On neoclassical economics.— Milton Friedman wrote a famous article in 1953 called “The Methodology of Positive Economics,” in which he argued that in science, the less realistic or more idealizing the model, the better.[1] A typically simplistic argument. But for a neoclassicist it served the function of making a virtue of necessity, thus allowing him to continue to believe his theories: since neoclassical economics is the most unrealistic, most idealized, most counterintuitive economic model of all, it’s the best! This Friedmaniacal methodology therefore lets economists retort to criticisms regarding the inability of their models to explain what happens in the real world, “That’s just because of the messiness and imperfections of reality! It doesn’t prove that our models are wrong. You policymakers simply have to make reality conform more closely to our logically beautiful models.” Sure. Make reality conform to models, rather than making models conform to reality. To quote Herman Daly, former Senior Economist at the World Bank: “My major concern about my profession today is that our disciplinary preference for logically beautiful results over factually grounded policies has reached such fanatical proportions that we economists have become dangerous to the earth and its inhabitants.”

When translated into policy, the fetish of a pure idea always leads to mass suffering. Nazism, Fascism, “Communism,” radical Islamism, and the Free Market ideology. Nothing is more inhuman than the urge to remake people and society in the image of an ideal model.

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On Milton Friedman.— On the one hand you have Gandhi: “The movement against war is sound. I pray for its success. But I cannot help the gnawing fear that the movement will fail if it does not touch the root of all evil—human greed.” Ideas we instinctively recognize as good and noble. On the other hand you have Milton Friedman, Ayn Rand, Friedrich Hayek, and all the other ideological hacks doing the bidding of big business by defending greed, saying it’s inevitable and good, selfishness makes the world go round, everyone is necessarily greedy and should be. Reducing human life to a cost-benefit analysis, as vulgar and inhuman, anti-humanist, as the behaviorist ideology of stimulus-and-response. It would be a horrible thing if these deniers of humanity and compassion, creativity, love, solidarity and cooperation, were right. Fortunately they’re wrong. The world is not what their ideology implies it is, a dystopia of frenzied individualism. That sort of anti-paradise has been approximated only in Nazi concentration camps and such environments of sub-animal existence. Greed and selfishness—unless the concepts are broadened so much as to be nearly meaningless—are in fact of marginal importance to human life. Ordinarily they’re recognized as pathological. They have no place in family life or between friends or lovers. Generosity is infinitely more common on the level of personal relationships than greed and selfishness are. Cooperation and concern for others are universal, except in the perversely structured realms of the economy and politics in “civilized” societies (as opposed to tribal societies). The existence of greed has far more to do with warped social structures than human nature.

But at least Friedman, Hayek and their like were consistent: rather than recoil from repulsive personifications of their ideology like Pinochet and military juntas, they embraced them and facilitated their brutality, advising them, giving them the cover of intellectual respectability. Hayek was very impressed by Pinochet, and Margaret Thatcher became his firm friend. And when the ideology led to worldwide misery, Friedman maintained “the courage of his convictions,” like George W. Bush, and never recanted or modified his position. Doggedly loyal to his vision of greed and selfishness.

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One of the ironies about Ayn Rand is that her philosophy of extreme selfishness and individualism would, if taken to its logical conclusion and realized in the world, result in a society that bore resemblances to the totalitarianism she fled when fleeing Russia. Let’s leave aside her stupid love of laissez-faire capitalism, an impossible economic order that, to the extent it could be approximated, was responsible for the Great Depression and thereby the rise of Nazi collectivism. ....Or, on second thought, no, let’s look at this laissez-faire capitalism, since it is one manifestation of her vision. If a pure version of it were possible, it would be something like Murray Rothbard’s “anarcho-capitalism,” which, to quote Chomsky, is “a world so full of hate that no human being would want to live in it.”[2] As someone once said, the closest we’ve ever come to a society of pure selfishness and individualism was Auschwitz, which was the culmination of a kind of totalitarian collectivism. The ironic parallels between Nazi (and Soviet) collectivism and Randian or Rothbardian individualism are significant: they’re due to the profound atomization that each entails. In the latter, the individual is to treat everyone as a means to his end; in the former, the individual is to treat everyone as a means to the state’s (or the movement’s) ends. In both cases, no human connections are allowed, no treating the other as a being with his own value and his own claims on one’s respect. Hate, mistrust, and misery are the inevitable consequences of both these dystopian visions.

Needless to say, people like Rand and Rothbard are not to be taken seriously, except as symptoms. But it’s fun to glance at them sometimes because of all the little ironies you’ll notice.

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Chomsky speaks.— “In a market system, your dollar is your vote. You have as many votes as you have dollars. If you have zero dollars, you have zero votes. Unborn generations have zero dollars, so what happens to them is of zero significance in a market system. What’s done today, they have to live with. If we destroy resources, they have to live with it. So to the extent—the limited extent—that market systems are allowed to function, they’re just guaranteed to self-destruct. That’s why if you take a look at modern history, in countries that were more or less organized and functioning they never allowed market systems to function. In Britain there was an experiment with laissez-faire around the 1860s and 1870s, but it was called off very quickly by the business world because they saw it was going to wipe out communities and the environment. What they instituted in its place was a kind of social democratic system.” See Karl Polanyi’s classic The Great Transformation.

[1] “Truly important and significant hypotheses will be found to have ‘assumptions’ that are wildly inaccurate descriptive representations of reality, and, in general, the more significant the theory, the more unrealistic the assumptions (in this sense).” Alan Musgrave refuted Friedman’s arguments in his 1981 paper “Unreal Assumptions in Economic Theory: the F-Twist Untwisted.”

[2] The footnotes to Chomsky’s Understanding Power have excerpts from one of Rothbard’s “libertarian” books: “Abolition of the public sector means, of course, that all pieces of land, all land areas, including streets and roads, would be owned privately, by individuals, corporations, cooperatives, or any other voluntary groupings of individuals and capital.... Any maverick road owner who insisted on a left-hand drive or green for ‘stop’ instead of ‘go’ would soon find himself with numerous accidents, and the disappearance of customers and users.... [W]hat about driving on congested urban streets? How could this be priced? There are numerous possible ways. In the first place the downtown street owners might require anyone driving on their streets to buy a license.... Modern technology may make feasible the requirement that all cars equip themselves with a meter....

“[I]f police services were supplied on a free, competitive market....consumers would pay for whatever degree of protection they wish to purchase. The consumers who just want to see a policeman once in a while would pay less than those who want continuous patrolling, and far less than those who demand twenty-four-hour bodyguard service.... Any police firm that suffers from gross inefficiency would soon go bankrupt and disappear.... Free-market police would not only be efficient, they would have a strong incentive to be courteous and to refrain from brutality against either their clients or their clients’ friends or customers. A private Central Park would be guarded efficiently in order to maximize park revenue.... Possibly, each individual would subscribe to a court service, paying a monthly premium.... If a private firm owned Lake Erie, for example, then anyone dumping garbage in the lake would be promptly sued in the courts.”