I frequently have quips with my friend Brahim Guizani over the pros and cons of free market capitalism. He recently posted this video of Milton Friedman, titled “Is Capitalism humane” to Facebook, citing the nobel prize winner as one of his main influences, and ‘taunted’ me to respond, knowing full well that I would very much disagree with Friedman’s no holds barred libertarianism. I would normally not presume to take on the opinions of a Nobel prize winner, nor am I qualified to argue economics with Brahim, but as the great Barney Stinson says: “Challenge Accepted!”.
Since I am not an economist, my critique of Milton Friedman’s speech will be based on historical, social and ethical considerations. In particular, I will present an argument that I call “The old man and the Tylenol” in the third section, which I think definitively refutes Milton Friedman libertarian concept of “Freedom is the only value that matters”. I will also note that I will not address Milton’s ideas in general, but only what he states in the video Brahim posted.
In his speech, Friedman gives a mix of pragmatic arguments along the lines of Capitalism is the system that gives the best results, and Robert Nozick/Ayn Rand type arguments along the lines of freedom and rights to ownership are the most important (or only) values that matter in a society, regardless of their outcome. In a sense he is already contradicting himself at a high level, since he is mixing deontic and consequentialist arguments.
Historical Arguments against Friedman’s position:
- At the beginning of the video he commits a now obvious fallacy (maybe it wasn’t so obvious at the time) that the free market is the antithesis of totalitarianism. As recent history has shown, this is not the case: China is now a free market economy which is nonetheless a totalitarian state with no political freedom, and more poignantly, Chile under Pinochet – who was associated with Milton Friedman through the group known as “The Chicago Boys” – was a free market economy which was also a brutal dictatorship. To use the example mentioned in the speech, the Chilean worker under Pinochet was afraid both of getting fired and getting fired at. More generally the socialism-capitalism dialectic has only existed for a couple of centuries, there have been other systems before that, and there will be other systems after that (Assuming the planet survives). So Friedman is committing a logical fallacy when he justifies capitalism as the only humane system because socialism failed and turned out to be oppressive.
- He moves on to make a mainly pragmatic argument: “Capitalism, socialism, central planning are means not ends. In and of themselves, they are neither moral nor immoral, humane nor inhumane. We have to ask what are their results.” He then goes on to argue that given the results, capitalism is clearly the best system. In this history has proven Mitlon Friedman spectacularly wrong. He states that socialism has created societies that were far more unequal than capitalist societies (the example of limousines in Moscow reserved only for members of the politburo). The reality in 2016 is completely different: In developed countries, we have somewhat left leaning socialist Europe vs the much more capitalist US economy, and it is the US economy that has produced far greater inequality than the social democratic systems of Germany or the Scandinavian countries. He mentions one example which is particularly interesting: The wage ratio of foreman to worker in the U.S.S.R was supposedly much greater than the wage ratio in the US. In 2016, as a result of no holds barred capitalism, the US has the largest ratio of executive to worker pay of any developed country.
Pragmatic arguments against Friedman’s position:
- Milton Friedman is contradicting himself on one of the main arguments of the video: After starting with a pragmatic point of view, and claiming that principles and intentions do not matter, only results do, he then starts arguing for the morality of capitalism and the immorality of socialism based solely on principles. In particular he states
“I go back to the essence of capitalism and its relevance to the question of humanity. The essence of a capitalist system in its pure form is that it is a system of cooperation without compulsion, of voluntary exchange, of free enterprise.”
Notice that he talks about capitalism in its pure form , an irony given his supposed pragmatism and realism. Later he states:
“The essential notion of a capitalist society (which I’ll come back to) is voluntary cooperation, voluntary exchange. The essential notion of a socialist society is force. If the government is the master, if society is to be run from the center, people ultimately have to be ordered what to do.”
Well is this the case in the real world? Clearly not. First of all, there is more than one type of force in the society, and large corporations using money to achieve corporate goals against the wishes of financially weaker individuals is a form compulsion. It might not be as bad as Gestapo or KGB agents breaking down your door, but it remains nonetheless a form of violent compulsion. Examples of such use of force are abundant: Large corporations destroying family owned small businesses, large scale land developers forcing individuals out of their properties against their wishes, hostile takeovers of small corporations by larger ones, etc…
- But there is an even more clear cut case of how a totally free market does not necessarily protect freedom: In a laissez-faire completely free market à la Friedman, even health care is privatized and driven by free enterprise. Yet it would be ridiculous to argue that someone who has cancer is voluntarily engaging in a business transaction with doctors and hospitals. Death from cancer is just as much a form of compulsion as Stasi agents coming in the middle of the night. This is not a hypothetical scenario: see the appalling state of health care in the US, where people are dying because they can’t afford the necessary care, and where bankruptcies driven by medical expenses are routine.
- Friedman also claims that:
“The essential notion is that both parties to the exchange must benefit.”
but this is not always true as well: In a real capitalist society, some interactions are zero sum games, where one party benefits at the expense of the other. Examples are the insurance industry, where the insurance company makes a profit only if the insured person looses, and looses money whenever it actually has to provide the service that it is supposed to provide. Another example is the fact that large companies in the US frequently raise the price of the services they provide without actually changing anything in the service they are providing. At the same time savings from various cost cutting measures are almost never passed on to the consumer, prices go down only when changes in demand force them to.
- With regards to health care however, Friedman does raise an interesting ethical question here: why should someone be forced to pay for another person’s health care costs? You were forced to seek expensive medical service because of a health condition that you had no control over – but why should I pay for it? Here I think it is possible to extend Robert Nozick’s argument for minimal government to include health care costs as well: Extracting involuntary payment for minimal law enforcement is justified on the basis of fairness, and extracting involuntary payment for funding health care is justified, given that there is a high probability that a given person will require medical services they cannot afford on their own at some point in their life. There will also be many situations were medical services will be provided to a person without their consent (for example if they are unconscious in a car accident) – and per Nozick’s reasoning, it would be fair to extract payment for such services.
The Old Man and the Tylenol (an ethical argument against Friedman):
Now comes the central argument of my rebuttal of Friedman. At the core of Milton Friedman’s speech is that freedom is the central (possibly only) value that should be protected. All exchanges should be voluntary, and coercing someone into giving away some of their property for the good of others or the greater good can never, ever be justified, since it invariably leads to more evil than good.
So lets consider this hypothetical scenario:
- We are in an isolated location far from any pharmacies or medical establishments, and in one of the households of that location an infant is very sick and in dire need of Tylenol to bring her fever down. However her family do not have any Tylenol, and have no way of procuring any in time to save her.
- A grouchy old neighbor lives nearby and has some Tylenol. He is the only person in a 300 Mile radius who has any Tylenol, Tylenol that he earned through his hard efforts as a farmer and small business owner, and which he rightly deserved. However, he is not a nice person and doesn’t like babies in general, and is afraid that he might catch a fever himself sometime in the future. So he refuses to give the family any Tylenol, claiming he is not responsible for the baby, and why should he give away his hard won Tylenol to save her? It is her parents’ problem, not his.
- Per Milton Friedman’s speech, the old man is under no obligation to provide her family with the Tylenol, and the local authorities trying to coerce him into handing over his Tylenol so that the girl can be saved is immoral.
- Per Milton Friedman, it would also be perfectly moral for the old man, given the unique supply and demand situation, to charge an exorbitant amount from the girl’s family.
In my view, and I think that most people would agree with me, we are justified in forcing the old man into handing over his Tylenol, because in this case the infant girl’s life takes precedence over the old man’s freedom to do as he pleases with his Tylenol. Somethings do take precedence over property rights, and some values do supersede monetary values.
And although this might seem like a idealized thought experiment that would never happen in real life, something really close to this actually did happen recently. Some of you might recall the infamous case of Martin Shkreli. Per Milton Friedman’s principles, Turing Pharmaceuticals should have been free to raise the price of Daraprim to any level it saw fit, and for any regulators to intervene would have been immoral.
Friedman states “I believe that the fundamental value in relations among people is to respect the dignity and the individuality of fellowmen, to treat them not as objects to be manipulated for, our purposes or in accordance with our values but as persons with their own rights and their own values.” – echoing Kant’s concept of the Kingdom of Ends . But as I show with my Tylenol argument, there are situations were freedom as an absolute right ends up infringing on human dignity. More generally, capitalism in its more extreme form seems to encourage the commodification of people, going against Friedman’s stated values of human dignity and freedom.
John Rawls presents a framework which allows for the respect of freedom as a fundamental right, yet allows for a more humane worldview than the one advanced by Milton in this video.
Rawls proposes the theory of Justice as Fairness, discussed in his book “A Theory of Justice”. Here, I will quote the SEP article on John Rawls:
These guiding ideas of justice as fairness are expressed in its two principles of justice:
– First Principle: Each person has the same indefeasible claim to a fully adequate scheme of equal basic liberties, which scheme is compatible with the same scheme of liberties for all;
– Second Principle: Social and economic inequalities are to satisfy two conditions:They are to be attached to offices and positions open to all under conditions of fair equality of opportunity;
They are to be to the greatest benefit of the least-advantaged members of society (the difference principle). (JF, 42–43)
Rawls here affirms that freedom is a fundamental right and, more importantly that inequality is acceptable – maybe even desirable – as long as it works to the advantage of everybody, i.e. everyone ends better off in the arrangement (everyone gets more utility points than they would have in an equal distributions, but some more than others).
The other big issue that Friedman’s world view ignores is the environment. The destruction of the environment is an outside factor that no auto correcting free market, even in Von Hayek’s and Friedman’s wildest fantasies, can ever account for.
One final point, I would like to point out that arguably mankind’s greatest achievement so far, the exploration of space, was achieved via large scale government programs funded by tax payer money. This flies in the face of Friedman’s naive assessment that humanity’s greatest achievements are accomplished by individuals.
There must must be some merit to Milton Friedman’s economic theories, he didn’t get the Nobel prize for nothing. But he is just an economist, and there is more to human society than economy. I am reminded of Paul Feyerabend’s (in)famous quote:
“In a democracy [science] should be separated from the state just as churches are now separated from the state.”
“The morality of the bazaar belongs in the bazaar. The market is a zone of the city, not the whole of the city. But it is a great mistake, I think, when people worried about the tyranny of the market seek its entire abolition. It is one thing to clear the Temple of traders, quite another to clear the streets.”