Baby, You’re a Rich Man

January 18, 2011

At the end of each episode in Milton Friedman’s Free to Choose TV series, they show a mini-debate between Friedman and some prominent intellectuals over the substance of the film. Since Friedman so often pushes for “deregulation” and a smaller role for government, he is often accused of “wanting to go back to the situation prior to the New Deal, when capitalists could run roughshod over the poor.” Friedman responds with the point I would make but doesn’t push it nearly hard enough. When you are thinking about the changes that have happened in the last 100 years, you have to separate two effects: the effect of government regulation and the labor movement, and the effect of people in general being much, much richer.

I’m going to use an analogy that wasn’t available to Milton Friedman when he made this series in 1980, the analogy of computer processing. My first computer, an Apple IIe, was quite basic. There was no graphical user interface, there wasn’t even a hard drive. If you wanted to run a game or program, you put in the floppy disk, typed a command, and voila, a half-minute later you would have a basic, black-and-white (or 16 colors at most) program running.

Why didn’t they just run OS X on these computers? The graphics are way better. Sure, you couldn’t connect to the internet back then, but still, the OS alone would have been a huge improvement. Well, running a graphics-intensive operating system would have been a huge waste of processing power. The programmers only had so many floating point operations per second and so much RAM to work with; using a ton of those resources in order to present a nice-looking user interface would have slowed down the computer and pissed people off. Without extra computer resources to burn, it made more sense to focus on the computer’s core functions, like adding numbers together.

Now I’m using a much more powerful computer, a 1.8 GHz AMD Athlon machine running Windows XP (no, it’s not 2004, but that’s when this computer was made), and everything about it is much nicer than that Apple IIe I had back in 1985. Still, even with this computer I’m feeling the differences between computers I’ve used that have Windows 7 and this one. But that doesn’t mean I’m going to rush out and get the Windows 7 upgrade. In fact, I recognize that the programs I’m running are pretty much straining the limits of this PC. I’m not going to slow the computer down more by installing a nicer operating system.

So, no, Milton Friedman didn’t want to go back to the conditions they had before 1930 in the United States. But the main reason is because the defining characteristic of those conditions was that people were really, really poor, compared to how rich they were in 1980 or how rich they are today in 2010. The reason I don’t want to go back to using the Apple IIe I used in 1985 was not that the operating system wasn’t good, but rather that the computer itself wasn’t very powerful, compared to a modern computer.

There is little danger of our going back to the level of poverty we had in the United States prior to 1930. But what of poor people in other countries? If you wouldn’t recommend that an Apple IIe user install Windows 7, you shouldn’t be recommending that poor people adopt expensive policies that fulfill their lower-priority needs. Being poor is hard enough; don’t make it worse by insisting that they spend the little money they have on things they don’t want.


2 Responses to “Baby, You’re a Rich Man”

  1. Rrrobert! Says:

    Granted: People are much richer now than they used to be, and that’s awesome.

    That still leaves debate over (a) whether the current distribution of resources is better or worse for making people richer tomorrow; and (b) even if it is, whether a different distribution would be more just, or, if you prefer, more optimal, given the value of that marginal future wealth.

    It’s (b) that is the center of the (admittedly somewhat simplistic) accusation that Friedman wants to go back to the 30s. What they’re really saying isn’t “Friedman wants everyone to be poorer” so much as “regulations/unions/what have you create more social utility than they destroy, because they reallocate money to people whose social utility comes cheap, and this offsets lost productivity (if any).”

    You’re right, of course, that it’s hard to credit regulations for, say, the way I can now check the weather on my phone. But we can credit them for, say, the way I can now breathe relatively clean air or (to take a less externality-based example) the way employers now have to buy respirators for employees working with dangerous chemicals. Sure, we’re richer now, and employees might have started demanding masks in a perfectly free market at some point. And sure, the requirement reduces employment in the industry, raises the price of employers’ services, and may have other ripple effects. But the claim is that the requirement is nonetheless worth it, either from a social values perspective (i.e., we think masks ought properly to be a cost of the service, rather than a cost of being an employee) or from an economic perspective (i.e., we think workers miscalculate their risks and the reg produces gain).

    Friedman denies those two bases of regulation, and so the claim is he would have opposed the regulations which we thought, in the 30s, were worth doing. The claim isn’t that he wants to go back to 10% of the workforce being disabled in an accident each year, so much as that his positions on equivalent regulations in todays world are equivalently wrong.

  2. […] I posted something, and Robert responded, but now I’m going to say that my original post wasn’t […]

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