A Correspondence With A Professor From A Very Prestigious University

This is a series of letters I had with L, a retired professor of economics from a very prestigious university. B, a former student of L’s, introduced me to him, saying that L was an admirer of mine. Our discussion ranged widely over mainstream and Austrian economics, anti-trust law and welfare economics, discussing the contributions of, among others, Milton Friedman and George Stigler. L supported these two Nobel Prize winners in economics; he was a grad student of the latter’s. I was very critical of Friedman and Stigler. I accused the latter, not just in effect, of intellectual dishonesty. This is five part letter exchange.

Letter 1
On Wed, Jul 18, 2018 at 1:04 PM, Walter Block wrote:

Dear B:

Thanks for the introduction to L.

Dear L (if I may):

B said some very nice things about you, including the fact that you and I have much in common, political-economy speaking. So, I thought I’d open up a conversation with you in this way.

Best regards,

Walter

Letter 2
From: L
Sent: Saturday, August 04, 2018 1:12 PM
To: Walter Block
Cc: B
Subject: Re: contact info

Walter,

Good to hear from you, and particularly by way of B. Nice to know that he has not given up his Libertarian ways!

I met you once, in fact, we had lunch together with a mutual friend and economists – D.

C and I have both retired. I am 82 and C 78. We both attend seminars, though infrequent. The Department of Economics at xyz is changing, in much the same way that Chicago (and probably the profession as a whole) is changing. MIT seems to be setting the pace. The questions seem less interesting, and the search for more sophisticated statistical tools the primary goal. We still send our share of Ph.D. students to leading universities and receive enough back that it is still a fine undergraduate program. We consider that to be the primary function at xyz – we have no interest in graduate programs of our own. Educate them and send them away. In the West, only Berkeley and Stanford send more undergraduates into Ph.D. programs than xyz. I wish they came back more interested in Political Economy than Statistics, but I can’t change that trend.

Where are Friedman and Stigler when we need them so badly?

L

Letter 3
On Sat, Aug 4, 2018 at 2:21 PM, Walter Block wrote:

Dear L:

I’m 76, so I’m the young guy in this crowd, and unusual position for me to be in, since I’m still on the faculty, and most of my colleagues are way younger than me.

I agree with you entirely about the over-mathematicalization of economics.

Friedman and Stigler? They are hardly exemplars of economic freedom.

This is from a forthcoming article of mine:

“MV make much of the distinction between Marx and Stigler, quoting the latter at length, supportively. This is a bit like shooting fish in a barrel. Of course latter is quite a bit better than the former insofar as support for free enterprise is concerned. But Stigler is no better than he should be. He is a fair weather friend of economic freedom. To wit, he was an avid supporter of anti trust law, a violation of economic freedom if ever there was one, and a sharp move in the direction of crony capitalism.

“McChesney (1991) is particularly critical of all of the leading members of the Chicago school for their support of antitrust legislation, and in particular, of George Stigler. McChesney starts off by quoting Stigler (1984, p. 46) to this effect:

“’If you propose an antitrust law, the only people who should be opposed to it are those who hope to become monopolists, and that’s a very small set of any society. So it’s a sort of public-interest law in the same sense in which I think having private property, enforcement of contracts, and suppression of crime are public-interest phenomena.’

“And then McChesney pounces:

“’Chicago’s views of antitrust face a second, and fundamentally more difficult, challenge. Much of the normative economic analysis on which Chicagoans relied in proclaiming victory is manifestly inconsistent with more fundamental positive notions of economics developed by Chicagoans themselves. In particular, Chicago’s positive approach to antitrust, viewing it as public-interest government intervention intended to correct market failure, squarely contradicts the now-dominant economic theory of regulation that Chicago itself popularized. The Chicago school of antitrust regulation, that is, runs counter to the Chicago school of regulation more generally.’

“The point is, that while MV extoll the virtues of Stigler,[1] McChesney quite properly depicts this Chicago economist and Nobel Prize winner with his pants down around his ankles. The latter blatantly contradicts himself.[2] If a firm acts in fully in accord with free enterprise principles, it commits no fraud, engages in no cronyism, is guilty of nothing along that line, but grows sufficiently through voluntary merger and/or via satisfying customers, it can still be found in violation of this profoundly anti-market law. This is a blatant contradiction of the free enterprise ethic. Antitrust is the Achilles Heel of Chicago economists in general, and Stigler in particular. Surely, there are better supporters of laissez faire capitalism than Stigler, with whom to compare to Marx.”

And here are some critiques of Milton Friedman

Block, 1999, 2003, 2010, 2011, 2013; Block and Barnett, 2012-2013; McChesney, 1991; Rothbard, 2002; Friedman and Block, 2006; Friedman and Block, 2006; Kinsella, 2009; Lind, 2012; Machan, 2010; McChesney, 1991; North, 2012; Rothbard, 2002; Vance, 2005; Wapshott, 2012; Wenzel, 2012; Wilcke, 1999

Block, Walter E. 2013. “Was Milton Friedman a socialist” Management Education Science Technology Journal (MEST Journal); Vol. 1, No. 1, pp. 11- 26; http://mest.meste.org/MEST_1_2013/_02.pdf;
http://mest.meste.org/MEST_1_2013/Sadrzaj_eng.html

Block, Walter E. 1999. “The Gold Standard: A Critique of Friedman, from the free enterprise perspective, Greenspan,” Managerial Finance, Vol. 25, No. 5, pp. 15-33; http://giorgio.emeraldinsight.com/Insight/viewContainer.do?containerType=Issue&containerId=13529; http://www.mises.org/etexts/goldcritique.pdf

Block, Walter E. 2003. “Private property rights, economic freedom, and Professor Coase: A Critique of Friedman, McCloskey, Medema and Zorn,” Harvard Journal of Law and Public Policy, Vol. 26, No. 3, Summer, pp. 923-951; http://findarticles.com/p/articles/mi_go2782/is_3_26/ai_n6640908/?tag=content

Block, Walter E. 2010. “Milton Friedman on Intolerance: A Critique.” Libertarian Papers; Vol. 2, No. 41;
http://libertarianpapers.org/2010/41-block-milton-friedman-on-intolerance-a-critique/; http://mises.org/daily/6208/Friedman-on-Intolerance-A-Critique

Block, Walter E. 2011. “How Not To Defend the Market: A critique of Easton, Miron, Bovard, Friedman and Boudreaux .” Journal of Libertarian Studies; Vol. 22, pp. 581–592
http://mises.org/journals/jls/22_1/22_1_28.pdf

Block, Walter E. and William Barnett II. 2012-2013. “Milton Friedman and the financial crisis,” American Review of Political Economy, Vol. 10, No. 1/2, June, 2012 – June 2013; pp. 2-17; http://www.ARPEJournal.com; http://arpejournal.com./ARPEvolume10number1-2/Block.pdf; arpejournal.com

Friedman, Milton and Walter E. Block. 2006. “Fanatical, Not Reasonable: A Short Correspondence Between Walter E. Block and Milton Friedman (on Friedrich Hayek’s Road to Serfdom).” Journal of Libertarian Studies, Vol. 20, No. 3, Summer, pp. 61-80; http://www.mises.org/journals/jls/20_3/20_3_4.pdf; https://mises.org/system/tdf/20_3_4.pdf?file=1&type=document

Kinsella, Stephan. 2009. “Milton Friedman on Intolerance, Liberty, Mises, Etc.” November 9;
http://archive.mises.org/11004/milton-friedman-on-intolerance-liberty-mises-etc/

Lind, Michael. 2012 . « Thank you, Milton Friedman: How conservatives’ economic hero helped make the case for big government.” August 7 ;
http://www.salon.com/2012/08/07/thank_you_milton_friedman/

Machan, Tibor R. 2010. Milton Friedman and the Human Good, June 7; http://mises.org/daily/4451/Milton-Friedman-and-the-Human-Good

McChesney, Fred. 1991. “Antitrust and Regulation: Chicago’s Contradictory Views,” Cato Journal, Vol. 10, No. 3, Winter, pp. 775-778

North, Gary. 2012. “Detours on the Road to Freedom: Where Milton Friedman Went Wrong.”
https://archive.lewrockwell.com/north/north1178.html

Rothbard, Murray N. 2002. “Milton Friedman Unraveled.” Journal of Libertarian Studies, Vol. 16, No. 4, Fall, pp. 37-54; http://www.mises.org/journals/jls/16_4/16_4_3.pdf

Vance, Laurence M. 2005. “The Curse of the Withholding Tax” April, 21;
http://mises.org/daily/1797

Wapshott, Nicholas. 2012. “A Lovefest Between Milton Friedman and J.M. Keynes.” July 30; http://www.thedailybeast.com/articles/2012/07/30/nicholas-wapshott-a-lovefest-between-milton-friedman-and-j-m-keynes.html
Libertarians worship Milton Friedman, and liberals lionize John Maynard Keynes. But a long-lost essay shows that the champion of small government admired the prince of the New Deal.

Wenzel, Robert. 2012. “How Milton Friedman Helped Make the Case for Big Government.” August 9; http://www.economicpolicyjournal.com/2012/08/how-milton-friedman-helped-make-case.html

Wilcke, Richard R. 1999. “An appropriate ethical model for business,
and a critique of Milton Friedman,” http://mises.org/journals/scholar/Ethics.PDF

Best regards,

Walter

Letter 4

From: L
Sent: Saturday, August 04, 2018 5:15 PM
To: Walter Block
Subject: Re:

Walter,

A very interesting read, and much more that I will want to return to later. I doubt that I can add anything to what you already know, but there seems to be a time period conflict here.

I am aware of Stigler’s early support of anti-trust legislation, but sometime before 1962-63, he had made a significant change — at least verbally and in his classes. In class, in 1963, Stigler made it very clear that while he started off favoring anti-trust legislation, Friedman and experience had taught him that over time market forces worked better than anti-trust legislation. I don’t know what he had in print acknowledging his “conversion,” but in class he was very clear, giving examples of US Steel, the autos, Alcoa, etc.

I thought you would want to know. I hope that there is something in print??

L

Letter 5

Dear L:

I don’t think this consideration you mention gets Stigler off the hook. If anything, it worsens my opinion of him, for it adds dissimulation, intellectual dishonesty, to error. It is bad enough that earlier on, Stigler published articles favoring antitrust. It is worse that after seeing the error of his ways, he did not publicly renounce them. For, teaching is a private undertaking. Only a few dozen, or, over the years, a few hundred of his students, were acquainted with the fact that he no longer supported anti trust. But what about the thousands, maybe tens of thousands of scholars, economists, lawyers, law professors, judges, etc., who looked up to him, and in that way were blinded to the flaws in this legislation? Stigler owed it (morally, not legally, of course) to this vast public of his to renounce his earlier views. He did not.

I don’t like to brag, but, at one time I favored the Hayekian triangle, used by virtually every Austrian macroeconomist. But, when I published this article (Barnett, William II and Walter E. Block. 2006. “On Hayekian Triangles.” Procesos De Mercado: Revista Europea De Economia Politica; Vol. III, No. 2, Fall, pp. 39-141; http://mises.org/journals/scholar/block18.pdf; http://www.academia.edu/1359916/On_Hayekian_Triangles; http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1880543) attacking the triangle, I singled out my own previous publications in support of that mode of analysis, and criticized myself. Block, 1; Stigler, 0.

If I insult someone, publicly, I should apologize to him, publicly, not privately. If I make an error publicly, in a refereed journal article, I should acknowledge this publicly, in the same venue, and, not just to a bunch of my students. I did that. Stigler did not.

By the way, Friedman also supported anti-trust. But he was a “moderate” on this issue. He did not say that all cases of “monopoly” should be pursued in court. For, to do so would be costly, and, maybe, more expensive than the welfare loss of monopoly that could be saved through a law suit. But, he totally bought into the fallacious notion that there was a dead weight loss associated with “monopoly” (that is, large size of companies attained through purely market efforts, not govt grants of special privilege). I suspect that Stigler’s later insight about anti trust was of this sort; that he never adopted the Austrian view that the entire analysis was misbegotten, due to interpersonal comparisons of utility, and other such welfare economic fallacies. If there is an afterlife, and Stigler, and Friedman are reading this interchange between the two of us, they might want to peruse this bibliography:

For an Austrian critique of neoclassical monopoly theory, see Anderson, et. al., 2001; Armentano, 1972, 1982, 1989, 1999; Armstrong, 1982; Barnett, et. al., 2005, 2007; Block, 1977, 1982, 1994; Block and Barnett, 2009; Boudreaux and DiLorenzo, 1992; Costea, 2003; DiLorenzo, 1996; DiLorenzo and High, 1988; Henderson, 2013; High,1984-1985; Hull, 2005; McChesney, 1991; McGee, 1958; Rothbard, 2004; Shugart, 1987; Smith, 1983; Tucker, 1998A, 1998B

Anderson, William, Walter E. Block , Thomas J. DiLorenzo, Ilana Mercer, Leon Snyman and Christopher Westley. 2001. “The Microsoft Corporation in Collision with Antitrust Law,” The Journal of Social, Political and Economic Studies, Vol. 26, No. 1, Winter, pp. 287-302

Armentano, Dominick T. 1972. The Myths of Antitrust, New Rochelle, N.Y.: Arlington House.

Armentano, Dominick T. 1982. Antitrust and Monopoly: Anatomy of a Policy Failure, New York: Wiley

Armentano, Dominick T. 1989. “Antitrust Reform: Predatory Practices and the Competitive Process.” Review of Austrian Economics. Vol. 3, pp. 61-74. http://www.mises.org/journals/rae/pdf/rae3_1_4.pdf

Armentano, Dominick T. 1999. Antitrust: The Case for Repeal. Revised 2nd ed., Auburn AL: Mises Institute

Armstrong, Donald. 1982. “Competition versus Monopoly: Combines Policy in Perspective.” The Fraser Institute: Vancouver, BC, Canada

Barnett, William, Walter E. Block and Michael Saliba. 2005. “Perfect Competition: A Case of ‘Market-Failure,’” Corporate Ownership & Control. Vol. 2, No. 4, summer, p. 70-75

Barnett, William II, Walter E. Block and Michael Saliba. 2007. “Predatory pricing.” Corporate Ownership & Control, Vol. 4, No. 4, Continued – 3, Summer; pp. 401-406

Block, Walter E. 1977. “Austrian Monopoly Theory — a Critique,” The Journal of Libertarian Studies, Vol. I, No. 4, Fall, pp. 271-279.

Block, Walter E. 1982. Amending the Combines Investigation Act, Vancouver: The Fraser Institute.

Block, Walter E. 1994. “Total Repeal of Anti-trust Legislation: A Critique of Bork, Brozen and Posner, Review of Austrian Economics, Vol. 8, No. 1, pp. 35-70.

Block, Walter and William Barnett. 2009. “Monopsony Theory.” American Review of Political Economy. June/December, Vol. 7(1/2), pp. 67-109; http://www.arpejournal.com/ARPEvolume7number1-2/Block-Barnett.pdf; http://www.arpejournal.com/

Boudreaux, Donald J., and DiLorenzo, Thomas J. 1992. “The Protectionist Roots of Antitrust,” Review of Austrian Economics, Vol. 6, No. 2, pp. 81-96

Costea, Diana. 2003. “A Critique of Mises’s Theory of Monopoly Prices.” The Quarterly Journal of Austrian Economics. Vol. 6, No. 3, Fall, pp. 47-62; http://www.mises.org/journals/qjae/pdf/qjae6_3_3.pdf

DiLorenzo, Thomas J. 1996. “The Myth of Natural Monopoly,” Review of Austrian Economics, Vol. 9, No. 2, pp. 43-58; http://www.mises.org/journals/rae/pdf/rae9_2_3.pdf

DiLorenzo, Tom and Jack High. 1988. “Antitrust and Competition, Historically Considered,” Economic Inquiry, Vol. 26, No. 1, pp. 423-435, July.

Henderson, David R. 2013. “The Robber Barons: Neither Robbers nor Barons.” Library of Economics and Liberty. March 4;
http://www.econlib.org/cgi-bin/printarticle2.pl?file=Columns/y2013/Hendersonbarons.html

High, Jack. 1984-1985. “Bork’s Paradox: Static vs Dynamic Efficiency in Antitrust Analysis,” Contemporary Policy Issues, Vol. 3, pp. 21-34.

Hull, Gary, ed. 2005. The Abolition of Antitrust. New Brunswick, NJ: Transaction Publishers

McChesney, Fred. 1991. “Antitrust and Regulation: Chicago’s Contradictory Views,” Cato Journal, Vol. 10.

McGee, John S. 1958. “Predatory Price Cutting: The Standard Oil (New Jersey) Case,” The Journal of Law and Economics, October, pp. 137-169

Rothbard, Murray N. (2004 [1962]). Man, Economy and State, Auburn AL: Ludwig von Mises Institute, Scholar’s Edition; http://www.mises.org/rothbard/mes.asp

Shugart II, William F. 1987. “Don’t Revise the Clayton Act, Scrap It!,” 6 Cato Journal, 925

Smith, Jr., Fred L. 1983. “Why not Abolish Antitrust?,” Regulation, Jan-Feb, 23; http://cei.org/op-eds-and-articles/why-not-abolish-antitrust

Tucker, Jeffrey. 1998A. “Controversy: Are Antitrust Laws Immoral?” Journal of Markets & Morality. Vol. 1, No. 1, March, pp. 75-82; http://www.acton.org/publications/mandm/mandm_controversy_35.php

Tucker, Jeffrey. 1998B. “Controversy: Are Antitrust Laws Immoral? A Response to Kenneth G. Elzinga.” Journal of Markets & Morality. Vol. 1, No. 1, March, pp. 90-94; http://www.acton.org/publications/mandm/mandm_controversy_37.php

I hope and trust you’ll see Friedman and Stigler in a little less glowing light. Maybe, instead, take up with Mises and Rothbard (the latter was nothing short of MAGNIFICENT on anti trust, and on much much more)

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11:16 pm on August 5, 2018