Ebook: Myths of the Free Market

Kenneth Friedman's book on the problems of the free market has many things in its sights: laissez faire, libertarianism, education, even the U.S. Supreme Court. The book has some great quotes; a sampling follows:

"Laissez-faire has not maximized wealth. It is worse: Even in principle laissez faire cannot maximize wealth."

"Globalization favors the rich, as it always has."

"Without intervention to protect the middle and lower classes, a free market economy can drain money from those classes to create an extreme concentration of wealth. Historically, such a concentration of wealth has destabilized societies and adversely impacted the security and standard of living of even the wealthy."

The book does miss some things. Friedman puts far too much emphasis on economic growth. GNP growth as a measure of well-being is so inaccurate as to be almost laughable. GNP is measured by counting up what is spent on various items. This works more or less OK if you're counting food bought by hungry people, but very poorly indeed if you're counting money spent on bombs or automatic rifles, or on parking garages for rich people's cars. GNP is not corrected for increasing population, pollution, drawdown of natural resources, or declining quality of life. More accurate measures of economic growth, such as the Index of Sustainable Economic Welfare or Genuine Progress Indicator, tend to show that there has been far less genuine economic growth than the official statistics suggest. For more on this, see McKibben's book Deep Economy, Daly's Beyond Growth: The Economics of Sustainable Development, or Brian Czech's Shoveling Fuel for a Runaway Train: Errant Economists, Shameful Spenders, and a Plan to Stop them All.

Friedman includes an excellent discussion on the problems of a free trade policy. One thing he misses here, though, is that the traditional comparative advantage analysis never mentions transport costs. In today's world transport is heavily subsidized. Under such conditions free trade is a fast route to impoverishment for all the countries involved in it. Globalization is essentially a fantasy created by cheap oil.

Friedman mentions that democracies generally work best in small homogeneous communities. He goes from there to proposals for improving community spirit. That's fine. He misses the obvious conclusion, though, that policies which simultaneously increase the size of a community and make the community more heterogeneous, are virtually guaranteed to decrease community spirit. Large-scale immigration does both. In my opinion, limiting such immigration is an essential step toward stronger communities.

Friedman includes an essay on improving education. I agree that education is critical, but I'm a bit skeptical of his proposals to improve it. Friedman wants to focus education less on "stuffing information into the crevices of a mind" and more on creativity. The problem here is that creativity is essentially about facts bumping into one another inside a single mind. Without a certain level of factual knowledge, creativity is unlikely. I presently have a son in the 5th grade in the local public elementary school. I don't see an overemphasis on factual knowledge there. What I do see is an endless stream of educational "reforms" that have been implemented with little or no research to show that they work with real kids in real classrooms. (The use of computer games for learning is an example.) The idea of teaching creativity instead of rote facts has been around for centuries. Rousseau was a big advocate. Unfortunately, "creative" teaching methods have serious problems. They're hard on teachers even under the best conditions, since they require a lot of preparation time. "Creative" teaching methods work especially poorly with unmotivated, lazy kids, who are always in the majority in most schools. Keep in mind that some of the most creative geniuses in history were educated using rote learning. Rote learning can simultaneously provide a foundation for later learning and give a bright child something to rebel against. Don't be too quick to throw it out.

Overall, "Myths of the Free Market" is a bit disjointed. It sometimes jumps wildly from topic to topic. However, it is too good to let that stop you from reading it.