Milton Friedman Portrayed


Leo Rosten, Milton, and Rose Friedman, started a lifelong friendship while attending the University of Chicago in 1934.

“Our long friendship with Leo, now deceased, was one of the great joys of our life. He was a wonderfully entertaining, yet also wise, friend, with incredibly wide interests and knowledge.”
-Milton and Rose Friedman, Two Lucky People, p.55

Leo became a noted and influential writer; Milton became a noted and influential economist. They shared a world-view that placed great value on the pursuit of truth.

Upon agreeing to the suggestion that he host a major PBS TV series, Friedman urged Bob Chitester to contact Leo Rosten to discuss ideas for its content. Leo participated in several early planning sessions for the series.

In his book, People I have Loved, Known or Admired, Rosten wrote an essay titled “An Infuriating Man.” Milton Friedman served as the model for this essay, about “Fenwick,” in which Rosten gives voice, wonderfully humorous voice, to the tendency of most people to wish the truth not be brandished in their face.
We’re grateful to Madeline Lee and Margaret Rosten Muir, for granting us permission to include this essay in our collection of articles about the Friedmans and their ideas.

The Essay

You take my friend Fenwick [Milton Friedman]. He is an exceedingly loveable little man. His disposition is so sunny, his character so open, that even the Most Hardened Cynics, of whom my wife is International Chairman, call Fenwick “utterly adorable.” He is the very incarnation of the Boy Scout creed: “trustworthy, loyal, helpful, friendly, courteous, kind, obedient, cheerful, thrifty, brave, clean (great Scott! but he’s clean), reverent.”

Now you would think that with a personality like that, Fenwick would be just about the most popular man on our block. That is not so. Fenwick is just about the most unpopular man on our block. People can’t stand him. I have seen Sunday-school teachers with unblemished complexions, and account executives with split-level ranch houses, throw conniption fits at the mere mention of Fenwick’s name. Why? Why? I puzzled over this for years, using the finest puzzling equipment money can buy, before I discovered the answer: Fenwick is a man who goes around being logical. He even uses reason at cocktail parties.

Now, most people believe in reason the way they believe in cold showers: It’s O.K. if you don’t overdo it. Very few people are so insensitive as to go around applying logic to other people’s beliefs. The consistent application of reason to human affairs is irrational. It is also dangerous, as you shall soon find out.

The basic trouble is that Fenwick, who is very intelligent, assumes that other people are very intelligent, too. And that, believe it or not, is the way he talks to them. This makes people uneasy, for nothing is more unsettling than to be treated as if you are extremely intelligent—especially by someone you hardly know. To avoid disillusioning such a man requires that you maintain a constant state of alert, and think before you speak, which imposes cruel demands on your brain. It even makes you examine the partly packaged platitudes you have always employed instead of thinking. Few activities tire one out so rapidly.

Fenwick has no understanding of such things. I think I should tell you that Fenwick enjoys reasoning. He uses his mind the way a sprinter uses his shoes: to get from one point to another with a maximum of speed and a minimum of nonsense. Such a discrepancy between the swift and the stupid ordinarily causes hubris in the former and dysphasia in the latter, hubris being the fancy name for cockiness and dysphasia a variety of depression. But these psychological reflexes do not click on where Fenwick is concerned, because the people he outruns (or, more correctly, out ratiocinates) tend to save face by calling his speed a symptom and his skill a neurosis. Such people attain emotional serenity from believing that superior thinking is a sign of emotional disturbance. I am not sure they are wrong.

Of none of all this is my friend Fenwick remotely aware. For although he actually likes to think, even when no one is forcing him to, he also likes people. The exotic combination of cold cerebration and warm feelings throws people for a loop.

Even more enlooping, my friend Fenwick loves to learn. It does not matter what you do, like, think, or talk about: Fenwick is passionately interested in it. He listens intently to anything you have to say, which is both flattering and seductive; but if you mention something Fenwick does not know, his eyes become as wide as Frisbees and he asks where you found that out, how you know it is true, and how—assuming for the moment that you are right, which is conceivable, though unlikely—you can account for any one of fourteen cases which, if true, shoot your case as full of holes as that of the couple with two children who decided not to have a third because they had read that every third child born these days is a Chinaman. And as you bumble and blubber and flounder and flush, Fenwick sweetly soothes your ego by sighing, “Of course, you may be right … but not for the reasons you presented.”

Fenwick appears to own a brain that came equipped with a sorting device that separates inference from information, allegation from argument, illustration from proof, and preferences from conclusions. Despite this, he has more friends than I do. His friends, it is true, tend to have strong nerves and read statistics the way some men read pornography. But they are staunch, stout friends. Even the thin ones are stout friends.

In ordinary conversation, Fenwick is a fellow-traveler. He follows every chug in your train of thought—indeed, he leaps right on the train with you. And you have barely begun to pick up steam before Fenwick excitedly demonstrates that: (a) you have taken the wrong train; or (b) it doesn’t stop where you want to go; or (c) the tracks don’t lead from your premise to your expectations; or (d) you had better jump off while the jumping’s good or you’ll land in the swamp of mushy ideas you never suspected your position rests upon.

Yes, my friends, Fenwick comes pretty (sic) close to being that most odious and exasperating of human types: the persistent thinker. He may even (I hate to suggest this) be an Intellectual. An Intellectual is a man who shamelessly uses his brain most of the time. No one, of course, uses his brain all of the time; such a man would be a monster—he would not dig sand piles by the sea, or fall in love, or observe Mother’s Day.

Oscar Wilde, who was diabolically clever (and just as superficial), once quipped: “I can stand brute force, but brute reason is quite unbearable. … It is hitting below the intellect.” Fenwick, a beamish fellow, never hits below the intellect. He is always kind, fair, patient, moderate—which greatly increases his unpopularity. Do you follow me? Fenwick is so fair in discussions that people can’t even accuse him of using unfair tactics, than which nothing is more aggravating when you are wrong.

I once heard Fenwick explain to a cocktail party full of decent, taxpaying liberals why it is that no socialist society, however well-intentioned, can give its masses anywhere near the standard of living of a competitive or capitalist society. After the dumbfounded humanitarians had finished stamping their feet, screaming “Reactionary!” and otherwise increasing their psychiatric bills, Fenwick kindly compared the postwar achievement of West Germany with East Germany, of Japan with Red China, of Italy with India, of France with Soviet Russia. He gave several of his listeners the veritable jim-jams by going so far as to compare the economy of Cuba before and after Castro, and the G.N.P. of liberated Africa before and after European imperialism.

If that episode doesn’t tell you what kind of screwball Fenwick is, let me cite another. Fenwick and a friend of mine from Washington, a sociological Meistersinger named Rupert Shmidlapp, were talking about minimum wages, which Congress had just voted to raise from $1.25 an hour to $1.40—and ultimately to $1.60.

Fenwick stunned Shmidlapp, whom I had forgotten to brief in advance, by mournfully remarking that the minimum-wage laws would of course create unemployment, and that these particular laws would wreak havoc precisely among those unskilled workers (Negroes, teenagers, Puerto Ricans) they were supposed to help.

“What?” gulped Shmidlapp.

“To begin with,” said Fenwick, “the American wage-earner today gets twice $1.40 an hour, so the bill is not going to affect him——-”

“The bill is designed to help the unskilled and the undereducated,” retorted Shmidlapp.

“An admirable intention,” beamed Fenwick, “because a tragic proportion of that group is unemployed. But if employers aren’t hiring them at $1.25 an hour, is there any reason on earth why they will hire them at $1.40?”

I poured a stiff drink for Shmidlapp.

Fenwick continued: “Surely the unemployed will have less chance of finding a job under the new, higher minimum-wage laws than they had under the old.”

“What?” cried Shmidlapp. “Can you prove that?”

“Yes,” said Fenwick. “Every time minimum wages have been raised, the ratio of unemployed teenagers has risen—and mostly among Negroes and Puerto Ricans, who are the teenagers it seems absolutely insane, if you look at the crime rate, to force onto the streets with nothing to do! … Don’t you agree that every time you raise the minimum, you must push more unskilled or inexperienced or poorly educated or discriminated-against workers onto the unemployment and relief rolls?”

Instead of repairing his fences, Shmidlapp attacked on the flanks. “What about the greedy employers,” he demanded, “who cruelly exploit their workers by not paying them enough to live on?!”

A twinge of pain crossed Fenwick’s boyish features. “Oh, very, very few employers can hold on to their workmen if they pay them less than the workers can get elsewhere.”

“It isn’t what they can ‘get,’ it’s what they’re worth!” Shmidlapp thundered.

“Only God can decide how much a man is ‘worth,’” sighed Fenwick. “Let us consider the best wage a man can get— for his labor, services or talent——”

“Some men just can’t live on that! Or feed and clothe their children! Or pay their medical bills!” This was Shmidlapp at his best.

“We certainly ought to remedy that,” said Fenwick. “No American who wants to work should go hungry because of the objective (and therefore efficient) forces of supply and demand. Let us by all means give and guarantee the poor a minimum income; that does far less economic and political damage than a minimum wage. A minimum income does not discriminate against the black, the illiterate, the inept——”

“Do you mean to stand there and tell me”—Shmidlapp was too agitated to notice that Fenwick was sitting, not standing— “that no workers are actually helped when Congress raises the minimum wage?!“

“Oh, some workers will have their wages raised from $1.25 to $1.40 an hour,” said Fenwick, “but far more will not get a job they might have gotten at $1.25! And fewer teenagers and Negroes will get on-the-job training, which they desperately need. It is just too costly to train them at $1.40, much less $1.60 an hour—especially for skills that take long training periods. This makes a raise in minimum wages absolutely heartless,” mourned Fenwick. “It prices decent, innocent, willing workingmen right out of the labor market!”

“Then why does Congress pass such laws?” shouted Shmidlapp.

Fenwick blinked. “Are you suggesting that Congress never passes foolish or short-sighted——”

“I am asking why, if minimum wages are so goddam stupid, far-sighted humanitarian leaders like Lyndon Johnson and Hubert Humphrey and Governor Rockefeller support them?!”

“Politics,” chuckled Fenwick. “Or innocence. Or ignorance. Or all three. Politicians and labor leaders get a lot of public credit for raising wages, and considerable private satisfaction in imagining all the good they have done.”

“I happen to know that many business leaders, Republicans and conservatives, favor minimum-wage legislation!” swooped Shmidlapp.

“Of course they do. They can be just as wrong, ignorant, or selfish as anyone else,” said Fenwick. “Many of them are manufacturing products in the North——”
“What does geography have to do with it?” demanded Shmidlapp.

“Well, northern manufacturers are delighted to force up their competitors’ costs in the South* ; in that way, businessmen in the North won’t have to face the desirable effects of that free-enterprise system conservatives and Republicans love to extol.”

“But opinion polls show that the public——”

“The public,” sighed Fenwick, “is not well-informed about economics, and will pay for its innocence. Increased minimum wages lead to increased costs, which lead to higher …. Then many honest, low-wage earners in the South (where the cost of living is lower; which is one reason wages there stay lower) will become disemployed. And many more of the young and no-skilled, in Harlem no less than Dixie, will remain more hopelessly unemployed than they already are.” Fenwick regarded Rupert Shmidlapp innocently. “Tell me, honestly: Would you rather work for $1.25 an hour or be unemployed at $1.40?”

While Shmidlapp was wrestling with many unkind thoughts, Fenwick gave his guileless smile: “I am strongly in favor of wages’ rising—which is entirely different from raising wages. Let wages go up as far as they can and deserve to, for the right reasons, which means in response to demand and supply and freedom to choose… Take domestic servants, Mr. Shmidlapp. Why maids, cooks, cleaning women, laundresses have enjoyed a fantastic increase in their earnings. And notice, please, that domestic servants are not organized; they don’t have a union, or a congressional lobby. Or take bank clerks ….”

But I can’t bear to go on. I guess you can see why Fenwick is so unpopular. The man is infuriating.

P.S. Outraged letters should be addressed to P.O. Box 146, Tierra del Fuego, where I shall be spending the long, hard winter.

Reprinted from PEOPLE I HAVE LOVED, KNOWN OR ADMIRED by Leo Calvin Rosten, copyright © 1970 By Leo Calvin Rosten.
Used by permission of The Rosten Family LLC

* John F. Kennedy was once quoted a saying he intellectually knew that the minimum wage was harmful, but the owners of the mills in Massachusetts who had to compete with the rising Southern mills convinced him it was politically necessary to change his mind. The first minimum wage law threw something like 400,000 black tenant farmers in the South out of work, replaced by machines.


What is the Quantity of Money?

We understand the Quantity of Money as a “quantity” (trillion dollars, lump sum) but it is not quite the same kind of thing as a trillion “gallons.”
First, to get such a “quantity of money” it is necessary to add up your bank balance and my bank balance, and everyone else’s bank balances. This becomes absurd. Should you include the informal cash accounts and FRN’s circulating in Africa?

    But the basic idea is that the sum total of all the “money” anyone might be able “to spend” is an important “quantity.”

Notice which labels, above, I have put into “scare quotes.” I want to emphasize in the comments below how those terms are not what you might have first believed the words mean.

In the Beginning, there was god and he created gold and silver. This is a good enough “creation myth,” and we don’t need to care about it. The central picture from this myth is the idea of a finite quantity in the universe for gold, or silver. The idea becomes fixed that somehow the fixed quantity of these metals is a critical economic detail, because Prices are quoted in the names and references of these metals, throughout history.

But the genuine innovation in the use of money among mankind was when somebody invented the Unit of Accounting. When the first cattle herding early man made a trade with his neighbor, perhaps trading half a bull for the other man’s daughter, the Unit of Accounting was invented, as also was the concept of “CREDIT” = Latin verb = “He trusts, he believes.”

Coinage came along much later, and it was always a free market coinage until the Roman Empire. The advanced Egyptians did not at first make coins. They had excellent scales and could weigh the gold dust and alloy the ore. No problem. No coins needed for repayments of credit-due in the markets of Egypt.

Coinage with government seals was a signal of the alloy or purity of the coinage, as in Lydia, which had a particular alloy of silver to offer in coined form. It made their mining product more exportable, because it was stamped for authenticity and purity: an early trademark.

The Roman victor in the civil war, Octavian Augustus Caesar, came to Rome and closed the mint at the temple of Juno Moneta, where Senators had always had their copper, gold and silver ore hammered into recognizable Units, of relatively standardized sizes. This had been a private-religious, not a government, activity. The Senator who minted his coins chose its face design, often a god or family event.

The family of Marcus Brutus celebrated his assassination of Julius Caesar by coining an image of that glorious republican deed. Augustus did not appreciate this, and closed the mint. Only coins with his face on them were permitted, which he used to buy votes in the Senate and among the Plebeians (he was an elected Tribune, with “veto power” also).

Ever since, a tradition of government monopoly of money has caused much mischief.

What Determines “the Quantity” of Money?

The conceptual Quantity of Money is not a “monetary aggregate,” measured by statistics such as M-1, M-2, M-[et al]. It is the same idea as your own bank account limit today. The hypothetical sum of all bank accounts is an exaggeration, since many such accounts hold fungible credit allowances, not “money.” Aggregates are treacherous epistemologically.

You should think about this idea as if I asked you “What is the quantity of bond asset values in society?” Surely the total quantity of bonds is important, as an asset class. As a macroeconomic valuable, surely this must be important. It certainly represents a monetary quantity, as bonds are a relatively liquid form of financial wealth, easily traded for other assets (houses, factories, government deficit finances). Maybe the total aggregate of corporate Aaa bonds would be something like M-7 and who knows what government bonds are? (Perhaps M-0?)

What makes it possible to calculate the asset value of a bond is to look at its annual dividend payments (or notional future dividend payments) and the current market interest rate for its security class, based on risk, etc. What some buyer will pay for it, based on some valuation calculated on its return.

What makes it possible to calculate the Quantity of Money is to look at the interest rate the Federal Reserve pays on excess reserves, which are the commercial banks’ basis for financing loans and creating new M-1 deposits for borrowers. Reserves are most importantly used for interbank clearings. When the Fed offers an “opportunity cost” of 1.0%, no borrower will get a loan by bidding lower than 1.0% – and higher capital restrictions and regulations will further make the banker cautious about increasing his part of the M-1 aggregate supply.

This is a form of “dynamic control.” It helps the central bank to work toward balancing the aggregate supply of what it can offer (“dollars”) for what the borrowing-part of the world economy wants to have, to make more liquidity in payments and trade. The ACH and SWIFT networks are very important, and need to be kept liquid for daily settlements. The “lubrication” of trade.

Gold as an Asset in the Future Payments System?

So, from an “Austrian Economics” perspective, how does the theory of Von Mises accommodate this new system of the quantity theory? Gold is not part of the “money supply,” nor is any form of specific commodity legal tender. It is all electronic today.

I would point to the later work of the Austrian economist, F.A. Hayek, who published “Denationalisation of Money” (1976) and proposed floating exchange rates as a formal, and privatized, system. He had earlier published “Monetary Nationalism and Economic Order” (1938) and the new global view of currency competition is more realistic. There are seven major currencies traded today, and thus seven central banks are in competition, with a bit also of cartel behavior. The governments believe such power is necessary, as did Augustus. Income taxes depend on these Units of Accounting.

Some new Blockchain products are offering to entitle units of gold weight in ownership on the public ledger. Any asset can be attached and entitled on the blockchain used for it. Logically, units of gold and silver will become popular as a store of value if they can be traded even more liquidly on a blockchain, and cashed for other assets (including one of the seven majors).

Open an account, among the many new ones and see how it works.

[ footnote:

  1. Public Law 99-185 (31USC5112) notwithstanding, although I wrote it; defining a bullion ounce of gold as $50 and thus a “dollar” = 2% of the current exchange rate XAU/USD.
  2. The ‘$50’ detail was added by Democratic staff, under Rep. Frank Annunzio (D-IL) at the insistence of the numismatic lobbyists, to make obvious the “legal tender” quality of the coin.
  3. Curtis Prinz was the chief of staff for Rep. Annunzio.

It plays only a nugatory role in the payments system, but it is “legal tender.” ]

    This essay will be expanded.