You have it exactly right, but you left out two important factors. First, not everyone has equal access to financial markets. A retail consumer can't go to the Fed and take out a loan at the discount rate to finance the purchase of a house. They have to access that credit through a middleman -- a bank, and banks are a good-old-boy network. That complicates the system response tremendously because it brings lots of human interpersonal dynamics into the mix. The idea that the economy is a distributed system of rational actors is just wrong. And second, everything Milton Friedman says has to be viewed through the lens of his political agenda, which was radical libertarian. So whenever Friedman says anything you always have to ask yourself: is he saying this because it is actually correct and there is actually data to prove it, or is he saying it because this conclusion is necessary in order to bolster the case for abolishing government? Just like the economy, the dynamics of economists is much more complicated than intellectually honest scholars seeking truth.
I agree that Friedman was ideologically opposed to government intervention, to some extent. That said, if you read him or watch his show he demonstrates an intellectual honesty and willingness to debate with anyone. The great tragedy with Friedman was that politicians, especially right wing, used his rhetoric selectively — which was very effective but dishonest. The world absolutely did NOT move in the direction of fiscal conservatism and small market-regulating governments, but quite the opposite. Yet people still act as if he was the puppet master of the corporatist kleptocracy we find ourselves in. It's a shame he died before the 2008 crisis, he probably turned in his grave when the bailouts happened.
Not doing the bailouts would have been a catastrophe that made Greece 2008 look relatively mild, across the entire Western world. Ordinary retail banking, cheque clearing etc would have been locked out for months while the bankruptcy was untangled.
Should the UK have said "sorry, if your bank account was with RBS, you don't have a bank account any more and you'll have to see what is left after the recievers have sold off the office furniture to see if you get any money back at all"? Including all businesses which bank with RBS? Many of whom themselves would be bankrupt as a result?
That said, there was a lot of choice in how the bailout was done, and in many cases it was done badly. Things like the robosigning fraud in the US should have been prosecuted more aggressively.
> he probably turned in his grave when the bailouts happened.
Maybe, but that is actually kind of the point. The bailouts were inevitable. It is simply not possible to structure an economy in such a way that the consequences of bad decisions fall solely on those who made the bad decisions. There are always externalities, moral hazards, and politics. If Friedman was intellectually honest then he was also hopelessly naive.
Yes, I understand that. But that is clearly an ideological position unsupported by any data. And in fact, if you think about it, this is necessarily the case because this position is necessarily based on assumptions about what constitutes a good outcome, and that is necessarily a matter of opinion, not objective fact.
And BTW, with regards to that video link, it's pretty easy to cherry-pick an encounter between Friedman and a woefully underprepared student that makes the student look like an idiot. But in fact the student is correct. Government is much better at providing infrastructure than the private sector, with the internet being exhibit A.
In that video link, the student isnt even challenging Friedman, just trying to ask a nuanced question. I actually agree with what he carefully says at the end (as its mostly vague and handwavy "dont do too much government intervention of the wrong kind") and Friedman still comes off as a complete asshole.
And yet people seem to view this as a success for him. Strange.
> or is he saying it because this conclusion is necessary in order to bolster the case for abolishing government?
Milton Friedman was libertarian, but not anarchist, IIUC. You may have conflated him with his son, David D. Friedman, who wrote The Machinery of Freedom.
Anarchists (left-libertarians) advocate people organize and build their own roads. Versus waiting for some far away unaccountable centralized state bureaucracy to do it.
That's fair enough, although what about long distance roads?
And what if people use the roads without paying? It's not a great commercial enterprise to build most roads, there's no way to have competition, so you'd probably need a large organisation. But then you'd have every user pay the same? Or make the more wealthy pay more? What if this monopoly turned a bit evil, we'd want some way to control who was running it, maybe if we were all members, and voted on who should run it perhaps?
Anything I can say is purely hypothetical. Because we have no left-libertarian societies to study.
But I'd like to believe that people would make stuff for use by people. People need to move? Cool. What's a good strategy? Isn't necessarily cars and roads. We'd probably have better land use policy and mass transit to optimize for moving people around.
Also, the engrained corporatist rhetoric is that every belief to the left of Grover Norquist is against capitalism, markets, competition, profits, and Freedom Markets™ in general. Nope. Not true. We love that stuff.
Corporatists (monopolists) hate competition, free enterprise, and so forth. All the anti-left screeching is pure projection, kabuki for the news cameras.
