Dear John:
It all depends. For the mainstream empiricist monetarist like Friedman, it would be falsifiable; you’d just go out and measure whether or not inflationary expectations are low, whether or not the demand to hold money has increased (parenthetically, these two are not unrelated). If this was true, then the monetarist hypothesis would be accepted in this one case. If not, rejected.
It is not at all falsifiable for Austrian economists such as myself (and Mises, Rothbard and others). We do not agree with your implicit contention that if a claim is not falsifiable, that it is just a mere tautology, having nothing to do with the real world.
Smith buys some apples from Whole Foods. The cost is $1. From this I conclude that ex ante he valued the apple more than $1, and that the owners of WF ranked his buck higher than their apples. Is this falsifiable? As an Austrian I claim No. There is no way to test this. But, it sheds great light on an important aspect of economics
Austrians maintain that some claims in economics are falsifiable (for example that claim, beforehand, that Jones will purchase apples) and some not (the one mentioned above). Virtually all economists see no room at all for non falsifiable claims. The mainstream says that Austrians are cultish because they do.
Best regards,
Walter
Walter E. Block, Ph.D.
From: John P Mackey (CE CEN)
Sent: Sunday, September 27, 2020 8:13 AM
To: Walter Block <[email protected]>
Subject: Re: [External] Re: New Article: “Milton Friedman and the New Attack on Freedom to Choose”
Based on that answer, I don’t see how monetarism could ever be falsified.
________________________________________
From: Walter Block <[email protected]>
Sent: Saturday, September 26, 2020 9:17:55 PM
To: John P Mackey (CE CEN)
Subject: RE: [External] Re: New Article: “Milton Friedman and the New Attack on Freedom to Choose”
Dear John:
One possibility is that the demand to hold money has increased. This is plausible, given the uncertainty engendered by the Covid. Another is that inflationary expectations are low. People don’t expect much inflation, since we haven’t had much, recently, before covid. Well, if prices rise, and people don’t expect them to stay up, they expect them to decrease, then they’ll hold off spending. That could reduce the inflationary effect of increased money supply. Only the very unsophisticated (erroneous) monetarist thinks there’s a direct and immediate 1 to 1 relationship between the quantity of money and prices.
Best regards,
Walter
Walter E. Block, Ph.D.
From: John P Mackey (CE CEN)
Sent: Saturday, September 26, 2020 9:12 PM
To: Walter Block <[email protected]>
Subject: Re: [External] Re: New Article: “Milton Friedman and the New Attack on Freedom to Choose”
That’s what I think. I agree that overall inflation is a monetary phenomenon. One thing that confuses me a lot that maybe you can help me understand: the Fed seems to be radically increasing the money supply, but inflation remains very low. Why?
________________________________________
From: Walter Block <[email protected]>
Sent: Saturday, September 26, 2020 9:07:43 PM
To: John P Mackey (CE CEN)
Subject: RE: [External] Re: New Article: “Milton Friedman and the New Attack on Freedom to Choose”
WARNING: This email was received from a source outside of Whole Foods Market. Do not respond, open any attachments, or click on links in the message if you do not know the sender or cannot verify the integrity of the message.
Dear John:
Sorry, I misunderstood. We were talking at cross puurposes. I was discussing generalized inflation, you were not. So, we have no disagreement, I think.
Best regards,
Walter
Walter E. Block, Ph.D.
From: John P Mackey (CE CEN)
Sent: Saturday, September 26, 2020 8:11 PM
To: Walter Block <[email protected]>
Subject: Re: [External] Re: New Article: “Milton Friedman and the New Attack on Freedom to Choose”
Again, I am not talking about generalized “inflation”. I am talking about how one individual business or even many businesses might react to a governmental mandated increase in benefits such as family leave. Perhaps, they might cut wages back to keep their overall compensation level the same—if they can—but perhaps they can’t because the government has also mandated a high minimum wage. If costs go too high then maybe they can do a technological substitution or cut their other expenses. However, perhaps the only option the firm has to maintain their profits at the same level is to raise their prices to compensate for the governmental mandated increase in costs. Do you not believe this happens?
________________________________________
From: Walter Block <[email protected]>
Sent: Saturday, September 26, 2020 7:56:11 PM
To: John P Mackey (CE CEN)
Subject: RE: [External] Re: New Article: “Milton Friedman and the New Attack on Freedom to Choose”
Dear John:
I think we handled the coauthorship very well. When either of us objected to anything, we just cut it out.
I have no doubt that you are correct. Virtually all businessmen would see things your way.
But most economists would not. In my view, when OPEC raised oil prices, that only increased the relative price of oil, but reduced the relative prices of many other goods, as long as the supply and demand of and for money remained the same.
Here’s a bit of a bibliography on this from an economic point of view that rejects cost push inflation:
Batten, 1981; Blumen, 2007; Hazlitt, 2010[1957]; Humphrey, 1998; Shostak, 2006
Batten, Donald S. 1981. “Inflation: The Cost-Push Myth.” Federal Reserve Bank of St. Louis June/July, pp. 20-26; https://files.stlouisfed.org/files/htdocs/publications/review/81/06/Inflation_Jun_Jul1981.pdf
Blumen, Robert. 2007. “The Financial Apocalyptics Are Back.” July 25; http://mises.org/daily/2637
Hazlitt, Henry. 2010 [1957]. “Cost-Push Inflation?” December 7, http://mises.org/daily/4829; [Newsweek, July 22]
Humphrey, Thomas M. 1998. “Historical Origins of the Cost-Push Fallacy.” Federal Reserve Bank of Richmond Economic Quarterly Volume 84/3 Summer, pp. 53-74; http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.200.7212&rep=rep1&type=pdf
Shostak, Frank. 2006. “Will An Oil Price Fall Push Inflation Down?” September 21; http://mises.org/daily/2331/Will-An-Oil-Price-Fall-Push-Inflation-Down
Best regards,
Walter
Walter E. Block, Ph.D.
From: John P Mackey (CE CEN)
Sent: Saturday, September 26, 2020 5:43 PM
To: Walter Block <[email protected]>
Subject: Re: [External] Re: New Article: “Milton Friedman and the New Attack on Freedom to Choose”
It wasn’t important enough to our op-ed to argue with you about cost increases resulting in price increases, but I think it is true. For example, California has raised the costs of doing business tremendously compared to most other states and our gross margins and prices to our customers are higher there than they are in Texas or Florida or most other states. However, since the costs are higher for all of our competitors too it doesn’t hurt us competitively. Perhaps overall price inflation can be explained strictly by monetary theory, but when the government mandates permanent cost increases it does create pressures to raise prices to offset the mandated cost increases. Higher prices are therefore often the result of government forcing costs up unless business can find some other way to offset them. This is really just common sense and I think you can ask almost any business person and they will tell you the same thing.
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________________________________________
From: John P Mackey (CE CEN)
Sent: Saturday, September 26, 2020 11:19:45 AM
To: Walter Block <[email protected]>
Cc: Evening Galvin (CE CEN)
Subject: Re: [External] Re: New Article: “Milton Friedman and the New Attack on Freedom to Choose”
We are good to go. Add a closing parentheses after 1950. It is a good response and I hope it is printed.
________________________________________
From: Walter Block <[email protected]>
Sent: Friday, September 25, 2020 7:17:29 PM
To: John P Mackey (CE CEN)
Cc: Evening Galvin (CE CEN)
Subject: RE: [External] Re: New Article: “Milton Friedman and the New Attack on Freedom to Choose”
WARNING: This email was received from a source outside of Whole Foods Market. Do not respond, open any attachments, or click on links in the message if you do not know the sender or cannot verify the integrity of the message.
Dear John:
I think we’ve nailed it, or, at least, we are 99% of the way there. I only disagreed, substantively with one of your very minor points. I’ve incorporated all the rest.
File 2 shows all changes.
I’m gonna send in file 3 to the New York Times, if you agree with every word of it. If not, please make any other changes you want to it. I’m sure one more pass from you, if needed, will be sufficient.
It is a pleasure working with you on this.
Best regards,
Walter
From: John P Mackey (CE CEN) <[email protected]>
Sent: Friday, September 25, 2020 4:45 PM
To: Walter Block <[email protected]>
Cc: Evening Galvin (CE CEN) <[email protected]>
Subject: RE: [External] Re: New Article: “Milton Friedman and the New Attack on Freedom to Choose”
Hi Walter,
I like the article and am willing to have my name associated with it. I’ve made a few minor changes down below and also ask a couple of questions.
Best,
John
From: Walter Block <[email protected]>
Sent: Friday, September 25, 2020 11:02 AM
To: John P Mackey (CE CEN) <[email protected]>
Cc: Evening Galvin (CE CEN) <[email protected]>
Subject: RE: [External] Re: New Article: “Milton Friedman and the New Attack on Freedom to Choose”
WARNING: This email was received from a source outside of Whole Foods Market. Do not respond, open any attachments, or click on links in the message if you do not know the sender or cannot verify the integrity of the message.
Dear John:
Please let me know if you want to co author this with me. As you know, these sorts of things have a short shelf life. If I don’t send it out soon, it will quickly become dated.
Best regards,
Walter
tel: (504) 864-7934
From: Walter Block <[email protected]>
Sent: Tuesday, September 22, 2020 10:19 PM
To: ‘John P Mackey (CE CEN)’
Subject: RE: [External] Re: New Article: “Milton Friedman and the New Attack on Freedom to Choose”
Dear John:
No, I haven’t read it yet; now I will. Purposefully so. I wanted to first write something that you and I could co author. See below. Why? Because I didn’t want to “steal” any of his ideas; I’m a big fan of his, and also a good friend. Rich Ebeling is a boyhood chum of mine. Here’s a reivew I did of one of his books:
Block, Walter E. 1995. Book review of Disaster in Red: The Failure and Collapse of Socialism, Richard Ebeling, ed., New York: Irvington-on-Hudson, 1995, in Freeman, Vol. 45, November, pp. 738-739, https://fee.org/articles/disaster-in-red-the-failure-and-collapse-of-socialism/
Now for my second draft. I tried to make this much kinder and gentler, while still defending Milton. Did I succeed? If so, please edit, add to, this. Maybe, come up with a better title?
Rejoinder to Appelbaum on Friedman (920 words)
By John Mackey and Walter E. Block
In his September 18, 2020 New York Times column, Binyamin Appelbaum appeared to be highly critical of Milton Friedman
The former started out by calling the latter “a free-market ideologue,” and did not mean this as a compliment. He ended on this note: “After 50 years of listening to Friedman, it’s time to do something about the flaws (in the views of this Nobel Prize winning economist).” In between, he maintained we should no longer wait for, rely on, businessmen to renounce “selfishness portrayed as a principled stand” as Friedman would have it. It is now time, it is past time, to get the government involved in compelling the wealthy in effect to support social justice.
It would appear at the outset, that there is a 180 degree difference between these two writers. Not so, not so, at least not when it comes to goals. Both seek an end to poverty, favor prosperity, freedom and economic development. Appelbaum supports egalitarianism, Friedman does not, but even here it is possible to at least partially reconcile their differences. The journalist favors heavy taxation of the rich and financial support for the poor; the economist would go part way in that direction with his negative income tax (those at the bottom end of the income distribution pay a negative tax; e.g., receive a subsidy). Moreover, Friedman would attest that economic growth disproportionately helps the impoverished. (Prosperity brought the nobles from candles to chandeliers, from a coach and six to a Maserati; the poor went from darkness to lightbulbs, from walking on foot to a Volkswagon). Walter—not sure these examples of prosperity will be impressive to the reader. How about using these statistics instead—200 years ago 94% of everyone alive on Planet Earth lived on less than $2.00 per day. Today it is only 10%. The average lifespan in 1820 was 30, today it is 72.6 (which is higher than any country in 1950). In 1820, illiteracy rates were 88%, while today they have shrunk to only 14%.
No, the gigantic, stupendous, difference between the two scholars concerns means, not ends. And here we side completely with the University of Chicago professor who was the most prominent dismal scientist of the 20th century (I agree with you personally, but most scholars would argue that Keynes was), and bodes well to continue that position in the present one.
What are the specifics?
Appelbaum wants to leave off “the public shaming of restaurants that refuse to give paid leave to sick employees” and have a law enacted compelling them to do just that. But what determines employee well being is total wages, the monetary plus the non-monetary (health care, safety on the job, other fringe benefits). The firm cares not one whit about the proportions; its eye is only on the cost of the total compensation package. It has every incentive to allocate remuneration in accord with worker preferences. Mr. Appelbaum does not realize that if paid family leave is given, and total compensation (based on productivity) does not change, then something else will be reduced, presumably take home pay. The workers, paradoxically, will be perched on a lower indifference curve (the average reader won’t have a clue about and indifference curve—most workers would rather have higher take home pay than paid family leave if this means to an agreed upon end is implemented. This is basic economics 101, and there are few people who have contributed more to it than Milton Friedman.
Similarly, the New York Times editorialist avers: “Instead of pleading with McDonald’s to raise wages, raise the federal minimum wage.” But as professor Friedman would explain, this legislative enactment does not raise compensation, certainly not in the long run; rather, it serves as a barrier over which an employee’s productivity must rise, if he is to obtain and keep a job. When compensation is legislatively raised above what the labor productivity of the worker is contributing, the firm will either be forced to raise prices or it will make an investment in new technology to substitute for the worker. Keep raising it, and more and more less skilled workers will be legislatively consigned to permanent unemployment. Again, neither man wants that. They disagree on means, not ends.
Also on Applebaum’s wish list is that our society “combat discrimination … reduce pollution (and) maintain community institutions.” Friedman was not only a world class economist, but this includes many of his students as well. Gary Becker, Thomas Sowell and Walter E. Williams would be the first to reply to Applebaum that different wage levels, whether between whites and black, or men and women, do not necessarily indicate discrimination. Friedman would have no problem with a law reducing pollution (he supported his colleague Ronald Coase’s solution in this regard), but would insist that if any one firm carried out this policy it would court bankruptcy. He also had no problem with supporting charitable organizations; he only insisted that people did this with their own money, not that of others (CEOs in behalf of stockholders).
Here is further evidence that the two men are not as far as apart as it might seem. Appelbaum calls for “Instead of shaming Amazon for squeezing small business, enforce antitrust laws.” But Friedman has supported anti monopoly legislation practically for his entire career (although later on he had some reservations about how it actually functioned) (I’m sensitive on this one Walter since Amazon owns Whole Foods. I don’t think Amazon is a monopoly and I don’t want this to be twisted by the media into me saying I think anti-trust actions should be applied to Amazon.)
States Mr. Appelbaum: “Friedman’s negative vision of government has helped to obscure the ways the public sector can help the private sector, for example by investing in education, infrastructure and research.” But a careful perusal of his famous book, “Capitalism and Freedom” will demonstrate that Friedman’s concept of “neighborhood effects” supported precisely these three policies. He saw a market failure in what most economists would call positive externalities: we all benefit from the education of others, infrastructure that we need not use directly and general research. Therefore, the government should subsidize these efforts, lest resources be misallocated.
One last example. The editorialist wants “to convince banks to steal less money from customers.” This is presumably a misprint. Obviously, he wants savings institutions to engage in no robbery at all. Does anyone doubt that the economist would enthusiastically support this?
There are deep dark chasms between Freidman and Appelbaum concerning means to an end, but less so, far less so, regarding goals they both share.
John Mackey is …..Co-Founder and CEO of Whole Foods Market
Walter E. Block is Harold E. Wirth Eminent Scholar Endowed Chair and Professor of Economics at Loyola University New Orleans
Best regards,
Walter
Walter E. Block, Ph.D.
From: John P Mackey (CE CEN)
Sent: Tuesday, September 22, 2020 5:16 PM
Subject: Fwd: [External] Re: New Article: “Milton Friedman and the New Attack on Freedom to Choose”
Did you read Richard Ebeling’s article today defending Milton? It is a brilliant article IMO. I offered some feedback to both Skousen and Richard on what I think.
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________________________________________
From: John P Mackey (CE CEN)
Sent: Tuesday, September 22, 2020 5:10:47 PM
Subject: Re: [External] Re: New Article: “Milton Friedman and the New Attack on Freedom to Choose”
Hi Mark,
I think Richard’s article is really, really good—quite brilliant in fact. I agree with almost all of it. I do believe Friedman has been misunderstood and unfairly demonized by the anti-capitalists. On the other hand, I also believe that Classical Liberals and libertarians have misunderstood stakeholder theory, business purpose, and value creation and have unnecessarily defended positions which I believe are misguided such as profit maximization is the only goal of business, business has no obligations besides maximizing profits, and “greed is good”. These arguments will not persuade anyone who isn’t already a Classical Liberal or Libertarian. It makes the entire argument for business and capitalism rest on increasing utility (which in a zero sum framework translates to more inequality and the rich getting richer and the poor, poorer) and it leaves out the ethical argument almost entirely. It is quite possible to make principled arguments for the higher purpose of business and value creation for all the major stakeholders with maximizing profit for investors being one of the most important outputs of doing so. Economists are overly obsessed with thinking about tradeoffs between the stakeholders and don’t think enough about the synergies between stakeholders that can happen through creative business strategies.
We all know business and capitalism are not zero sum games, but create rising value for all market participants. It is the growth of value creation for all market participants—stakeholders—that needs to be the narrative that we tell. I believe that is the narrative that will need to tell today if we want to keep the anti-capitalists and the socialists from taking over our government and killing the Golden Goose of Liberty and prosperity.
Best regards,
John
________________________________________
Sent: Tuesday, September 22, 2020 3:42:28 PM
Subject: [External] Re: New Article: “Milton Friedman and the New Attack on Freedom to Choose”
WARNING: This email was received from a source outside of Whole Foods Market. Do not respond, open any attachments, or click on links in the message if you do not know the sender or cannot verify the integrity of the message.
Dear Richard,
I still prefer the John Mackey stakeholder philosophy, not just the shareholder philosophy. The traditional view (yours and Friedman) is simply not appealing to young people. You have to appeal to your employees, suppliers, investors, and community in order to succeed these days.
John Mackey is planning a big debate with Walter Block on this issue. More to come.
Best wishes, AEIOU,
Mark
—–Original Message—–
From: richard ebeling
To: Mark Skousen
Sent: Tue, Sep 22, 2020 1:33 pm
Subject: New Article: “Milton Friedman and the New Attack on Freedom to Choose”
Dear Mark,
I have a new article on the website of the American Institute for Economic Research (AIER) on, “Milton Friedman and the New Attack on Freedom to Choose”:
https://www.aier.org/article/milton-friedman-and-the-new-attack-on-freedom-to-choose/
A counter-revolution against freedom is busy at work in the United States today, and it is, perhaps, not surprising that one of its targets has become the late free market economist, Milton Friedman. “The New York Times” and other publications such as “Fortune” magazine, are focusing on an article he wrote 50 years ago on, “The Social Responsibility of Business.”
Friedman argued that the executives responsible for the management of corporations are the stewards of those who have hired them, the shareholder owners of the enterprise. For government or others to insist that they utilize the resources of the company for any purpose other than maximizing the returns of those owners is to call for them to be ethically and legally derelict in their duties to their employers. Equally, in wanting to make private enterprises become social welfare agencies is to dangerously blur business and political decision-making that would be harmful to both in the longer run.
Friedman’s critics in the “Times” and in Fortune, insist that businesses become agents to advance the interests of “stakeholders” – every conceivable ideological busy-body and special interest plunderer under the sun – rather than the actual owners of the company. But as I detail in my article, their very arguments and policy proposals for “socially responsible” business demonstrates all the reasons why Friedman’s case against such “social” responsibility was completely on the mark when originally penned by him half a century ago this year.
Best,
Richard Ebeling
5:34 am on March 13, 2021
