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Monday, January 09, 2006

the friedmans on military intervention

No, no, no, not Tommy the neocon, but Chicago school economist Milton and his anarcho-capitalist son David, as summarized in this piece by David R. Henderson at
Nobel laureate in economics Milton Friedman has never, to my knowledge, written on foreign policy. But the framework in one of Friedman's best articles from the early 1950s can be applied directly to foreign policy. As far as I know, no one has done so. This is not surprising for two reasons. First, the article, "The Effects of a Full-Employment Policy on Economic Stability: A Formal Analysis," is not well-known because it was originally published in a French economics journal and its translation appears only in Friedman's 1953 book, Essays in Positive Economics. Second, U.S. economists, in my experience at least, tend not to think of foreign policy in the systematic way they think of domestic policy; instead, they tend to be flag-wavers who talk about our brave young men and women who are "fighting for our freedom." One of my goals in the economics profession is to get my fellow economists to apply some of the powerful analytic frameworks we have to issues in foreign policy. This article is my application of Milton Friedman's reasoning in the above-mentioned article to foreign policy.

Where does David Friedman come in? He does not apply his father's formal economic model as I'm about to do. However, in "Is There a Libertarian Foreign Policy?," a chapter in his outstanding book, The Machinery of Freedom, he makes a case that is very much in the spirit of my application of his father's model. For those who are impatient for the bottom line, here it is. For an interventionist foreign policy to work, the government must be right much more often than it's wrong. This is an unlikely scenario.
The Machinery of Freedom is indeed an excellent book, a very important work that really helps one visualize a potential world without government, and it doesn't shy away from the tough issues. An excellent point made by David Friedman is quoted by Henderson in his article:
"To say that our foreign policy is badly run is in a sense misleading. Perhaps when we [sic – see my "Who is 'We'"] support dictators who contribute very little to the defense of the U.S., the reason is that they contribute instead to the profits of American firms who do business in their countries, and the American firms in turn contribute to the politicians who make our foreign policy. If so, what we are observing is not the incompetence of the people making our foreign policy but their competence at achieving objectives other than the defense of the U.S. – most notably their own wealth and power." (p. 214)
Read the rest of Henderson's piece, and be sure to read The Machinery of Freedom if you haven't done so already.


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