Binyamin Appelbaum - The Economists’ Hour: How the False Prophets of Free Markets Fractured Our Society

How the False Prophets of Free

Markets Fractured Our Society

For my parents,
my partner,
and my children.

Binyamin Appelbaum writes about economics and business for the editorial page of the New York Times. From 2010 to 2019, he was a Washington correspondent for the Times, covering economic policy in the aftermath of the 2008 crisis. He previously worked for the Washington Post, the Boston Globe, and the Charlotte Observer, where his reporting on subprime lending won a George Polk Award and was a finalist for the Pulitzer Prize. He lives with his wife and children in Washington, D.C.

To keep the fish that they carried on long journeys lively and fresh, sea captains used to introduce an eel into the barrel. In the economics profession, Milton Friedman is that eel.

Paul Samuelson (1969)

I n late 1966, Martin Anderson, a young Columbia University economics professor with libertarian leanings, found himself seated at a dinner party next to a lawyer from Richard Nixons law firm. Nixon had joined the New York firm after announcing his first retirement from politics, telling reporters, You dont have Nixon to kick around anymore. The lawyer did not like Nixon and, by the end of the night, he also didnt like Anderson. With views like that, he told Anderson, you should be working for my boss not me. A few days later, Anderson received a call from Leonard Garment, a partner at Nixons firm and a close adviser. Garment told Anderson hed heard there was a Columbia professor saying crazy things, and he invited Anderson to pay a visit. Soon, Anderson was meeting regularly with the small group plotting Nixons political resurrection in the 1968 presidential election.

At a meeting in March 1967, the Nixon group turned its attention to military conscription. The United States had drafted men to fight in most of its major wars but, after the end of World War II, Congress for the first time had authorized an ongoing draft. The nation was shouldering global responsibilities; no one was quite sure how many soldiers were needed to fight a Cold War. Over the next quarter century, the government annually conscripted tens of thousands of men.

Popular support for the draft had started to wane by the 1960s. While military service was described as a universal obligation, significantly less than half of American men served in the military. As fighting in Vietnam intensified, so did objections to the basic unfairness of picking some men to serve and perhaps to die. Reformers floated ideas like replacing local draft boards with a national lottery, or requiring all men to attend military training, but those plans did not address the basic inequity.

I have an idea, Anderson told the Nixon men. He had just read an article by the University of Chicago economist Milton Friedman, who argued that the government should end conscription and instead recruit an all-volunteer military by offering competitive wages. What if I could show you how we could end the draft and increase our military strength at the same time? Anderson asked the group. Let me put together a paper on this.

The world changes and its hard to say why. The United States ended conscription in 1973 because Americans had a lot of babies in the 1950s and because an insecure man named Lyndon Baines Johnson doubled down on a losing hand and because it kept getting harder to teach recruits how to operate new military technology and because the voting age dropped to eighteen and because young men in an increasingly prosperous nation did not want to fight. All of that was important. But it is also true that the United States ended conscription because Milton Friedman persuaded Anderson, who persuaded Nixon, who won the 1968 presidential election.

Friedman was a formidable academic, crowned with a Nobel Prize in economics in 1976, yet he deserves to be remembered chiefly as one of the most influential ideologues of the twentieth century, the forceful prophet of a conservative counterrevolution that reshaped life in the United States and around the world.

He wrote in his 1998 memoirs that economists exert influence by keeping options available when something has to be done in a time of crisis by ensuring the refrigerator is well stocked when policy makers

Milton Friedman skittered disruptively through the twentieth century like a loose electron, leaving behind a world reconfigured by his ideas. He was a small man with large glasses and the boyish enthusiasm of a natural salesman. Great scientists often are portrayed as singularly bad at communicating with other humans; indeed, this is held to be a mark of their brilliance. Great economists, by contrast, tend to be the popularizers of their own ideas and, in this art, Friedman had few peers. His animating idea was simple and universal: the open marketplace was the best possible system of human governance certainly much better than traditional forms of government, which ought to be kept to an absolute minimum. He joked that if government bureaucrats should ever gain control of the Sahara, there soon would be a shortage of sand.

In Free to Choose, a ten-part exposition of Friedmans views broadcast on PBS in 1980, the economist held up a simple yellow pencil and rhapsodized over its construction. Literally thousands of people cooperated to make this pencil, Friedman told viewers. He listed the workers who provided the wood and graphite, the yellow and black paint, the rubber eraser, and its metal band. People who dont speak the same language, he said, who practice different religions, who might hate one another if they ever met. And what, he asked, tapping the pointed tip, brought them together? It was the magic of the price system.