Milton Friedman and Ayn Rand

[Christopher]

I just completed Capitalism and Freedom, and I was impressed with Friedman's pragmatic focus on protecting freedom. His writings echo very similar themes to Ayn Rand's, but there are three differences that I think are interesting to bring up on an Objectivist forum for discussion. These points regard private monopolies, property rights, and types of contracts that can exist between employer-employee.

1. Private Monopolies: Friedman is for anti-trust laws. His arguments are the following:

A. Economic activity must be coordinated through voluntary co-operation

B. Voluntary co-operation exist in an economic transaction provided the transaction is bi-laterally voluntary and informed

C. The central feature of market organization is that it prevents one person from interfering with another in respect of most of his activities. The consumer is protected from coercion by the seller because of the presence of other sellers with whom he can deal. The seller is protected from coercion by the consumer because of other consumers to whom he can sell.

D. Exchange is truly voluntary only when nearly equivalent alternatives exist

E. Monopolies inhibit effective freedom by denying individuals alternatives to the particular exchange

F. In practice, monopoly frequently, if not generally, arises from government support or from collusive agreements among individuals. The solution is either to avoid government fostering of monopoly or to stimulate the effective enforcement of rules such as those embodied in our anti-trust laws*

G. Collusion limits consumer choice and therefore infringes on the ability of the consumer to enter into truly voluntary agreements (there is no voluntary choice when the choices are coercively restricted

* Note, the difference here is that Objectivism is against anti-trust laws *

In Capitalism: the Unknown Ideal - it was argued that collusive monopolies cannot exist in a free market because collusion between producers to raise prices articifically will create new producers who will invest and compete. According to Friedman (and Adam Smith), the reality is that such an ideal situation never actually occurs when one looks at history. Therefore, anti-trust laws are required to prevent the accumulation of power within private hands that can influence the economy to operate against individual freedoms

2. Defining Private Property and Property Rights: Friedman argues that it is important to have a basis for defining what constitutes property and property rights since these concepts are so deeply embedded in our culture that we rarely think about them.

"Property and what rights the ownership of property confers are complex social creations rather than self-evident propositions. Does my having title to land, for example, and my freedom to use my property as I wish, permit me to deny to someone else the right to fly over my land in his airplane? Or does his right to use his airplane take precedence? Or does this depend on how high he flies? Or how much noise he makes? Does voluntary exchange require that he pay me for the privilege of flying over my land? Or that I must pay him to refrain from flying over it? The mere mention of royalties, copyrights, patents; shareas of stock in corporations; riparian rights, and the like, may perhaps emphasize the role of generally accepted social rules in the very definition of property. It may suggest also that, in many cases, the existence of a well specified and generally accepted definition is far more important than just what the definition is."

Most of my readings of Objectivism refer to property by assumed definition and have not accounted for neighborhood effects such as noise or how property ownership actually extends beyond a mere 2-dimensional plot of land

3. Restrictions on employer-employee contracts: Friedman argues that there are indeed restrictions that must exist on employers looking to hire people despite the fact that many should also not exist.

A. Friedman is against legislation that prevents employers from discriminating by race or religion. He argues that such legislation infringes on the freedoms of the employer

B. Friedman is against "right-to-work" laws, which make it illegal to require membership in a union as a condition of employment (this obviously infringes on both potential employee and employer freedoms)

C. Friedman is also against "yellow-dog" contracts (contracts making non-membership in a union a condition of employment)

D. "Yellow-dog" contracts are contracts that effectively limit the freedoms of a potential employee; therefore, they cannot be a basis for a contract in a free market economy (much as indentured servitude is now illegal)

Although I do not see a conflict between Friedman's view against yellow-dog contracts © and Rand's philosophy, I think that there might be a knee-jerk reaction from many Objectivists who would argue that such contracts should be the right of the employer to write and the employee to agree to.

These above 3 items I found interesting to contemplate as they represent potential variances from strict Objectivist thinking. There are also other differences in reference to money and the gold standard, but that is less philosophy and more economy than the ones above.

Hope everyone is enjoying the Objectivist gathering!!!

[Reidy]

Philosophy is just where they differed most. They gave similar political/economic advice on a lot of issues (though not all, as you point out), but Friedman was a positivist who bought into the is/ought opposition and maintained at length that ethics and economics should stay out of each others' domains.

Another political/economic difference is that Friedman thought education was properly a government function and favored vouchers as the best way to implement this. Rand advocated tax credits (as early as 1962) as a step toward full privatization. The Chicagoites also favor a government monopoly on currency.

[Christopher]

I'm not sure that's how I read Friedman. Capitalism and freedom, much as the title suggests, seemed to me to be very much based on a human rights philosophy. Could you be thinking about another similar economist?

[mcm]

Anti-trust and employer restrictions are closed topics in my book. Both require the fabrication of victimless crimes.

The task of defining the scope of property rights, on the other hand, I have not taken the time to fully resolve, and is a most interesting topic. I am in agreement with Rand's explanation that — as I understand it — one may claim to own only the product of one's own mind and/or actions. Consequently, matter cannot be owned, because it cannot be a human product. Therefore the justification for the exclusive control of a plot of land is that, while it cannot be owned solely as an object per se, it can be owned as property because it is the otherwise unowned by anyone else embodiment of the improvements that are a human product.

This principle establishes up front the basis for property rights of both the physical and intangible kind, in principle, leaving open the concrete details that must be defined by what you refer to as "accepted social rules". I hope that does not mean arbitrary social conventions. These details seem to me to be more akin to logistical methods required to fulfill the mandate of the principle.

An example would be Rand's recommendation that intellectual property rights be protected for 50 years beyond the creator's death in order to secure their value by guaranteeing to any purchaser of the rights that they can be monetized even if the creator dies immediately after signing the bill of sale. The specific number of years is not as important as that the time is sufficient under anticipated conditions to profit from their purchase. A century from now, the advance or decline of technologies could alter that number without altering the fulfillment of the principle.

I don't see any issue in stock shares that would differ from common contractual questions. Riparian rights and rights to the seas along with airspace rights do raise new questions. Smaller bodies of water surrounded and managed by private property could easily and justifiably be owned in condominium as could airspace surrounding buildings (the original Pan Am building was constructed under separate ownership in the airspace over Grand Central Station).

Ultimately, by the principle for claiming ownership above, much of the atmosphere and space, as well as the seas, would likely be not improvable and therefore not ownable. This is most pertinent to the issue of pollution. But I can already see those rights divided into two parts. Pollution that can be verified to have caused specific damages could be dealt with as any other aggression. Less definable or inadequately defined or enforced rights to be free from pollution could be regulated in the market by boycott and shunning.

As for neighborhood problems, I can't think of one that cannot be resolved by deed restrictions and the markets ability to reward and punish their rationality or irrationality.

[Christopher]

Good points. I would like to hear more on what you have to say about property development in relation to property ownership. The ideas of non-ownership for air and sea seem interesting and plausible, albeit there would still need perhaps a social establishment on airplane or water-vehicular noise (as well as other neighborhood effects in areas that are truly "public space"). What about developments of squatters on unused portions of personal property? Perhaps a property contract on empty land should represent a contract for priority to build on that land; however, the contract should be limited to a certain number of years and become nullified if that land is not used for construction or improvement. This would fit Rand's pro-stance for initial claims to empty land.

Regarding closed topic on employer restrictions, I urge you to reconsider Friedman's point. Specifically, Rand asserted that Objectivism is built on the premise that man's life belongs to himself - that man will exist on his own production and will not exist on the production of others. In other words, the same ethics that allows an employer to select his own employees also prevents the employer from selecting employees in such a way as to undermine employees' rights. (whether voluntarily entered into or not - no one can voluntarily give up their rights in an Objective ethical system; and if they could give up those rights, no one under an Objective ethical system could accept the exchange). Hence, Friedman proposes the existence of employer restrictions and regulations.

Again, very interesting proposition on land, property, and ownership of one's actions.

Edited July 13, 2009 by Christopher

[mcm]

In general, a standard for the nature of the minimum improvement necessary to establish a claim to objects like land must be defined if, when, and wherever possible. Whatever might be beyond immediate possibility would have to be regulated by the market. In a society of all private property, such regulation would be potentially as effective as a government wielding force. Persons, groups, or companies that would alienate any large bloc of the public would risk being cut off from food, water, electricity and roadways by the producers of those products and services acting without coercion in sympathy with or for the sheer good will of their customers, the public. Your phrase, "social establishment" is chilling in the absence of any indication of what you envision.

I would not say that air, space, and the seas cannot be owned, because I cannot predict future technologies that might enable it and/or give rise to a need for it. Presently, however, one could easily make the world's whale populations private property, which would instantly guarantee they would never be extinct. I can see all kinds of animals that follow regular patterns of location being definable as property, even as they traverse the property of others.

The only land that is not property nowadays is that controlled by the government. It could be homesteaded in the usual manner. I don't understand your mention of squatters. The standard that justifies perpetual ownership of land does not require development, but rather that ideas and actions are required to maintain the value of the improvements. This is contrary to intellectual property that requires no further effort and therefore must expire after the creator's lifetime benefit has been received. The property rights to objects generally would never expire, because they almost always require some maintenance of their value.

Re employer restrictions, note that that employers and employees do not have rights, human beings have rights, and they are identical for each and every one of them. Rights pertain solely to the use of physical force in exchanges of values. Employees may not use government to coerce which particular set of terms will be offered just as employers may not use government to coerce which terms employees will accept.

The most concise statement I have been able to fashion, so far, of the sole task of government is that it must guarantee that:

No person shall initiate the use of physical force to gain, withhold, or destroy any tangible or intangible value created by or acquired in a voluntary exchange by any other person.

In my view, that is the only restriction there is on both employers and employees.