Several years ago Milton Friedman reminded a gathering of economists no matter how much they quarreled among themselves they still agreed on at least 90 percent of their economic thinking. It was just the vociferous struggle over the other 10 percent that made them appear to be at each other's throats all the time, he said.
Friedman's new book, "Free to Choose," written with his wife, Rose, is a 90/10 sort of book. It is a "personal statement," an exposition of their minimal-government philosophy buttressed by Nobel laureate Friedman's conservative economics.
Nevertheless, even the most liberal of economists will say, "Right on", to the authors' praise of the marketplace as the most efficient arbiter of who makes what and how much in an economy and who has the income necessary to buy it. Likewise, they will nod approvingly at the advocacy of freer trade and at the attacks on the stupidities of past federal regulation that proved of far more benefit to the industries than their customers. Nor will the liberal economists complain about the characterization of some of the rhetoric surrounding Social Security as Orwellian double-think.
But the other 10 percent should give most economists -- and everyone else -- pause.
After singing the praises of the market, the Friedmans complain of the "tranny of controls" imposed by government that limits the market's marvelous flexbility and individuals' personal freedom. Often their intense desire to let the market hold sway in virtually every instance causes them to skip more of the economic -- as opposed to the philosophical -- considerations in the cases in which the government has chosen to intervene in the market.
In their detailed denunciation of railroad regulation, the Friedmans never bother, for instance, to address what, if any, role government should play in situations where the railroad has a monopoly. Competition from trucks is a fine way to keep railroads under control, but what about those instances, such as coal transport, in which trucks cannot compete except over very short distances? Should the railroads be able to charge what the market will bear in such a case, particularly in a world where the government for both economic and national security reasons, wants electric utilities to burn more coal and less oil?
"Free to Choose" is disturbingly free of such complexities. Like a prism emitting only one part of the light spectrum the book filters out all the elements that would distrub the Friedmans' free-market approach.
The book, which accompanies the recently begun 10-part series of the same name in public television, is intended for a general audience largely unfamiliar with economic issues. Such a reader will find out how a market works, but he will learn little about market imperfections (except those caused by government).
And he will, here and there, get some information that is altogether wrong. In the first sentence of the introduction, the dates of the first settlements in the New World by Europeans are wrong. Other errors are much more serious.
In a devastating chapter on "What's Wrong with Our Schools," the Freidmans argue against government and for higher education, challenging the assertion that such aid is in the public interest because it provides skills necessary for economic growth. Such an assertion, they wrote, "would be equally correct if made about physical capital (i.e. machines, factories, buildings, etc.) yet hardly anyone would conclude that tax money should be used to subsidize the capital investment of General Motors or General Electric."
Well, whatever one's conclusions tax money is used for precisely that purpose. Last year, a widely supported 10-percent investment tax credit on purchase of business equipment reduced federal corporate and personal income taxes by more than $16 billion.
The book's ultimate flaw lies in its failure to recognize adequately the cost the market can and does impose on powerless peoples. There is little discussion about how one should go about deciding how to cushion the blows that are part of the price of accepting the marketplace efficiency. Perhaps the best to read "Free to Choose" is, immediately afterwards, to also read "Equality and efficiency: The Big Trade-off" by economist Arthur M. Okun, published in 1972 by the Brookings Instution. In it, Okun wrote, "Capitalism and democracy are really a most improbable mixture. Maybe that is why they need each other -- to put rationality into equality and some humanity into efficiency."
"Free to Choose" is very long on rationality and efficiency and very short on equality and humanity.