During a FinTech meeting held in Chicago on March 18th, Mayor Ralph Emmanuel made it very clear that he wants his “Windy City” to pioneer the ongoing worldwide crypto revolution.
By Jack Parkos | United States
When it comes to economics, libertarians tend to subscribe to one of two schools of thought: The Chicago School and Austrian School. Both of these ideologies are rooting in laissez-faire capitalism and believe in the power of the free market. Yet both have unique differences between them that can divide people who believe in free market capitalism. It is important to understand the differences between the two for one to decide which school they agree with.
The Chicago School, which is sometimes called the Monetarist School, belongs to the neoclassical school of thought. It tends to get more attention from “mainstream” economists and politicians. Milton Friedman, arguably the most famous and influential economist of the Chicago School, served as an unofficial advisor to President Ronald Reagan as well as winning many awards for his books. While many Austrians have won awards for their work, they are not nearly as “popular” as their Chicago counterparts. In a high school economics course, you’re more likely to learn about Milton Friedman and Chicago economics than Ludwig von Mises and Austrian economics. Austrians are seen as outside the mainstream, meaning it is “heterodox”. Perhaps someone may be asking why this occurs.
Difference in Methods
One reason that Austrians tend to be seen as economic “outcasts” is that they tend to use different methods to come to conclusions. As stated before, Austrians are not seen in the mainstream, unlike their Chicago counterparts.
This is mainly due to the fact that Chicago economists tend to use similar methods as most other economists. Monetarists tend to use mathematics to test their theories. Chicago economists believe economics is like a science with rules that cannot be broken. Meanwhile, the Austrians believe that since the economy is based on the actions of individuals, no mathematical formulas can accurately predict how people would act. Thus, Austrians base their work on philosophy, logic, and reasoning. Praxeology, the study of human nature, is an important part of the Austrian School of economics.
While both schools criticize the Federal Reserve, they have different reasoning for it. The Chicago school calls out the Federal Reserve’s failures but still believe it should exist and be used in the right way. Monetary policy is a big part of Chicago economics, hence sometimes being called the Monetarist School. For example, Milton Friedman criticized the federal reserve for not printing enough money during the Great Depression. Friedman also believed the monetary supply should be increased by about 2.5-3.5% each year.
Meanwhile, the Austrians do not believe the government should print more money ever. They tend to believe in a fixed supply, typically a standard based off of precious metals. The Austrians do not want the government inflating the currency at all. They blame many economic problems on government creating inflation through printing money.
Here are some famous economists from the Austrian and Chicago schools.
Ludvig Von Mises- Big leader and teacher of the Austrian school of thought.
Murray Rothbard- A leading pioneer of both Anarcho-Capitalism and Paleo-Libertarianism.
Frédéric Bastiat- Developed the concept of opportunity cost.
Milton Friedman- Won Presidential Award for Freedom, possibly most famous Chicago economist.
Thomas Sowell- National Humanities Award winner, theorist on welfare economics.
Gary Becker- Awarded Nobel Memorial Prize in Economic Sciences.
Friedrich Hayek (who also belonged to the Austrian School) – Award-winning economist who contributed to the Business Cycle Theory and The Economic Calculation Problem.
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By Roman Bilan | United States
Murray Rothbard was born in 1926 and died in 1995. Milton Friedman was born in 1912 and died in 2006. Their careers almost entirely overlapped, yet one left a lasting influence on the free world, while the other died in more or less absurdity. Rothbard only influenced his own cult-like following, yet many of his anarcho-capitalists rather “throw out” Friedman’s libertarian legacy.
When it comes to twentieth century figures within the libertarian movement, there may no greater figure when it comes to influencing economics, the public, American public policy and the lives of millions.
Milton the Economist
Milton Friedman’s contributions to the science of economics cannot be understated. He was the figurehead of the Chicago School, a free market oriented school of economic thought based out of the University of Chicago. Alongside him were his prominent colleagues, Frank Knight, Ronald Coase, and Robert Lucas, to name a few.
The entire field owes a huge debt to Friedman and his crew. He overturned many of the prevailing errors brought about by the Keynesian Revolution: most notably with his critique of the Phillips Curve. Even Paul Krugman admits that Friedman did the science a great service with his contributions and critique of former Keynesian orthodoxy:
“Friedman’s critique of Keynes became so influential largely because he correctly identified Keynesianism’s weak points… I regard him as a great economist and a great man.”
Regardless of how you feel about his political inclinations, he believed in them because of his economic thought. And his thought is arguably one of the most profound things to be produced in the 20th century. It is completely unfair to dismiss, much less “throw out,” someone because of minor disagreements on theory. Friedman is one of the greatest intellectuals of his time and libertarians should wholeheartedly embrace him as one of their own.
Milton the Public Intellectual
As was written in his obituary for FEE, “Friedman did more than any single person in our time to teach the public the merits of deregulation, privatization, low taxes, and free trade. His work inspired the economic agendas of President Ronald Reagan and British Prime Minister Margaret Thatcher, as well as the liberalization of economies in eastern Europe and the former Soviet Union.”
Take Capitalism and Freedom, for example. Read by over half a million in eighteen different languages, it introduced ideas like school vouchers and pushed for lower and flatter taxes.
Similarly, Free to Choose was the best selling nonfiction book in 1980 and was watched by millions. Only F.A. Hayek could boast a similar public reach for a libertarian.
Additionally, Friedman wrote over 300 op-eds for Newsweek, 121 op-eds for the Wall Street Journal and another twenty-two for the New York Times. But maybe he would have been been better off preaching to the libertarian choir instead of engaging with the public at large?
Milton Ends the Draft
In 1940, the United States began its third and final draft. On March 27, 1969 President Richard Nixon formed the Gates Commission to look at the possibility of an All-Volunteer Armed Forces– Friedman was one of its most prominent members. The commision of fifteen members had five members in favor of an all-volunteer armed forces while the other ten were split evenly between being against the idea and neutral towards it. In less than a year, the Commission came to a unanimous 14-0 recommendation (one member was unable to vote on the specifics, although he did support an all-volunteer military) to end the draft.
Three years later, the draft was gone.
Milton Influences Estonia
On August 20, 1991, Estonians left the darkness of the Iron Curtain and joined the free world as the Republic of Estonia replaced the Estonian Soviet Socialist Republic. Mart Laar was the first Prime Minister of Estonia after the interim government. He led from 1992 to 1994 and again from 1999 to 2002. As noted in Foreign Policy,
“In barely two years, from 1992 to 1994, the radical reforming Estonian government of Mart Laar introduced a flat tax, privatized most national industry in transparent public tenders, abolished tariffs and subsidies, stabilized the economy, balanced the budget, and perhaps most crucially, restored the prewar kroon and pegged it to the rock-solid deutsche mark. As a result, Estonia became one of the most open and transparent economies in Europe, and with growth came political stability: Russian troops left the Baltic region by 1994, fears of Balkan-style ethnic conflicts receded, and Soviet noncitizens in Estonia and Latvia began to assimilate.”
Before Laar became Prime Minister he read one book: Free to Choose by Milton Friedman. A few years later, he was in D.C., talking with US Representative Dick Armey. Armey asked how the Estonian government was able to be so successful with their free market reforms. Laar’s answer was simple, “We read Milton Friedman and F. A. Hayek”.
Milton Friedman: Common Complaints
No, Milton Friedman was not an Austrian, but Austrian Economics is not synonymous with libertarianism. Libertarians can be non-Austrian and Austrians can be non-libertarian.
No, Milton Friedman did not believe in Praxeology, but Praxeology is also not a necessity for libertarianism, nor is its veracity without question. Even F.A. Hayek, Ludwig Von Mises’s greatest student, broke from Praxeological orthodoxy.
No, Milton Friedman is not an anarcho-capitalist. He believes in a state, but anarcho-capitalism is only one part of the broader libertarian ideology. As Hayek said, “Our general views on what is desired and what is not are almost identical until we get on to money.”
The greatness of a libertarian should not be defined by their purity, but by how much they advance liberty. Libertarians like Murray Rothbard win the purity test but do little to advance libertarianism. As Paul Krugman wrote in 1994, Friedman waged a campaign “Goliath of Big Government” that “eventually bore fruit in radical changes in both economic ideology and real-world economic policy.”
Whether it be his direct or indirect influence on Republican administration, pushing free market policies in other countries, advocating for drug legalization, getting the state out of education, loosening licensing laws, giving less power to central banks or cutting taxes and spending, Milton Friedman’s legacy is one of promoting freedom and liberty. Thus, libertarians should be proud to share an intellectual home with him.
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By Mason Mohon | @mohonofficial
I think it’s pretty clear that Friedman is a statist. -Murray Rothbard
Milton Friedman is popular, and not just “libertarian popular” (although he is) but mainstream popular. His book Capitalism and Freedom has over half a million sales and Free to Choose has also had its fair share of economic and political influence. I have spoken to many fellow lovers of the free market and many have stated he was their primary influence in pushing people towards libertarian ideology.