don't want to hear that the world is too complex for them to make a difference by trying to run other people's lives. Especially when there are cushy government jobs (uh oh, public choice rearing its ugly head again) in it for them.

Chris writes:

"Only in the last thirty years, when issues like immigration and America's status in the world have become populist hot buttons, have progressives lined up with elites and anti-progressives lined up on the populist side."

It's more complicated than that. In the 1920s, Republican presidents were opposed to immigration, for example. For the most part, even the Southern Democrats who who supported the New Deal were more likely to be racially progressive, and those opposed to it more racially conservative. See Eric Schickler's forthcoming article in Studies in American Political Development. Also see Schickler and Karol on Congressional voting, in which Northern Democrats were more liberal on race than Republicans by the 1940s. (It is true that many staunch opponents of the New Deal were anti-Prohibition). Barry Goldwater wound up being a supporter of abortion rights but he, along with many other conservatives, supported school prayer in the 1960s.

If you have information to the contrary, I'd like to see it.

Dain writes:

"It would be better for libertarians to emphasize complexity and the relative ignorance of the individual when compared to the process of market evolution."

And therein lies the rub. It's unlikely a POV that emphasizes what we CAN'T know will appeal to intellectuals.

djf writes:

Contrary to the implication of Chris's comment, the progressives (and organized labor) generally favored limiting immigration in the early 20th century. It is true, of course, that many Republicans were also anti-immigration (and it should be noted that some progressives were Republicans, e.g., LaFollette), but, for reasons that should be obvious, big business interests - generally represented by Republicans - favored allowing more immigrants to enter the country in the late 19th and early 20th century, and that view prevailed until the mid-1920s. In opposing immigration, the progressives were aligned with the populists of the time, which supports Arnold's point.

As to prohibition, progressives were among the supporters of that misguided cause.

liberty writes:

"And therein lies the rub. It's unlikely a POV that emphasizes what we CAN'T know will appeal to intellectuals."

Except for complexity theorists, physicists, and philosophers.

liberty writes:

Also, is it me, or does it seem like all those tests and examples of violent tribalism in "the illusion of asymmetric insight" thing, whatever truth they might contain, relied almost or entirely exclusively on societies of boys/men?

Any chance women would act even slightly differently? Any chance a mixture of the genders could produce a more balanced societal reaction? .... er, nah, of course not. Just silly female thinking. The genius (male) researchers would have thought of that if it had any merit.

fundamentalist writes:
Q: How would you break down that hostility to capitalism? A: By de-emphasizing "Incentives matter" and instead emphasizing that "unintended consequences matter."

Forgive me, but that seems really simplistic to me. I don’t think the left’s ideology is based on a misunderstanding of what the right means or even ignorance of economics. If it were that simple, then the debate would not have lasted centuries.

The debate about markets goes back to the Dutch Republic of the 16th century. Until the Dutch Republic, the honorable means to greater wealth were looting in war, kidnapping for ransom and accepting bribes as a state official. Commerce was considered evil.
The Dutch made those means to wealth illegal and implemented the teachings on property and markets of the 16th century Church Scholastics of Salamanca, Spain.

As Deirdre McCloskey points out in her series of books on bourgeois values, the attitude toward commerce changed at that time and for the first time in history. But it didn’t change for everyone. Those who looked favorably on commerce were a minority. The nobility, the very poor and most theologians opposed the new values vehemently. The opposition wanted to conserve state and church control over property and the markets because they still held to the ancient idea that all commerce is greed and therefore evil.

Then in the early 1800’s Saint-Simon invented the idea that man can perfect human nature by getting rid of oppression. Private property is the greatest oppressor of all. Those who clung to the ancient animosity to commerce loved it. Marx and Lenin understood very well that socialism couldn’t thrive unless human nature changed. The USSR was the greatest experiment in changing and perfecting human nature ever attempted, second to that of Communist China.

The ancient contempt for commerce coupled with the utopia of a perfect humanity achieved through government action makes socialism too alluring for most intellectuals. As Mises wrote, intellectuals hate reality. They find reality tedious and boring. They prefer fiction and flights of fantasy. In competition with reality, fantasy always and everywhere wins.

fundamentalist writes:

From Wikipedia:

“Marcuse’s analysis of capitalism derives partially from one of Karl Marx’s main concepts: Objectification.,[4] which under capitalism becomes Alienation. Marx believed that capitalism was exploiting humans; that the objects produced by laborers became alienated and thus ultimately dehumanized them to functional objects. Marcuse took this belief and expanded it. He argued that capitalism and industrialization pushed laborers so hard that they began to see themselves as extensions of the objects they were producing.”

Marcuse has a different take on Saint-Simon and the perfecting of human nature. Man is not born with a tendency toward evil and must be civilized, as Western society believed for millenia. Oppression turns good men bad: capitalism forces people to identify with their products (the opposite of Marx’s alienation from those products) and make good people bad.

The left/right debate is mostly about human nature and how to perfect it. The right sees human nature as something beyond our control and the best we can do is limit the damage that evil people can do. The left sees the potential for perfecting human nature and creating heaven on earth.

Cyril Morong writes:
"Friedman says that he thinks that too many economists prefer an incentives-based argument (public choice theory) against government intervention to an argument based on the concern that experts are ignorant."

Richard Feynman said "Science is the belief in the ignorance of experts."

Roland Stephen writes:

The relative unimportance of incentives and relative the importance of information is Mises' great contribution. But of course some scientists know some things, as do some experts. Much less than they think, very often, but not nothing. And social choice requires, well, choice some of the time. We need practiced experts in policy who know humility..

Publius The Lesser writes:

Liberty wrote:

Any chance women would act even slightly differently? Any chance a mixture of the genders could produce a more balanced societal reaction? .... er, nah, of course not. Just silly female thinking. The genius (male) researchers would have thought of that if it had any merit.

I think this quote from the linked article applies here.

So, you pick a team, and like the boys at Robber’s Cave, you spend a lot of time a lot of time talking about how dumb and uncouth the other side is. You too can become preoccupied with defining the essence of your enemies. You too need the other side to be inferior, so you define them as such. You start to believe your persona is actually your identity, and the identity of your enemy is actually their persona. You see yourself in a game of self-deluded poker and assume you are impossible to read while everyone else has obvious tells.
topcat writes:

You write:
"Friedman winces when I describe progressives as elitist. He sees no elitism in the views of the founding progressive philosophers."

Perhaps he is unaware of Herbert Croly, founder of the "New Republic" magazine and one of the original progressives. A recent post on Power Line blog said this:
"The original progressives, exemplified by Herbert Croly, acknowledged the paradox. Thus, Croly wrote that “any increase in centralized power and responsibility. . .is injurious to certain aspects of traditional American democracy.” But “the fault,” Croly stated, “lies with the democratic tradition” and the fact that “the average American individual is morally and intellectually inadquate to serious and consistent conception of his responsibilities as a democrat.” Thus, the “erroneous and misleading” democratic tradition “must yield before the march of a constructive national democracy.”

That sounds pretty elitist to me. I also don't see how you could regard Woodrow Wilson (also an early progressive) as anything but an elitist.

Mike Huben writes:

Evidently Jeffrey Friedman was playing nice. His two articles What's Wrong With Libertarianism and The Libertarian Straddle are thoroughly excellent skewerings of libertarian pretenses to reason.

In editing a journal that has received manuscripts from virtually every libertarian scholar, famous and unknown alike, I have long been struck by the consistent juxtiposition of... libertarian philosophical sentiments with weak empirical research, leaps of logic, contempt for non-libertarian points of view (of which the authors usually appear ignorant). The polemical tone and deficient evidence, however, and the tarnishing of often-good ideas by doctrinaire rhetoric and low scholarly standards, are only the least of it. The worst thing is not the waste of effort that goes into producing propaganda barely veiled by the robes of scholarship. The greater tragedy is what libertarians could produce, but do not.
Jeffrey Friedman, "What's Wrong With Libertarianism"
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