Don’t hesitate to think of crazy ideas – Milton Friedman

I promised to share my Milton Friedman story and here it is. By the way, I’ve read from a reliable source that “Hong Kong Wrong – What would Cowperthwaite say?” was Milton’s last published economics article. Milton’s love and care of Hong Kong was truly amazing and was deeply felt in Hong Kong based on what I read.

Like Albert Einstein, Milton was a giant that took time to answer letters from the public. In 2001, I wrote a letter to wish Rose and Milton a happy 63rd wedding anniversary. The letter included the following excerpt,

Every time I look at the cover of my copy of Two Lucky People, I always wish that my future wife and I would be as happy as you two are at your age. (Prof. Cheung‘s photo was really well done. :) I have also secretly hope that my life could be one tenth (or even one hundredth) as interesting as fulfilling as yours. :)

I look forward to reading more of your ideas/interviews in the press.

Milton was so kind to take time and wrote a note thanking me for my kind thoughts in his handwriting with his signature. A note that I treasure greatly.

In my 2002 letter, again before Rose and Milton’s wedding anniversary, I wrote a longer letter. This time I wrote Milton to tell him how happy I was when I got his reply the year before, about my MBA studies, and how much I enjoyed the PBS program “Commanding Heights” (with many video clips). Here is an excerpt from my letter about what I learned from the PBS program, [K: emphasis newly added here]

I now realise and appreciate the challenges faced by the Chicago School of Economics in the 1950s till the mid 1970s. It amazed me that Hayek‘s idea was so out of favour that only University of Chicago gave him a job in the US in 1950.

On the human side, quoting Gary Becker, “When I came as a graduate student to Chicago 1951, I was flabbergasted by how stimulating the atmosphere was. I had been a very good student at Princeton. My first day in Friedman’s class he raised a question. I answered. He said, “That’s no answer; that’s just rephrasing the question.” That was the example of how blunt people were.” And quoting Milton yourself, “Nobody was very polite. People were interested in ideas and argument and not in making sure you didn’t ruffle anybody’s feathers.”

It seems such a stimulating environment where ideas and argument comes first! I would love to study in such an environment. Of course, that’s what I say until I am on the receiving end of “That’s no answer; that’s just rephrasing the question.” :) Don’t know if my skin is tough enough.

And then I asked Milton for some advice about gas prices spread. (note: looking at the show date now, I might have been watching a re-run?) And thats where I committed the crime of claiming “market failure” without proper facts and figures to back me up completely. Here is an excerpt, [K: emphasis newly added here]

On a different topic. I have a question about the issue of oligopoly and potential price fixing in the retail of gas in Canada. A survey done by CBC’s TV program “Market Place” found that Canadian gas prices are lot higher than US cities of similar size and geographical area with or without tax. What especially troubled me was that the price spread (difference between the high and low price in a city) at the pump is much higher in the US cities (around 15 cents Canadian) Vs around 3 cents spread in Canadian cities. So shopping around in Canada will save you much less than the US

Now, I know this may and probably will make you angry, but can I say this is a case of market failure where the gas retailers have so much market power thus making the market inefficient? What would you recommend as a solution to this problem? How can consumers induce or force competition? As a consumer, I hate to see Canadians paying much more than US especially when we are comparing “similar” cities.

And then I proposed my “crazy ideas” (thats how I call them) of how to “force/induce competition“. Here is Milton’s kind reply to my crazy ideas (emphasis mine),

I know nothing about the distribution of gas in Canada but before you decide that there is a market failure, find out the reason. You will probably find that government regulation plays a role in keeping down competition in gasoline. I do think that the particular idea you suggest is somewhat crack-brained. Whatever power enables the sellers in a particular market to keep their prices close to one another would not be affected by people knowing that elsewhere that was not the case.

I no longer do very much traveling or speaking so there is no chance that I will be in Banff or Calgary anytime in the near future. I have been there in the past and have enjoyed both places very much. Do keep alive your desire to learn and don’t hesitate to think of crazy ideas.

Milton has taught me important lessons of doing proper research before making any hasty conclusion, respect of others’ views even their ideas may seem “crazy” or “crack-brained” (like mine (smile)), and be willing to stand firm on the truth and what one believes in (no compromise).

Milton was once asked about his view on some public policy in private by a Hong Kong newspaper editor. And then this editor asked Milton if the quotes can be used in a newspaper report. Milton became very serious and told the editor that he would never say something in private that he was not wiling to say in public. To me, that is integrity.

Milton, where ever you are, thank you for your kindness to this total stranger. I will keep alive my desire to learn. And thank you for granting me a license to think of crazy ideas.

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10 Responses to Don’t hesitate to think of crazy ideas – Milton Friedman

  1. plubius says:

    Yea. Milton Friedman is one the greatest thinkers of our time. And, as a person who actually lives in Hong Kong – I’d bet you wouldn’t find it suprising to hear that whenever Friedman had something to say about Hong Kong, it would always be on top of the news. As a person who has lived the benifits of HK non-interventionist economic policies – I can tell you how much the economic conditions have grown since… Some time ago. But, the numbers and statistics have shown how the laissez-faire policies have work – many studies show Hong Kong as the freest economy and the GDP growth for the past few years after SARS has grown phenomenally; increasing at around 6 to 7% pre year.

    Anyways, the letter itself is great, and thank you for sharing it.

    *************

    Hello reader,

    Thanks for your kind words. Even though I look a bit fool-hearted in my letter but I felt it important to share with others. For one thing, I think the world will be a better place if we all take each others ideas more seriously and give them the full consideration and respect that we can. Even though we may think their ideas are wrong or ill-conceived.

    It is wonderful to hear feedback from Hong Kong as to how Milton’s influence was felt in HK. Great to hear HK’s economy is growing but I am cautious as to how much of it was a result of Mr. Donald Tsang or his predecessor Mr. Tung’s effort? Is it just “rising tide floats all boats”? I won’t repeat what Mr. Tung did to HK. I personally don’t hold any illusion that Mr. Tsang is a great administrator that can save Hong Kong. In fact, being such an efficient and obeying administrator, he has the power to harm HK quite efficiently.

    For example, the messy distorted school voucher system HK is definitely not one that Milton had envisioned. Sad sight.

    Anyways, thanks for your kind words and feedback.

    Cheers,
    Kempton

  2. Simon says:

    As a HK citizen, I am interested that you mentioned about the distorted school voucher system. Could you explain further what’s wrong with the original proposal from our Education Department? The successful examples in the States or Canada may help HK to do better on this issue, either willingly by our officers or under the pressure from the parents.

    ***************

    Hi Simon,

    Based on my limited understanding of Milton Friedman’s idea of the voucher system, the vouchers should be allowed to used in any private or public schools. In the original HK school voucher system, private pre-primary education was not covered. I just did some new research and confirmed that as of Nov 14 2006, looks like the HK government has extended the useage of the voucher to include private pre-primary education. So I stand corrected for my previous post which may be correct before Nov 14, but I was likely wrong after Nov 14. Click here for the HK government source.

    Quoting the press release,
    “The voucher scheme for pre-primary education will be amended and a three-year transition period established to cover private independent kindergartens, Secretary for Education & Manpower Prof Arthur Li says.”

    Cheers,
    Kempton

  3. […] people I’ve included on my “Great Minds of Our Time” series amongst the likes of Milton Friedman, Richard Feynman, Woz, et […]

  4. redsoxmaniac says:

    Didn’t the Chicago Boys work to set up the economy in connection to the coup in Chile? Lot of people died where some of his disciples practices were initiated.

  5. kempton says:

    Hi,

    I am no historian but you can read more in this Chicago Boys Wikipedia entry.

    Kempton

  6. redsoxmaniac says:

    I have a good understanding of Los Chicago Boys. I just find it odd that a free-market school would pursue to train people in a socialist country. This was also funded by our government and Ford Moter Company. None of these men once they graduated were in the pre-Allende economic team, but they were after.

    I contend their existence was bigger than being proponents and placing themselves in high positions to produce free-market initiations. They’ve held some high positions in Latin American countries, but a decent amount of them after violent coups and turnovers. I’m not a fan of correlations; Something has to be awry when you are appointed into economic teams concurrent with the inauguration of dictatorships ( Chile, Argentina, Bolivia, Uruguay, Brazil.)

    I have only read small references through the years, but if you need me to validate this information, I will do so.

  7. kempton says:

    Dear reader,

    If I understand your main point, it is that these and other Chicago Boys should not be helping countries that are under dictatorships. Correct?

    Some many well agree with your main point but have you thought of the alternatives? Now, if you look at China today, there are some Chicago Boys & Girls helping out its reform, is it good or bad? Lets try this thought experiment — if there were Chicago Boys & Girls in serious position of influence during Cultural Revolution, would there have be the associated mass starvation? We can’t know for sure of course but I suspect any properly trained Chicago Boys & Girls would have seen the potential economic disasters that the terrible economic policies might have bought forward.

    Now, on a personal note. There are certain dictatorial country that I have refused to travel to for personal pleasure. But then if there are business opportunities there, I probably will travel there. Am I indirectly helping a dictatorial government? Probably yes. At the same time, I fundamentally believe doing businesses with these countries will ultimately help the people under the control of the dictatorial regimes. I prefer engagement to isolation.

    Regards,
    Kempton

  8. redsoxmaniac says:

    I see your point. I just fin it odd that the Chicago Boys were at the right place to mitigate an economic problem during dictatorships at the right. Even more so that seldom were there any free-market government people in this area until they showed up. And all of those countries that fell under dictatorships had a great amount of resources and a great economic system.

    I just wondered how they all got hired? Not like any of these people had experience with an entire government system. If my roof leaked, I wouldn’t call on someone who has not only never fixed a roof, but has a different way of fixing from anyone else. It seems to me like the were glad-hands involved in the movement of the neo-liberal economics throughout Latin America.

    I think Friedman was an amazing person and his intellectualism did fuel some great economic policies. But I can’t say that a lot of what he did was perfect, and that the free-market ideology will last another 20 years. I feel for the sake of developing better policies, one has conjure up exactly whether these free-market policies were instituted on democratic grounds. Economic policies go hand-in-hand with the political system; I have to place some emphasis in regards to how many people lived in Latin America compared with the Free-Market-Police complex that surrounded them.

    They may have been advisors, but could it be possible that the advice of their economic system was a positive feedback in the torture and killings in these places?

    I would like to talk to you more on this; you know more about economics. I am basing most of this on history and craziness that happened during the 70’s.

  9. kempton says:

    Dear redsoxmaniac,

    I read your latest comment but I think you lost me somewhere. (smile)

    If you want to know more about Milton Friedman, I highly recommend you borrow from the library a copy of his and Rose’s auto-biography – Two Lucky People. Very readable.

    As for further discussion on this, I am not sure I am the best person as I only have very selected interest in history.

    Regards,
    Kempton

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