[Spouter]

From an essay called "the Case for Free Trade."

Alexander Hamilton in his Report on Manufactures [said], a potential industry [...], if once established and assisted during its growing pains, could compete on equal terms in the world market. A temporary tariff is said to be justified in order to shelter the potential industry in its infancy and enable it to grow to maturity, when it can stand on its own feet...

Three paragraphs later he says the following.

[Another] argument, one that was made by Alexander Hamilton and continues to be repeated down to the present, is that free trade would be fine if all other countries practiced free trade but that, so long as they do not, the United States cannot afford to.

Apparently, he has something against Hamilton. It is clear why: Hamilton makes very clear and forceful arguments in favor of centralized government. As someone with anarchist sympathies, I sympathize with old Milton's antipathy to these arguments. The answer is to study the argument in detail. Then your criticisms will be more mature and authoritative as a result.

That is not old Milton's method. He likes to build a strawman, resembling his opponent's argument in some ways, except for this one critical attribute: the new structure is much easier to knock down.

Another fallacy seldom contradicted is that exports are good, imports bad. The truth is very different. We cannot eat, wear, or enjoy the goods we send abroad. We eat bananas from Central America, wear Italian shoes, drive German automobiles, and enjoy programs we see on our Japanese TV sets. Our gain from foreign trade is what we import. Exports are the price we pay to get imports. As Adam Smith saw so clearly, the citizens of a nation benefit from getting as large a volume of imports as possible in return for its exports or, equivalently, from exporting as little as possible to pay for its imports.

Why does Milton focus on the "volume" of imports versus exports? Presumably, by drawing this analogy from geometry, he means to create an aura of scientific credibility. But money is the only concrete way to evaluate the "volume" of a trade or transaction. Knowing next to nothing about economics, I know that the price of money is measured in goods, and the value of goods are measured in money. Never once do I remember Smith saying that we should increase the "volume" of our exports, in these terms. My read was that the wealth of nations is derived, not from the "volume" of trade, but from the quality of trade. The ideal is to take in raw and unprocessed material, and that is manufactured into higher-end commodities. A poor country sells their resources in a less processed form, and they receive it back in a more manufactured form. A rich nation buys raw materials, and gives it back as manufactured product. That is what I take from Smith and Hamilton.

Friedman ignores that argument. He ignores many important things that Adam Smith had to say. At times, as I was reading Milton's column, I found myself thinking, has he even read Adam Smith? Is he consciously distorting Hamilton and the rest of our founding fathers?

[Soixante-Retard]

But money is the only concrete way to evaluate the "volume" of a trade or transaction.

No, how about focusing on tangible goods that can be used for consumption and production? If I trade 3 pigs for 15 cows with my immediate neighbor Joe, yet with a tariff between me and Johnny-foreigner I can only trade 3 pigs for 12 cows then I'll prefer to trade with Joe, however if the tariff between me and Johnny-foreigner was removed I could perhaps trade 3 pigs for 18 cows. Wow! If I was incredibly poor (or rich) I'd prefer to trade with Johnny-foreigner - by trading with him my work brings me more units of goods per unit of good I sell him than by trading with Joe.

Also, I recommend watching this.

[Spouter]

Also, I recommend watching this.

I recommend that you restrict your recommendations to articles. I am likely to read an article, but I am unlikely to watch a youtube video. I like to read, because I can listen to music at the same time - video consumes one's full attention. Also, I can directly quote the sourced text in my response, if we are talking about a written piece.

I have been looking for a transcript of "Free to Choose." After all, this was aired on the Public Broadcast System, so it ought to be freely available. In the meantime, I must rely on the paltry links provided to Friedman's articles through wikipedia and google. I refuse to pay money for one of his books.

One of the articles that wiki links to is "the Case for Free Trade." From the opening paragraph, he proves to me that he is a vulgar propagandist, either profoundly confused in his own mind, or cynically prepared to fog the minds of others with conscious distortions.

It is often said that bad economic policy reflects disagreement among the experts; that if all economists gave the same advice, economic policy would be good. Economists often do disagree, but that has not been true with respect to international trade. Ever since Adam Smith there has been virtual unanimity among economists, whatever their ideological position on other issues, that international free trade is in the best interests of trading countries and of the world. Yet tariffs have been the rule...

He is factually accurate that tariffs have been the rule - more tariffs than someone of his ideological leanings would be comfortable with, in any case. The unanimity imagined among economists is illusory, however. What about the example of Keynes? Is he not a very influential economist, for tariffs and against what Friedman calls "free trade"? And Friedman also misrepresents the position of Adam Smith, in my opinion.

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.

This is a famous quote that I lifted off of the wikipedia article. Let's just say that Adam Smith had serious reservations that don't even seem to flicker through the mind of Friedman for the briefest of moments. There are considerable differences between the mature concept of free trade as we find it in Smith, and the simplistic concept that Friedman propagandizes for, under the same banner. All of these difference are papered over by the "virtual unanimity" which he imagines are found in the writings of all economists. At least he qualifies his assertion with the adjective, virtual.

He also misrepresents the arguments of Alexander Hamilton, I think.

[Alexander Hamilton in his Report on Manufactures said,] a potential industry that, if once established and assisted during its growing pains, could compete on equal terms in the world market. A temporary tariff is said to be justified in order to shelter the potential industry in its infancy and enable it to grow to maturity, when it can stand on its own feet...

Actually, that sounds fairly accurate - it jives with what I have read in the Federalist Papers on Hamilton's economic ideas. Friedman dismisses this argument a little too glibly, however:

The infant industry argument is a smoke screen. The so-called infants never grow up.

But, in his opening paragraph, which I quoted a portion of above, he explicitly states that America is one of the worst offenders when it comes to tariffs ("...tariffs throughout the nineteenth century... raised still higher in the twentieth century, especially by the Smoot-Hawley tariff bill of 1930.") And yet America is an industrial powerhouse, in which small, infant industries have continually grown up into large, sprawling industries that are connected to everything - through the exact period he is talking about, actually. What would Carnegie be without steel tariffs? What would be the state of the domestic steel industry if foreign producers were allowed unrestricted access to our markets? Simple logic allows us to draw the obvious conclusion.

Friedman is arguing against common sense. If you want to help an industry grow, like domestic steel manufacturing, then it makes sense to restrict steel imports. If these foreign manufacturers are well established, then they have an obvious advantage over the infant industries in your own nation. And, as can easily be seen by the expansion of Carnegie's steel business, these infant industries actually do "grow up." Examples of how tariffs have assisted domestic manufactures can be multiplied at will.

There are indeed rational arguments to be made in favor of free trade. Perhaps you don't want a domestic steel industry, because it will lead to a further multiplication of your proletariat. But Friedman advances childish propaganda-arguments that twist reality. America, by his own admission, has historically had a protectionist policy on foreign trade, and our industry has expanded rapidly despite this fact. I would suggest, because of this fact (not that that is necessarily a good thing, but it is childish to deny the facts).

He tries to divide an artificial wedge between the arguments of Hamilton and Adam Smith, although the former are clearly informed by the latter. Smith divides society into three classes: those who make their living from the profits of stock, those who live from the rent of property, and those who live from their own labor. He defines the Wealth of Nations in terms of the last class. If the laborers are doing well, then your nation is wealthy (those who live from rent also benefit). It is a valid inference (not necessarily a correct one) that the goal is to make your laboring class as wealthy as possible, by protecting their industries from foreign competition. The more foreign competition, the lower the wages. There may be very rational reasons to set an open trade policy that restricts the growth of domestic industry, but it is hard to deny that such policies would restrict that growth. Friedman seems reluctant to deal with these complexities.

The most intellectually dishonest thing in his article is that he casts the opponent's argument in terms of the volume of trade, when the more important issue is the quality of trade. In the era of the Constitutional Convention, America was forced to import her manufactures from abroad, as she had very little domestic industry. If we read Madison's notes of the Convention, we can see that this was recognized as a condition of dependency, and everyone looked forward to the day when the situation was reversed. The goal was not to take in a higher volume of trade, but to trade their raw materials for your own manufactured goods. To focus on volume is a strawman-argument, and does not accurately represent the arguments advanced by serious advocates of protectionism, like Hamilton.

[Soixante-Retard]

I refuse to pay money for one of his books.

Do you realize how petulant and immature this makes you sound? How am I meant to take you seriously if you don't want to understand Friedman's case? I think you are guilt of what you are accusing Friedman being; a propagandist.

I recommend, at the very least, purchasing an inexpensive second hand copy of Capitalism and Freedom and Free to Choose off Amazon. In the meantime you can watch this, if you like, or if you like old texts, you may like to read this by William Sumner (1880).

[The Clockwork Rat]

What was wrong with the points that Spouter did make based on that one famous quote? If Friedman's argument really is more nuanced than his quote makes him out to be, then perhaps you could expound on his behalf.

[Soixante-Retard]

If Spouter is not prepared to give his full attention to the argument he is trying to knock-down then I am not prepared to pick up his slack.

One can always pick out quotes to supports one's theory. A pertinent example is when Adam Smith is quoted that division of labor makes people stupid as support for an argument against the division of labor when Smith is in fact making an argument for public schooling.

[The Clockwork Rat]

Would you be willing to provide evidence to counter Spouter's argument?

[Soixante-Retard]

Would you be willing to provide evidence to counter Spouter's argument?

I believe I already have.

[The Clockwork Rat]

Forgive my blindness, but I really can not see it.

[Soixante-Retard]

Okay, TCR, I'll play your game.

Spouter, if I am reading him correctly, is making the claim that Friedman misrepresents Smith by focusing on the volume of trade rather than the quality of trade. When actually Friedman is reinforcing one of Smith's central points in The Wealth of Nations because money is not "the only concrete way to evaluate the 'volume' of a trade". To evaluate any trade one must consider how many goods and services one receives for how many goods and services one gives up. I pay for what I import with what I export. Smith's point is that money is not the source of wealth (mercantilist doctrine), goods and services are. Friedman is just echoing.

[Spouter]

If Spouter is not prepared to give his full attention to the argument he is trying to knock-down then I am not prepared to pick up his slack.

One can always pick out quotes to supports one's theory. A pertinent example is when Adam Smith is quoted that division of labor makes people stupid as support for an argument against the division of labor when Smith is in fact making an argument for public schooling.

Please, some patience! I can't simply type posts all day, instantly answering everyone's argument! Besides, you haven't offered any objections to my argument at this point that I can respond to. Later on, in your last posting, prompted by the nagging of The ClockworkRat, you finally dealt with one of my criticisms directly. I will get to that in a moment. Above, I have quoted your third contribution to the thread, and so far all you have done is toss out some links, criticize my refusal to spend hard-earned cash on the works of a vulgar propagandist, and point out that it is possible for an unscrupulous writer to take quotes out of context.

I try to be very slow and deliberate in answering my critics, so that I don't miss anything. For example, you make this strange claim that Adam Smith's comments on the division of labor were offered in support of public schooling. Of course, you do not offer any evidence like a direct quote from Smith, although the copyright-free antiquity of his work and the cut-and-paste functions of modern computers would easily allow that. I assume you are referring to his famous description and analysis of the division of labor in the first 3 chapters of the Wealth of Nations? It has been years since I read this, and now I must reread it in order to determine if there is any substance to your claim about Smith's argument. Thanks a lot for making that so easy for me! Just kidding actually - I enjoy it, because it gives me an excuse to scrutinize Smith for a moment, which always throws the flaws of modern libertarianism into sharp relief...

There is no substance to your claim. What is it with this compulsion of libertarians to distort and mischaracterize Adam Smith? The word education (or the verb) is used exactly 4 times in that famous opening sequence, none having anything to do with public education. The phrase "public schooling" does not occur until the fifth and final book, in a section called "Of the Expense of public Works and public Institutions." These two passages are separated by hundreds of pages!

In his opening, Smith establishes subjects that are connected to everything else that follows. Like all authors of this period, he tries to establish his principles and definitions early, and all that proceeds is meant to flow from that one source, in a solid, deliberative way. Absent a detailed review, I can guess that Smith is hoping to establish in this 5th and final book that public schooling and other "public Works" can mitigate the negative effects of the division of labor.

But you impute this as the sole motive for his critical observations on the division of labor. I will give you this - that you at least acknowledge he speaks of the negative consequences of the division. You seem to respect Adam Smith as some kind of authority, just as does Milton Friedman. In the same way, you are troubled by his completely honest description of the negative aspects of capitalism. You can sense that your ideological opponents will exploit these quotes, and you would prefer to strike at the heart of the issue immediately: Yes, Adam Smith admitted that the division of labor makes people stupid, but that is all okay, because he only said this to back up his argument for public schooling.

That is a misleading and overly narrow summery of Smith's argument. I am sure that it is not consciously deceitful, but a lie told in good faith is still a lie. I am sure that Friedman spouted all of his lies in good faith as well. Are you really serious? You think the first 3 chapters of Wealth are designed merely to promote public schooling? Surely you can see that Smith's arguments are more subtle and deeper than that, can't you?

Here is Smith's objective in the opening of the Wealth of Nations. First, he wants to offer some simple examples (the manufacturing of pins), in support of his basic definitions. Second, he wants to establish the principles upon which division of labor is based, so his definitions will be more sound. Thirdly, to make the definitions even more authoritative, he seeks to outline how the productivity of the division of labor is limited by the markets that are supplied through this means.

In the end, Smith is basically in favor of these things - the division of labor is a good thing, he thinks. But he does have some serious reservations. With the emergence of more modern libertarian thought, all of these reservations seem to have disappeared. The only concern is to be a cheerleader for capitalism. Smith is also a promoter of libertarian capitalism, but he does something that no modern libertarian would ever dare to do: he makes a serious evaluation of the costs. The stupefying effect on those trapped in the system, the decline of military values and the rise of market-values (which he openly bemoans), the opportunity afforded to conniving businessmen and their conspiratorial schemes - all of these costs are added to one side of the scale. In the end, the balance still tips in favor of capitalism for Smith. I may not agree with his final evaluation, but it is impossible to say that he was less than completely conscientious and responsible in his deliberations.

Modern libertarians do none of this, it seems. They don't like to be reminded of the costs at all. It seems more like a religion than an economic doctrine: all contradictions are resolved through the power of positive thinking. Everything bad just goes into the memory hole.

But, I am running ahead of myself. I've got to read more of these cranks. I will start with Friedman. In the meantime, I promised to respond to your one substantive comment:

Spouter, if I am reading him correctly, is making the claim that Friedman misrepresents Smith by focusing on the volume of trade rather than the quality of trade. When actually Friedman is reinforcing one of Smith's central points in The Wealth of Nations because money is not "the only concrete way to evaluate the 'volume' of a trade". To evaluate any trade one must consider how many goods and services one receives for how many goods and services one gives up. I pay for what I import with what I export. Smith's point is that money is not the source of wealth (mercantilist doctrine), goods and services are. Friedman is just echoing.

First of all, you are not reading me correctly.

Friedman misrepresents Smith and Hamilton. I am primarily concerned with his distortion of Hamilton's argument, and he supports that with an erroneous reading of Smith as well, but I find his deceitful representation of Hamilton to be even more appalling. The argument that Friedman is attacking can be found in the Federalist Papers. It goes on and on for page after page, in great detail. Hamilton is obviously making an effort to answer his critics in a serious way (the level of political discourse was much higher back then). What stands out among all of these details is not so much his concern to increase the volume of the trade. His primary goal is to be less reliant on the manufactured goods of foreign powers. At this point in history, we traded to foreign powers our raw materials (a lower quality of product), and bought them back in a manufactured form (a higher quality of product). Hamilton would like to reverse that relationship.

That's the real argument. Friedman chooses to attack a different argument, concerning the volume of trade. Disgracefully, he puts this argument into the mouth of Hamilton, which almost is like a fully conscious lie, if he has ever actually read the Federalist Papers. To his further shame, he supports this with an erroneous reading of Smith. So he attacks a strawman of Hamilton, and he defends a strawman of Smith. I almost guarantee you that Hamilton had a better understanding of Smith. Friedman is reading Smith through some ideological lens that distorts his understanding.

I will read more, but I promise that you will not like the result. This one little article that I got from wikipedia is a rich source of intricate doublethink, and I expect to have a lot of fun going through his lengthier works, which should be chock full of even crazier nonsense.

[Spouter]

[The Wealth of Nations] analyzed the way in which a market system could combine the freedom of individuals to pursue their own objectives with the extensive cooperation and collaboration needed in the economic field to produce our food, our clothing, our housing. Adam Smith's key insight was that both parties to an exchange can benefit and that, so long as cooperation is strictly voluntary, no exchange will take place unless both parties do benefit. No external force, no coercion, no violation of freedom is necessary to produce cooperation among individuals all of whom can benefit.

Libertarians ought to leave Adam Smith alone. For starters, his thought is too subtle and complex for them, mainly because he wrote in an age that proceeded the rigid theologies of modern propaganda. Secondly, it gives too much ammunition to the critics of libertarianism, because Adam Smith had many reservations that modern libertarians are almost incapable of comprehending.

Friedman's summery of the Wealth of Nations, quoted above, is more or less accurate, in and of itself. I wouldn't have chosen to put it that exact way - he makes Smith sound like an enthusiastic and uncritical cheerleader like himself, constantly gushing about freedom and prosperity. But, it is true that Adam Smith's primary message concerns the superiority in general of an unplanned system, and why it is better to let individuals make their own economic decisions, guided by nothing but their own self-interest, free from any coercion by the government, as far as this is possible.

It is the part in italics that modern libertarians like Friedman tend to forget. In general, yes, this would be a wise policy, but it is not some absolute, metaphysical truth that works perfectly in all situations. Supporters of Friedman would of course deny that any such thing is being asserted. With Adam Smith, I know he is not asserting some absolute and inviolable truth, because he always includes the exceptions, the uncomfortable facts that give him pause, the criticisms that have some truth to them, and so on. These serious reservations can be found sprinkled abundantly throughout the text, and in fact, he gives such a good representation to the position of critics that modern critics of libertarian capitalism would be well served by reading him. Despite all of his reservations, however, he still comes out in favor of a libertarian system.

Friedman's primary method of deception is the lie of omission. All good propagandists prefer this method, because an outright lie will often produce a "blowback" effect if the deception is discovered, poisoning one's credibility for all time. For example, it is better not to completely lie about Adam Smith and blatantly misrepresent his position - thanks to the internet, your lie will be easily discovered. But, if you just silently omit the parts that are troubling, only a serious student of Adam Smith will notice, and casual readers will remain ignorant. If you are called out on this, you can always fall back on the excuse that it was an accidental omission. That is why defense lawyers advise their clients not to deny certain facts, but just to say, "I don't remember." No one can prove if you truly do remember. Reagan was a master of this.

And so, right here in the introduction, it is not surprising to find that immediately after his summery of the Wealth if Nations, Friedman quotes that famous line about the "invisible hand," from chapter II of book IV, "Of Restraints upon the Importation from Foreign Countries of such Goods as can be Produced at Home." It is also not surprising that he omits Smith's comments from the end of the chapter, in which he outlines the exceptions where some restraint can indeed be justified.

Here's the problem. I began this thread by criticizing an article titled The Case for Free Trade, in which he is explicitly arguing against tariff-policies. Although he mentions Smith, he avoids that quote about the "invisible hand." Perhaps he would prefer not to draw one's attention to book IV, chapter II, considering the subject of this particular article. If so, I don't blame him. When it is time for Friedman to lay out the position of his ideological opponents - those in favor of tariffs - he would prefer to paraphrase his counter-arguments, the "only [...] arguments [that] have ever been advanced in favor of tariffs that even in principle may have some validity," mainly from Alexander Hamilton in his Report on Manufactures. The same arguments can be found in the Federalist Papers, but I am guessing Friedman chose the more obscure source because it makes him sound smarter.

He does paraphrase the "national security" objection to a policy of free trade, and he dismisses it somewhat casually, although he admits that "it cannot be denied that on occasion it might justify the maintenance of otherwise uneconomical productive facilities." But, he gives no hint that this same argument can be found in book IV, chapter II of the Wealth of Nations, in the very same chapter where Smith is arguing in favor of free trade, just like Friedman is in his article. At the end of this chapter, Smith summarizes the exceptions when trade restrictions are justified, and reasons of national security are right at the top of the list. Specifically, he uses the example of a British act of navigation, which he admits was motivated by the passions of national animosity, but still, this act "aimed at the very same object which the most deliberate wisdom would have recommended, the diminution of the naval power of Holland, the only naval power which could endanger the security of England." There are other exceptions which give him pause - some are partially valid, some he dismisses, but all are given a fair hearing. These are not strawman objections. Smith enters into the arguments of his opponents in a serious and substantial way.

Quite different from Friedman's style. While admitting the possible need for trade restrictions for reasons of security, he cannot think of one concrete example in which this was actually the case (giving the impression that really it never is the case). He suspects that even in the cases where there is such a need, those enacting the restriction have not "compare[d] the cost of achieving the specific security objective in alternative ways and [have not] establish[ed] at least a prima facie case that a tariff is the least costly way." Presumably, the act of navigation that Smith supported is such a case in which the legislators did not preform these economic calculations with the necessary diligence. After all of this, if you still have any doubts, that can be eradicated through the power if positive thinking. Let the slogans fly!

We could say to the rest of the world: We cannot force you to be free. But we believe in freedom and we intend to practice it.

How pollyanish! What naive idealism he displays! And nowhere is it suggested that Adam Smith himself made much more forceful and substantive arguments in favor of trade restrictions (even if he was in the process of knocking them down). That is how the lie of omission works.

I am making slow progress on Free to Choose. In his analysis of the causes of America's economic prosperity, he constantly omits the important facts that would lead to a more balanced and mature picture. Some of these facts I am aware of, but many I am not, so I have to pause constantly to look at an article or two on Wikipedia, or to consult another book. The process is painful and slow, but interesting. Friedman is a very important figure in the world of right-wing propaganda. His disciples on FoxNews faithfully intone his magical formulas to this day.

[mikema63]

You could google any argument from any famous figure like Friedman and find some counter argument someone's made, all your doing is feeding confirmation bias. It doesn't really matter but your already invested in your position so there really isn't any point in watching Friedman at all except to let you better rationalize your emotionally derived opinion.

That's the problem with human beings, a good logical argument isn't necessary for you to believe something and it won't convince anyone else, it's just gravy.