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Milton Friedman v. The Buddha

by Professor Stefan Padfield on December 3, 2009

in Banking & Finance Law,Business,General,Government,Political,Securities Regulation,Stefan Padfield

There was an interesting article in the Wall Street Journal recently about the economist Arthur Cecil Pigou (1837-1959).  The article describes Mr. Pigou as an economist âwhose intellectual legacy is being rediscovered, and, unlike those of Messrs. Keynes and Friedman, it enjoys bipartisan appeal.â  This bipartisan appeal may be a reflection of the fact that Mr. Pigouâs appreciation of markets was apparently tempered by a recognition of their limitations:

[W]hile Mr. Pigou believed capitalism works tolerably most of the time, he also demonstrated how, on occasion, it malfunctions.  His key insight was that actions in one part of the economy can have unintended consequences in others.

But what really caught my eye was the following quote from Milton Friedman:

The great advances of civilization, whether in architecture or painting, in science or in literature, in industry or agriculture, have never come from centralized government.

Now, I am not sure this statement is factually correct even if you believe that it is possible to neatly divide humanityâs creations into those arising from centralized government and those arising from the private sector.  For example (and at the risk of setting off a flurry of Al Gore jokes), I believe the defense department is generally credited with creating the internet.

But what Iâm really interested in is this idea that one can in fact neatly separate centralized government and the private sector.  And this is where the Buddha comes in.  Buddhism, as I understand it, includes a belief that âall existences are not discrete and separate but are interdependent

Another way of putting this in the current context would be to ask whether a creation that arises at a time when centralized government exists could have arisen but for the presence of that centralized government.  If all things are interdependent, the answer is ânoâ.

Interestingly, it seems this is a realization modern science is coming to as well:

In nineteenth-century science the relationship between various elements of the world was understood in purely mechanical terms. The causal relationship described by classical physics implied a discreteness between objects. The Cartesian scheme of the world as a movement of innumerable but logical cogs was clean and simple: "cog it out, here goes a sum" (304.31). The subatomic experiments of quantum physics, however, indicated that the discreteness is only superficial and that ultimately all matter is united in a profound way that simple causal relationships do not suggest.

(For a somewhat interesting and related movie experience, check out Mindwalk.)

All this comes full circle in a very interesting way in the light of our recent financial crisis.  Arguably, our failure to recognize the interconnectedness of the various players in our markets was part of the problem.  Conversely, a greater appreciation of the interconnectedness of all things might lead us to adopt regulation limiting the ability of entities to get "too big to fail" or for keeping better track of the various financial derivative dominoes.

{ 1 trackback }

Tricycle » Can the Buddha save the economy?
December 4, 2009 at 12:46 am

{ 3 comments }

larry d. December 3, 2009 at 8:39 pm

Alternatively, since everything is interconnected nothing can be lost when such an entity fails; whatever true value was held by the entity simply shifts to other parts of the single cosmic being we are all a part of.

Dan S. December 4, 2009 at 12:09 am

So then, why didn't my un-mortgaged house sprout a garden full of money plants when all those over-mortgaged houses withered on the blown bubble vine???

larry d. December 4, 2009 at 8:44 am

Because the financial entities were deemed to big to fail and were thus propped up by the government and taxpayers. If they had indeed been allowed to fail their true value would have been dispersed and money plants would have grown in someone's garden, for sure.

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