Streetwise Professor

October 24, 2011

Obsession: The Sincerest Form of Flattery

Filed under: Economics,Financial crisis,Financial Crisis II,Politics,Regulation — The Professor @ 11:41 am

So now we know where commenter “a” (he of the Chicago obsession) has been hanging out (courtesy AT):

I actually love this.  Chicago, and Friedman in particular, are so in their heads it isn’t even funny.  Obsession is the sincerest form of flattery.

Ever since the financial crisis began, those who had been smarting at the whipping that Friedman had delivered over the previous decades leaped on the crisis as an opportunity to heap scorn on him, who conveniently for his critics, was dead.  Had he been alive, he would have delivered another whipping.

This attempt to blame the crisis on Chicago is rather pathetic–and a fact- and logic-free exercise.  Anybody who thinks that recent American, let alone European, policy was designed, built, or even approved at 59th and University is, quite frankly, an ignoramus.

Bleating about “deregulation”–whatever.  Many deregulatory policies that did bear the Chicago stamp, and which were actually implemented, in things like trucking, rail,  and air transport, have worked pretty much as advertised–and had nothing to do with the crisis.  But to think that financial policy over recent decades is largely Chicagoan is just wrong.  Yeah, Chicago types generally supported changes to Glass-Steagall, but these changes had absolutely nothing to do with the crisis, just as Glass-Steagall itself changed things that had nothing to do with causing the Great Depression.

I could go on about this for far longer than I have time for right now, but let me just mention a couple of things about Friedman in particular that prove just how bogus it is to heap blame on him for what blew up in 2008.

The first is monetary policy.  Friedman was an arch foe of the discretionary monetary policy implemented by Greenspan and then Bernanke in 2001-2008.  You may criticize Friedman’s monetarism, and if it was implemented during the 90s and 00s maybe different problems would have occurred.  But if Greenspan and Bernanke had been acting according to Friedman’s lights, they never would have committed the egregious errors that they did.  Friedman did not believe in “maestroes.”  Indeed, he believed they were dangerous.  He was utterly correct in his beliefs.

The second is the nexus between finance and government.  One of the foundations of Friedman’s belief in small and limited government is that private interests would exploit government power to seek rents. A lot of that went on in the lead up to the crisis.  To blame it on Friedman-Chicago libertarianism is farcical.

The third relates to the current crisis, which has the potential to make one look back wistfully on the halcyon days of 2008 and 2009.  It is a crisis of government spending, government entitlements, and government debt.  All of which Friedman in particular warned about for virtually his entire life.

I could go on.  The Euro and the EU, for example.  But suffice it to say that blaming Crisis I or Crisis II on Friedman and Chicago economics is delusional.

But we enjoy the attention!

And we really enjoy living rent free in your heads, particularly since there is so much available space.  Beats rent control any day.

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  1. “…fact- and logic-free exercise…”

    Yes, it is a fact that Roosevelt prolonged the Great Depression. It is a fact that the US GNP grew only 17% between 1933 and 1934, from $56 billion to $66 billion, a growth rate that was easily exceeded every year of Our assiduous servant Friedman-follower Ronald Reagan’s presidency. It is also a fact that economic catastrophe followed Our servant William’s tax increases in 1993. Our servant Newt Gingrich advised the American people to sell their stocks afterwards. And the stock market crash in 2008 was caused by policy uncertainty due to the fact that a Kenyan Marxist running for the presidency.

    We truly appreciate the careful attention to factuality the good Professor shows.

    Comment by a — October 24, 2011 @ 12:15 pm

  2. There’s a specter staulking SWP…the spectre of a grandpa M.D. from Galveston who thinks…gasp…if you can’t trust this bunch to run health care or the U.S. economy, you probably can’t trust them to run a global military base empire either.

    Comment by Mr. X — October 24, 2011 @ 1:05 pm

  3. No you cannot trust them to run a base system – there will be a lot of stealing and inefficiency. Our choice is the existing base system something larger, smaller or no. With a different global military as we have our security might be endangered. it certainly costs too much. As long as the change is in small increments, we can watch it

    With the economy, we also have a choice, but the immediate consequences of misbehavior are more severe – a guaranteed loss of property, liberty and our freedoms to our internal enemies and or elites – and it is happening NOW. That is what what Friedman railed against, much as I have a problem with some of the monetarist ideas.

    Comment by Sotos — October 24, 2011 @ 2:10 pm

  4. “…a guaranteed loss of property, liberty and our freedoms to our internal enemies and or elites – and it is happening NOW. That is what what Friedman railed against…”

    Before Friedman’s intellectual triumphs, for decades We had no comparable opportunity to concentrate assets and income in Our hands, for in a depression, assets return to their rightful owners.

    Thus Our oft-mentioned gratitude to him and his fellow scholars of the Chicago School.

    Comment by a — October 24, 2011 @ 5:56 pm

  5. Too bad the word ‘pagliaccio’ had never acquired the same meaning in English as it did in Russian.

    Comment by LL — October 24, 2011 @ 6:34 pm

  6. Meanwhile the EU is well on track to solving its debt crisis:

    “European Internal Market Commissioner Michel Barnier is considering a move to ban the agencies from publishing outlook reports on EU countries entangled in a crisis”,1518,792970,00.html

    Comment by Ivan — October 25, 2011 @ 12:23 am

  7. @A – The concentration of assets you snidely remark is often a function of the growing growing anti free market operations of our government – they are not the triumph of Friedman’s ideology , but in many ways proof of his warnings of the corruption of our leaders and the economic elites: the use of cronyism to gain power. Look where have these concentrations occurred?

    Some have been building products people need – but most have not Jobs, Maybe Gates, some retailers creatives and fashion people.

    Others –

    – Real estate the booms of which have been supported by tax policy and the long expansion of money supply under F&F and the FED. Large scale development usually depends on seizing sovereign powers like eminent domain. this process is riddled with corruption, the looting of Banks and ties to both parties (see the Pritzker family for example. Insurance – the most heavily state regulated enterprise, with bizarre accounting that allows deferral of losses, tax treatments that defy understanding – see Buffet a smart guy much of whose fortune is a few good bets backed by the bailout provided by a thirty year bull market in the bonds held by his insurance companies. Also not paying his taxes – see ongoing litigation. Medicine again state regulated and mostly funded through the government or regulated entities. Much of Wall Street is competitive interest peddling. Accounting, Law, Government contracting, wake up and smell the coffee.

    Comment by Sotos — October 25, 2011 @ 6:16 am

  8. @Ivan–if it weren’t so tragic, the Europeans could be a source of endless amusement. If only Mark Twain or Ambrose Bierce were around to eviscerate them, and mock their folly.

    The ProfessorComment by The Professor — October 25, 2011 @ 8:12 am

  9. Does anyone know if @a bases his writing style on Queen Victoria?

    Comment by pahoben — October 26, 2011 @ 6:07 am

  10. This dude needs spell check for his protest signs. What a half baked effort but its “creation” undoubtedly evoked a deep sense of pride and accomplishment.

    I wish Friedman were still with us-his passing is still regretted.

    Comment by pahoben — October 26, 2011 @ 6:30 am

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