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Saturday, December 2, 2023

Genuflecting to the free market


FREE MARKET: The History of an Idea

Author: Jacob Soll

Publisher: Basic Books

Pages: 336

Price: $32

Late in the process of writing what was going to be a positive, if not quite head-over-heels, review of Free Market, I tried looking up a quote that the author Jacob Soll appeared to attribute to Milton Friedman. The famed economist, Soll writes, “came up with the nihilistic and even possibly anti-democratic libertarian concept that ‘all bad things come from governments’.”

An endnote directed me to Page 137 of the 2002 third edition of Friedman’s Capitalism and Freedom, of which I own a copy. Page 137 is the beginning of a chapter on occupational licensure, a topic not addressed in Soll’s book, and it does not contain the phrase “all bad things come from governments.” Neither does any other page in Capitalism and Freedom. The exact phrase was also not to be found on the internet before Free Market was uploaded into Google Books, although a version with “government” singular has been used a few times by critics of libertarianism.

After that unsettling discovery I followed up on the other references in Free Market to Friedman’s work, with which I am somewhat familiar. I didn’t find any other newly invented quotations. But of the 10 endnotes in total that I checked, only four pointed to pages that clearly backed up the preceding text. With the rest I could see little or no connection between Soll’s paraphrases of Friedman’s ideas and the work mentioned in the endnote.

On some of the references, it’s possible that I just failed to look hard enough. Not so with Soll’s attempt to explain the “Phillips curve,” the supposed trade-off between inflation and unemployment that Friedman, in a prescient presidential address at the 1967 annual meeting of the American Economic Association, argued was only temporary. “A rising rate of inflation may reduce unemployment,” he said, “a high rate will not.”

In Soll’s befuddled account, which I’m afraid I breezed over on first reading, the Phillips curve is a theory “by which tight money and high interest rates were seen to cause inflation.” To debunk it, Friedman “demonstrated that monetary expansion could cause temporary inflation, but the economy would eventually stabilise.”

These explanations are completely wrong. They are followed by an endnote pointing to a dense 1959 Friedman paper on “The Demand for Money,” in which, as best I can tell after repeated readings, none of these matters is discussed.

What is a reviewer to make of this? The Phillips curve is not important to the story told in Free Market, and “all bad things come from governments” is not an unfair summary of the political philosophy of a man who once wrote an essay titled “Why Government Is the Problem.” Soll doesn’t seem to be trying to put one over on readers. But he also doesn’t seem to be very careful, or knowledgeable, about Friedman’s economics, which left me much less inclined to rely on his depictions of other thinkers and ideas.

This poses problems for a book that aims to guide readers through 2,000 years of Western free-market thought. For example, I had originally blamed my own obtuseness and some overly dense writing by Soll for my failure to understand how the Roman statesman Cicero, subject of the book’s first chapter, could be said to have laid the groundwork for later theories of a self-regulating market. Now I just don’t buy it. Soll is a history professor whose research has focused on 17th-century France, and his narrative is sharper and more persuasive the closer it is to that time and place. The most vivid character is Jean-Baptiste Colbert, King Louis XIV’s first minister of state, from 1661 to 1683, who used subsidies, tariff barriers and the king’s authoritarian powers to propel his backward country part of the way to economic modernity. Colbert believed that France should participate in global but not be ruled by them, and variants of his model have been followed ever since by nations making the leap to riches and power, from the to Germany to Japan to China.

Colbert doesn’t get a lot of credit for this, instead often being tagged by free-marketers as a misguided mercantilist obsessed with having France run trade surpluses and hoard precious metals, an erroneous approach supposedly swept aside by Adam Smith’s 1776 blockbuster, An Inquiry Into the Nature and Causes of the Wealth of Nations.

Soll argues that Colbert saw trade policy as a way to stimulate development, not an end in itself, and that Smith’s main criticism of what he called Colbert’s “mercantile system” was that it was too solicitous of merchants.

That I’ll buy. Less convincing is Soll’s claim that what Smith meant by an “invisible hand” that leads self-interested merchants to serve the public good was “society” (the surrounding text in doesn’t really back this up). But he’s right that Smith’s work is leavened with more scepticism of capitalists and respect for government than the “cherry-picked” caricatures of it that gained currency in the 19th and 20th centuries.

Milton Friedman was among the cherry-pickers, and his work certainly invites scrutiny and critique. But while I wholeheartedly endorse Soll’s conclusion that “faith in the market alone will not save us,” he hasn’t really delivered the book for those who want to learn what will.

©2022 The New York Times News Service


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