Friday, November 17, 2006

The Death of A Giant

A tribute to Milton Friedman.

Back in the 1950’s, the prevailing thought about Economics was that Keynesian Economics was the correct one. It was what was taught at the Universities and most of the Elite in this country, ( and in most others), was the Left leaning, semi-managed economics of “a little bit of inflation is a good thing.”

Keynes had this theory that if you increased the money supply, it would stimulate the economy in basically the same way that a true increase in demand for goods would.

Keynes thought that by having more money in circulation, there would be more initial demand on goods, which would then stimulate sales. His thinking was that about 2-3 percent was about right.

He also said very emphatically that there could not be a “stagnate” economy and an inflationary economy at the same time. If my memory serves me, in the 1980's we had "Stagflation" and Kenyes was in trouble.

Along about 1962 Milton Friedman wrote a book called “Capitalism and Freedom.” See excerpts
here.

This book and the Universities that began to recognize its importance, has been a major factor in “freedom” loving people around the world understanding the connection between “true freedom” and economics.

Margaret Thatcher and Ronald Regan were both big supporters of his. Once their success became widely recognized with the precepts found in Friedman’s books, Russian began to see the light and started to experiment with them.


Now even China has recognized that not only was Socialism a failed Economic principal, but its little brother called “Keynesian Economics” was too.

It is all about “Competition” setting the value of goods and services instead of some nebulous governing body, that can almost never guess the value correctly. The guesses bring shortages and black markets without fail.

Russia found that until they allowed farmers to “manage” their own farms and keep some “profits” that for some reason until that time there was never enough food, but with competition and ownership comes supply and often abundance.

Not only has Russia been moving more and more towards a “competition” based society and away from socialism and communism, but China has as well.

But alas, even with all of this proof, there are those in this country that want to go in the opposite direction. From Competition towards Socialism.

We have never had true "Capitalism", nor have we ever had a true “Free Market” system, but the basic principals are there if we ever recognize that moving more toward them is the right direction and not toward more government management of our Economy.

History will and has not only honored Milton Friedman with the “Noble Prize” for Economics, but with a great eye opening of the principals of the connection of freedom with the free market principals of competition, and also with the removal of government interference within that marketplace.

6 Comments:

At 8:11 PM, Blogger Yolo Cowboy said...

I don't remember much from my Econ classes. I think I remember how to figure GDP, its C+I+G-NX right?

I actually loved economics, the theory part anyway. The problem came in all plotting and graphing of various curves and remembering the formulas. High school students would be light years ahead if they were taught basic economic principals. Real world situations;

Ben and Greg are out of school and both have job that pays 2,000 dollars a month, they pay the same for rent and groceries but Ben wants to drive a brand new Mustang with a payment of 520 dollars a month, Greg buys a two year old Corolla for a payment of 195 dollars per month.

Ben gets the hot chick, but she wants to go out to the clubs every night where Ben pays out an additional 170 dollars a week on his new credit card.

Greg finds a nice, almost hot chick who likes to rent DVDs from Blockbuster at 12 dollars a week. Greg pays cash.

In four years Ben is still upside down in his car, 12,000 dollars in debt and his hot chick has gone on to someone with a platinum credit card, and to top it off, Ben has a nasty STD. Gregg is planning to get married to his almost hot chick and the Corolla is paid for and still running fine.

Ben may have had more fun that Greg, but he doesn't have to explain about genital warts to the girls he dates.

That would be a good class.

 
At 8:16 PM, Blogger Yolo Cowboy said...

In the second semester they could teach how Greg's new wife caught him in bed with Ben's old girlfriend one afternoon and divorced him. He lost the house, the car, owes her alimony, plus attorney’s fees and now he has genital warts.

That would be a good class too.

 
At 6:21 AM, Blogger Gem Hudson said...

Well inflating what is really not making all that much of the money transforms that dollar right back into paper and you die more than the deficit death. You just got a bloated economics that even the sharks will take a bit into.

 
At 8:41 AM, Blogger Free Agency Rules said...

I took three terms of Econ in College and loved it too.

In fact I studied it on my own for about 8 years after that with a passion.

I think Economics is just as important as Politics is, yet most people haven't got a clue about how the government causes inflation and in fact, falsely believe that Corporations can.

The lie is..."Companies cause inflation when they raise their prices." WRONG!

The classic definition of inflation is..."too much money chasing too few goods."

MONEY and GOODS. Only two components of inflation. How does rasing the price of oil cause inflation? It is all about discretionary income, if we are faced with one product raising in price, we just have less money to buy something else. The amount of money in circulation or the amount of goods in circulation is not affected.

It's amazing how a lie told enough times can really fool people.

Just like the lie that "all businesses have to do to absorb the minimum wage increase is to just increase their prices."

Oh, the stupidity of that statement.

First, it assumes that a company has not already tried to do that and found that if they raised it anymore their sales would decrease because of a little law known as "the law of diminishing returns."

In "most cases" If a company could charge more...THEY WOULD ALREADY HAVE DONE IT!

FAR.

 
At 11:01 AM, Blogger Free Agency Rules said...

Yolo,

I love your humor! :)

FAR.

 
At 8:09 PM, Blogger Bill Lama said...

FAR,
A moving tribute to a great man. Thank you.

 

Post a Comment

<< Home