Milton Friedman, the Chicago School, and Austrian Economics

Lynne Kiesling

Today is Milton Friedman Day, and although the Day Job has kept me from much reading and writing today, I would like to point you to this nice article from the Freeman about Milton Friedman and the Chicago School. In the course of the discussion Richard Ebeling contrasts the Chicago School with Austrian economics, and it’s an enlightening comparison.


2 thoughts on “Milton Friedman, the Chicago School, and Austrian Economics

  1. I am a student of post-science, which is discussed in a recent book Knowledge http://www.amazon.com/Knowledge-Hugh-Ching/dp/0615136583/sr=11-1/qid=1170212885/ref=sr_11_1/103-3319597-0183824. Post-science is in agreement with Milton Friedman in general, except two notable differences. I would like to point out the similarities and the differences.

    Differences:
    Friedman: Empirical validity of falsity of an economic theory or policy prescription.
    Post-Science: Value, defined as the sum total of all the future benefits and losses, is NOT empirically verifiable, because infinity never arrives. Social science is different from science, which depends on empirical verification, and must depend on mathematical rigor (Kant).

    Friedman: Free to choose.
    Post-Science: We are free only within the limits of freedom defined by the non-violable (mathematical) laws of nature in social science, such as the Infinite Spreadsheet http://www.infinitespreadsheet.com. Only when the market participants are well-informed of these laws of nature would the market be stable. The Infinite Spreadsheet easily predicted the US S&L Crisis as early as 1984, as described in the above mentioned book http://lulu.com/ching. Dr. Friedman must decide to plan or not to plan?

    Similarities:
    Friedman: Small government and political freedom.
    Post-Science: Knowledge led society, where the order of authority is (1) Knowledge, (2) Persons of knowledge, (3) Free thinking individuals, (4) Government, (5) People as a whole.

    Friedman: Free market
    Post-Science: Maximum Planning, where individual plans should not be interfered by government central planning, but planning, not free-choice, is the goal of a social system.

    Friedman: No government regulation.
    Post-Science: Laws of nature replacing man-made laws http://www.knowledgebook.us.

    Friedman: Predictions.
    Post-Science: The Infinite Spreadsheet is almost (inputs might not be sufficiently accurate) infallible in prediction.

    Friedman: Competition is engine of progress.
    Post-Science: The Infinite Spreadsheet arbitrates between buyer and sellers of real estates and stocks and can greatly reduces unnecessary competition. Rational arbitration will contribute to world peace, whose solution might lie in life science from the speculative concept of self-creation from post-science http://www.self-creation.org, which is even beyond the book mentioned above.

    The Austrians: Stability of price.
    Post-Science: There is a definite relationship between the price, the rate of return, and the interest rate, as quantitatively determined by the Infinite Spreadsheet. Fed should know this relationship before it can adjust the interest rate.

    Friedman: Against the tide.
    Post-Science: Anti-established views. Mankind should move beyond science into post-science in the next two millennia.

    Thank you for your attention. ### [CYL]

  2. I’m not sure post-science, as described here, makes much sense…
    “Value, defined as the sum total of all the future benefits and losses…” Value (utility) is simply an ordinal ranking, and summing it is meaningless — both an Austrian and neoclassical point.

    “Dr. Friedman must decide to plan or not to plan?” As Hayek pointed out, the debate was never “plan vs. no plan,” but *central* plan vs. many individual plans coordinated by markets.

    “We are free only within the limits of freedom defined by the non-violable (mathematical) laws of nature in social science, such as the Infinite Spreadsheet. Only when the market participants are well-informed of these laws of nature would the market be stable.” I don’t know about the infinite spreadsheet, but uncertainty about how the universe works is inescapable. Yet markets are stable, because that’s what their job is, to cope with this uncertainty. In a world of certainty, markets would be irrelevant.

    “Laws of nature replacing man-made laws” Laws of nature are inescapable; man-made laws are tools we use — hopefully we’ll design better tools, but we need the tools. A society with no rules, conventions, etc. except those imposed by nature makes no sense.

    “Mankind should move beyond science into post-science in the next two millennia” Post-science’s Great Leap Forward? Most of us haven’t made it to the science point yet…see my own blog for comments on this re evolution & faith (shameless self-promotion, I confess: http://www.unforeseencontingencies.blogspot.com)

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