Tuesday, February 19, 2013

The Lucky Economist

         Milton Friedman is arguably the most influential economists of the past fifty years. As with most other economists his work was not fully appreciated in its time but slowly grew in popularity as the evidence presented itself in the market. Luckily he lived long enough to see how his economic ideas proved themselves truer and truer with every year in the world economy. The journal article The Age of Milton Friedman by Andrei Shleifer provides various economic graphs that correlate with an increase in quality of life around the world. As of yet the free market is the most reliable economic system. Its popularity among the hoi polloi is not the highest but amongst economists it is widely held as superior. The proof is in the pudding, as the article by Andrei Shlfeifer demonstrates. At the crux of it all is Milton Friedman. His name is associated with free markets and his legacy will thrive so long as free markets maintain their momentum in increasing quality of life.

       The undeniable superiority of free markets begs the question. Why haven’t all countries switched to a free economy? This is a loaded question and cannot be answered in a short essay even by the most determined entry level economic students. But I will try. In short countries will not switch over to a free economy because of political will and uncertainty.

         Political will is critical for any national change. The masses and the politicians must be aligned in order for any major change to occur. There is very little political will to change our current economy into a free economy. For although the United States is a front runner for free enterprise our economy is still heavily modified. Perhaps the shrewder politicians have read Bastiat and know that if a free economy is ever instated they will lose their purpose soon after. I like to think of it as going backwards on the road to serfdom. Politicians aside the people are also not in favor of free markets, and as Milton Friedman put it, they have no need to be. A housewife has no need to learn how markets function because she will not use this information. The public is largely ignorant of economics. It is no surprise that they want to maintain social security public, price ceilings on milk, and other economic policies. On face value, many economic policies seem to be noble. That is they seek to allocate funds in to the right hands to help society. But of course the hidden costs go unnoticed and tend to leave the economy in worse shape then it would have been otherwise.

           Politics aside there is a certain unknown factor to a free market. It is difficult to grasp the concept that the market will sort itself out into equilibrium. Leaving the market to run itself may leave a sense of helplessness. Our current model allows us to alleviate pressure of the economy. The Federal Reserve can lower interest rates or buy bonds in order to help an ailing economy. Relieving all control can be considered to be too much of a risk. However all these problems that need regulating are caused by market interference in the first place.

           I do not think a free market is possible with the current political mood and ignorance of politics in general. Even if these things were both in place, it is still hard to imagine a major over haul of economic policy. Potentially there could be a long series of adjustments to the market that lead to a free economy over a span of several generations. Or the current model may fail leading to revolt and a switch to a free market. But the most likely outcome is that our economy will continue to exist in a quasi-free state.  

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