Friedman, Externalities, and the Difference Between a Smart, Honest Conservative and an Idiot
Via Avedon Carol, we get to Nathan Gardels who relates some comments from his interview with Milton Friedman – apparently Friedman’s last interview:
Gardels: In the end, your ideas have triumphed over Marx and Keynes. Is this, then, the end of the road for economic thought? Is there anything more to say than free markets are the most efficient way to organize a society? Is it the “end of history,” as Francis Fukuyama put it?
Friedman: Oh no. “Free markets” is a very general term. There are all sorts of problems that will emerge. Free markets work best when the transaction between two individuals affects only those individuals. But that isn’t the fact. The fact is that, most often, a transaction between you and me affects a third party. That is the source of all problems for government. That is the source of all pollution problems, of the inequality problem. This reality ensures that the end of history will never come.
Gee, Milton Friedman was concerned about externalities. I’ve noted on other posts that in my exchanges with Arnold Harberger, I always found him to be very concerned about externalities as well. There, ladies and gentlemen, I believe is the difference between a smart, honest conservative and an idiot: the former recognizes that externalities are a problem and there’s some sort of a role for government in correcting them. The latter talks only about the beauty of the free market and property rights.
While categorical syllogisms have only three parts, valid and sound inferences are derivable by composing syllogisms (and inferences). Not recognizing the joke behind adding a 4th component is a mark of a smart, honest, but horribly misguided, conservative.
As far as government, corporations have internal government, rooted in a governance model based on that of Bismarck from the mid to late 1800s. In the meantime, the industrial revolution achieved a high pitch transformation into something else. That form of governance is antiquated and not suited to the reigning in the externalities that are consequences of the large corporation’s social behavior in order to compete in the marketplace. If there is a solution, then it will have to be the corporations internalizing governance procedures that address their long-term costs. Or the external government will continue do the reckoning for them, sickle in hand. In this regard, conservatives have been no wiser than the standard heroin addict, despite the rational evidence that their behavior is killing them.
Good luck, fellas.