Yesterday, in a comment on my post about the Taylor Rule, Patrick R. Sullivan reminded readers of the famous debate between the late Milton Friedman and the late Walter Heller about the relative potency of monetary and fiscal policy. Friedman argued that monetary policy was more potent, Heller that fiscal policy was more potent.
That comment reminded me of a pleasant conversation I had on the phone with Heller that I've decided to share here.
During the summer of 1980, I wrote and circulated an Economist's Statement Against the Draft. The reason was that Democratic Senator Sam Nunn of Georgia was pushing for reinstitution the draft and President Jimmy Carter had already revived draft registration after a 5-year hiatus. I wanted to get on record the insight that economists across the spectrum have about the draft: that it does not reduce the cost of manpower, but simply hides the cost by shifting a large part of it on to the shoulders of young draftees. I've already discussed that statement here, but here again is the statement:
We, the undersigned, oppose moves toward the reimposition of the draft. The draft would be a more costly way of maintaining the military than an all-volunteer force. Those who claim that a draft costs less than a volunteer military cite as a savings the lower wages that the government can get away with paying draftees. But they leave out the burden imposed on the draftees themselves. Since a draft would force many young people to delay or forego entirely other activities valuable to them and to the rest of society, the real cost of military manpower would be substantially more than the wages draftees would be paid. Saying that a draft would reduce the cost of the military is like saying that the pyramids were cheap because they were built with slave labor.
Notice, by the way, that nowhere in the statement do I say that the draft is immoral, which I think it is. The reason is that, as I put it to an economist friend at the time, "I don't want to lose Chicago." Various people at the University of Chicago, and probably at other schools too, who were strongly against the draft might hesitate to sign a statement claiming the draft was immoral. So I gave it a moral tone with the last sentence. It seemed to work with the University of Chicago. With other places that weren't thought of as particularly pro-free market, not so much.
I sent a copy to Walter Heller at the University of Minnesota and waited a couple of weeks. I got nothing back. So I called his number at U. of Minn. and his secretary said he was at his summer home on an island off the coast of Washington. I asked her for his number and she gave it to me.
When I called, Walter Heller answered and I told him about the statement. He said he wouldn't sign, but he did so pleasantly. I honestly can't remember whether he wouldn't sign because he didn't agree or because he didn't believe in signing public statements. I think it was one of the two.
When I don't get what I want, I almost always try to get something. So I decided to try to "get" a pleasant conversation out of it. We talked about his home on the island. In a minute, I'll quote the conversation, but to understand it, you need to know that Milton Friedman had retired at Chicago in 1977 and moved out to the Hoover Institution at Stanford. Here's where the conversation went:
Heller: When I bought the place, some of my friends accused me of trying to get as far as possible from Milton Friedman.
Henderson: Well that didn't work, did it?
Heller: Ha ha.
There's one other thing to know about Heller, a story that Milton and Rose Friedman tell in Two Lucky People, their joint autobiography, and that I learned only on reading their book in 1998. Milton had a temporary appointment at the University of Wisconsin in academic year 1940-41. A number of the faculty were not happy about that. But Milton, as you might expect, got along well with many of the Ph.D. students, among them Walter Heller and Joseph Pechman.
As late as 1988, in a letter to the organizers of the fiftieth-anniversary celebration of the founding of the Income Conference, Joe [DRH: Pechman] noted that "at the end of the [academic] year  the graduate students--let by Walter Heller--petitioned the Department of Economics to add him [DRH: Milton] as a member of its faculty. The department rejected our petition and the University of Wisconsin lost the opportunity to persuade Milton to remain in Madison." Walter and Joe, both of whom are now deceased, long took pleasure in informing newsmen who assumed that political difference necessarily implied personal hostility that they had carried picket signs on my behalf at Wisconsin. We remained lifelong friends.