Monday, September 03, 2012

Myths That Conceal Reality

Milton Friedman was a master economist as well as a master lecturer, and in the 1980 video here he discusses 5 myths that conceal reality:
1)  the 19th Century was a time of merciless, unbridled capitalists who "exploited the poor unmercifully and ground them beneath their heals"--the robber-baron myth
2)  the Great Depression was caused by a failure of private enterprise--the Great Depression myth
3)  government has had to step in because of a failure of the private market and a great widespread demand for government services--the "demand for government services" myth
4)  there is such a thing as a free lunch--the free lunch myth, and
5)  the myth that government operates by taking from the rich and giving to the poor, that government has helped the poor at the expense of the rich--the Robin Hood myth


mmazenko said...

And his analysis and theories are the right ones because ... ?

Darren said...

Because he's a bright guy who makes sense, who backs up his statements with logic and facts. I know that's different from the "emoting" that the left does, but that *used* to be the way everyone intellectually justified their beliefs.

Anonymous said...

"And his analysis and theories are the right ones because..."

Well, you have to read what he says and consider his arguments before you'll be able to have an opinion of your own about the correctness of his theories.

But, to take an example from memory: The US (and other countries) had experienced recessions (even large ones) before the Great Depression. A good question to ask might be, "What was different about how the economic downturn was managed during the Great Depression?" Friedman points out that the Great Depression had *MORE* government intervention than had ever been attempted before. This was true even under Hoover! Yep, by historical standards up to 1929, Hoover was wildly in favor of government intervention to fix/correct the economic downturn. So much so, in fact, that one argument Roosevelt used when running against him in 1932 was there there was too much government intervention (obviously, this changed once Roosevelt won ...).

There was a nasty downturn in 1920 to compare the Great Depression against (most people today have never heard of the 1920 downturn ... much like most people today haven't heard of *most* economic downturns in US history). This had pretty much minimal government intervention, was very deep, but also was over in about a year.

There were also differences in how the Federal Reserve managed the money supply during the Great Depression that can be compared against other economic downturns. As nearly as I can tell, there are *NO* mainstream economists who believe that the Federal Reserve managed their bit well during the Great Depression.

You don't have to agree with Friedman, of course, and lots of professional economists don't. But the way for you to decide if he is correct is to read the arguments yourself (and the counterpoints) and try to figure out which ones make sense.

-Mark Roulo

Darren said...

I've linked to the report on this blog many times--a couple UCLA economists who say that govt meddling prolonged the Great Depression by 7 years.