Genuflect at the open market

FREE MARKET: The story of an idea

Author: Jacob Sol

Editor: Core Books

pages: 336

Price: $32

Late in the process of writing what was to be a positive, if not entirely giddy, review of Free market, I tried to search for a quote that author Jacob Soll seemed to attribute to Milton Friedman. The famous economist, writes Soll, “proposed the nihilistic and perhaps even anti-democratic libertarian concept that ‘all bad things come from governments’.”

An endnote directed me to page 137 of the 2002 third edition of Friedman’s Capitalism and freedom, of which I have a copy. Page 137 is the start of a chapter on professional licensing, a subject not covered in Soll’s book, and it does not contain the phrase “all bad things come from governments”. No other pages of Capitalism and freedom. The exact phrase was also not found on the Internet before Free market has been uploaded to Google Books, although a version with the singular “government” has been used a few times by critics of libertarianism.

After this disturbing discovery, I followed the other references in Free market to Friedman’s work, with which I am quite familiar. I couldn’t find any other newly invented quotes. But of the 10 total endnotes I checked, only four pointed to pages that clearly supported the previous text. Along with the rest, I could see little or no connection between Soll’s paraphrases of Friedman’s ideas and the work mentioned in the endnote.

On some of the references, I may not have searched enough. Not so with Soll’s attempt to explain the “Phillips curve,” the supposed trade-off between inflation and unemployment that Friedman, in a prescient presidential address at the 1967 annual meeting of the American Economic Association, argued was only temporary. “A rising rate of inflation can reduce unemployment,” he said, “a high rate will not.”

In Soll’s muddled account, which I’m afraid I skimmed through on first reading, the Phillips curve is a theory “that tight money and high interest rates were thought to cause inflation” . To debunk it, Friedman “demonstrated that monetary expansion could cause temporary inflation, but the economy would eventually stabilize.”

These explanations are completely false. They are followed by an endnote pointing to a dense 1959 article by Friedman on “The Demand for Money”, in which, as far as I know after repeated readings, none of these issues are discussed.

What should a critic think of this? The Phillips curve is not important to the story told in Free Market, and “all bad things come from governments” is not an unfair summary of the political philosophy of a man who once wrote an essay titled “Why Government is the Problem”. Soll doesn’t seem to be trying to put one on the drives. But he also doesn’t seem to be very careful or knowledgeable about Friedman’s economics, which left me much less inclined to trust his descriptions of other thinkers and ideas.

This poses problems for a book that aims to guide readers through 2,000 years of Western thought on the free market. For example, I had originally blamed my own obtuseness and some overly dense writing by Soll for my failure to understand how the Roman statesman Cicero, the subject of the book’s first chapter, could be said to have thrown the foundations of later theories of a self. regulating market. Now I don’t buy it anymore. Soll is a history professor whose research has focused on 17th-century France, and his narrative is sharper and more persuasive as he gets closer to that time and place. The most prominent figure is Jean-Baptiste Colbert, King Louis XIV’s Prime Minister of State from 1661 to 1683, who used the king’s subsidies, tariff barriers and authoritarian powers to propel his backward country on the road to economic modernity. Colbert believed that France should participate in world markets but not be governed by them, and variations of his model have since been followed by nations making the leap to wealth and power, from the United States to Germany in through Japan and China.

Colbert doesn’t get much credit for this, instead he’s often labeled by free-traders as a misguided mercantilist obsessed with France running trade surpluses and hoarding precious metals, an approach mistaken supposedly swept away by Adam Smith’s blockbuster in 1776, Inquiry into the Nature and Causes of the Wealth of Nations.

Soll argues that Colbert saw trade policy as a means to spur development, not an end in itself, and that Smith’s main criticism of what he called Colbert’s “mercantile system” was that he was too concerned about traders.

Which I will buy. Less convincing is Soll’s assertion that what Smith meant by the “invisible hand” that leads traders interested in serving the public good was “society” (the surrounding text in The Wealth of Nations does not really confirm this). But he is correct that Smith’s work is imbued with more skepticism of capitalists and reverence for government than the “hand-picked” caricatures of it that gained popularity in the 19th and 20th centuries.

Milton Friedman was among the cherry pickers, and his work certainly invites scrutiny and criticism. But while I wholeheartedly agree with Soll’s conclusion that “faith in the market alone won’t save us,” he hasn’t really delivered the book to those who want to learn what will.

©2022 New York Times News Service

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