The Teachings of Milton Friedman and Thanksgiving 2021 

The Teachings of Milton Friedman and Thanksgiving 2021

Inflation is an increase in the overall general price level of an economy. It should not be confused with an increase in the price of a good or service over a short period due to increased demand, relative to supply in the case of the introduction of a new version of a product like an Xbox, nor reduced supply, relative to demand due to supply chain problems, such as the case of computer chips for automobiles.

Nobel Prize winning economist Milton Friedman noted, “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output (goods, services and or assets).”

What is noteworthy today is President Biden declared in 2020 as he campaigned for the U.S. presidency that  “Milton Friedman is no longer in charge.” This is ironic given that 10 months into Mr. Biden’s presidency (and driven by massive increases in fiscal and monetary policy from his and the previous administration), he is presiding over the highest rate of U.S. inflation in more than 30 years. Or as Bill McGurn recently pointed out in The Wall Street Journal on the 15th anniversary of Dr. Friedman’s death: “Friedman seems to be getting the last laugh on the issue of inflation” making the University of Chicago icon as relevant as ever. This is especially true today as one reflects on Friedman’s secondary definition of inflation as a “cruel tax.” Here Friedman notes that inflation reduces a person’s purchasing power as more dollars are injected into the economy relative to output making each dollar less valuable and harming the poor disproportionately!

Inflation and the celebration of Thanksgiving

Current year over year inflation in the United States is running at 6.2% with states like Michigan running at roughly 6.5%, slightly higher than the national average.

There is much debate as to whether this inflationary spike is transitory or permanent and how much of our current rising prices are caused by supply chain malfunctions and/or increase in demand for a popular product or service. Or whether it is as scholars like Milton Friedman would argue largely due to excessive government spending and monetary policy used to fight the pandemic. One can certainly look at the more than $2 trillion the Federal Reserve has injected into the economy in the last two years and upwards of $8 trillion more designated or under debate to be spent as the root cause of today’s inflation surge. This excessive liquidity in the capital markets certainly validates Friedman’s explanation of why prices across the economy are increasing with no general explanation other than there is more money in the economy chasing the same or slightly more goods and services.

As Thanksgiving approaches, our research predicts Americans will pay more this year ($53.94) for a traditional dinner for 10, including turkey, bread stuffing, sweet potatoes, rolls with butter, peas, cranberries, a relish tray of carrots and celery, pumpkin pie with whipped cream, coffee, milk and/or water to drink. This cost is 15% higher than last year’s 10 year low of $46.90 and 9.87% higher than the previous 10-year average of $49.10, according to Statista. Many Americans will choose to substitute the traditional turkey (turkey prices are up between 20 and 24 percent) with chicken to make the meal more affordable.

It is clear to us that the price of Thanksgiving dinner is the validation of Friedman’s premise that inflation is a monetary phenomenon caused by excessive government monetary and fiscal policy with only a minor level of higher prices at Thanksgiving due to supply chain problems. Additionally, the cost to travel and spend Thanksgiving with family or friends will also be considerably higher in 2021. Based on current national averages: gasoline is up 61%; hotels are up over 15%; airline tickets are up over 24%; rental cars are up roughly 86%; new cars are up 9.8%; and the cost of used cars, SUVs and trucks are up almost 26% year over year. So, if you’re traveling for Thanksgiving, your overall costs will be considerably higher.

Let’s not forget why we celebrate Thanksgiving

We hope at this time of year Americans reflect on the very meaning of Thanksgiving. From the first Thanksgiving in the 1600s in Massachusetts to modern times, Thanksgiving has been a time to reflect on the many blessings, good times, and people in our lives who have made a difference, and to give thanks that we are very fortunate to be citizens of the greatest country and economy in the history of the world.

Most importantly, we should not only be grateful for all that we have, but also reflect on what we can do to improve the lives of others now and moving forward. Now more than ever we should consider acts of kindness; helping a family member or neighbor, service to  our communities, or if able: a financial gift to a place of worship or local charity.

It is our hope that every American WILL have a joyous Thanksgiving – and the prospect of a better future. With inflation at a 31-year high, many more people will need to depend on Thanksgiving generosity in 2021 — thus we must all do our best to enhance the Thanksgivings of others this year while enhancing our own Thanksgivings by the process.

Finally, for the sake of a brighter American future, it would be  wise if Milton Friedman once again became  relevant in the White House and the halls of Congress moving forward.

Happy Thanksgiving, America!

Dr. Timothy G. Nash is director of the McNair Center at Northwood University. Dr. Kent D. MacDonald is president of Northwood University. Dr. Daniel G. DeVos is chairman of the Orlando Magic and chairman and CEO of DP Fox Ventures. Lisa C. McClain is a member of the U.S. Congress from the 10th District of Michigan.

Milton Friedman discusses J.D. Rockefeller

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Government officials always think they know better how to spend money than the private individual. We have a huge government deficit today that demonstrates that the government does not know best. Below are some wise words from Milton Friedman:

  • “The strongest argument for free enterprise is that it prevents anybody from having too much power. Whether that person is a government official, a trade union official, or a business executive. If forces them to put up or shut up. They either have to deliver the goods, produce something that people are willing to pay for, are willing to buy, or else they have to go into a different business.”
    • “Free to Choose” (1980), segment 2 of 10, “The Tyranny of Control”

Here are some quotes from Milton Friedman that I thought you would enjoy:

  • Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.… A steady rate of monetary growth at a moderate level can provide a framework under which a country can have little inflation and much growth. It will not produce perfect stability; it will not produce heaven on earth; but it can make an important contribution to a stable economic society.
    • The Counter-Revolution in Monetary Theory (1970)
  • On the level of political principle, the imposition of taxes and the expenditure of tax proceeds are governmental functions. We have established elaborate constitutional, parliamentary and judicial provisions to control these functions, to assure that taxes are imposed so far as possible in accordance with the preferences and desires of the public — after all, “taxation without representation” was one of the battle cries of the American Revolution. We have a system of checks and balances to separate the legislative function of imposing taxes and enacting expenditures from the executive function of collecting taxes and administering expenditure programs and from the judicial function of mediating disputes and interpreting the law.
    Here the businessman — self-selected or appointed directly or indirectly by stockholders — is to be simultaneously legislator, executive and, jurist. He is to decide whom to tax by how much and for what purpose, and he is to spend the proceeds — all this guided only by general exhortations from on high to restrain inflation, improve the environment, fight poverty and so on and on.

  • The political principle that underlies the market mechanism is unanimity. In an ideal free market resting on private property, no individual can coerce any other, all cooperation is voluntary, all parties to such cooperation benefit or they need not participate. There are no values, no “social” responsibilities in any sense other than the shared values and responsibilities of individuals. Society is a collection of individuals and of the various groups they voluntarily form.
    The political principle that underlies the political mechanism is conformity. The individual must serve a more general social interest — whether that be determined by a church or a dictator or a majority. The individual may have a vote and say in what is to be done, but if he is overruled, he must conform. It is appropriate for some to require others to contribute to a general social purpose whether they wish to or not.
    Unfortunately, unanimity is not always feasible.There are some respects in which conformity appears unavoidable, so I do not see how one can avoid the use of the political mechanism altogether.

    • “The Social Responsibility of Business is to Increase its Profits” in The New York Times Magazine (13 September 1970)
  • So the question is, do corporate executives, provided they stay within the law, have responsibilities in their business activities other than to make as much money for their stockholders as possible? And my answer to that is, no they do not.
    • Interview “Milton Friedman Responds” in Chemtech (February 1974) p. 72.
  • There is no place for government to prohibit consumers from buying products the effect of which will be to harm themselves.
    • Free to Choose (1980), segment Who protects the consumer?
  • “The strongest argument for free enterprise is that it prevents anybody from having too much power. Whether that person is a government official, a trade union official, or a business executive. If forces them to put up or shut up. They either have to deliver the goods, produce something that people are willing to pay for, are willing to buy, or else they have to go into a different business.”
    • “Free to Choose” (1980), segment 2 of 10, “The Tyranny of Control”
  • Governments never learn. Only people learn.
    • Statement made in 1980, as quoted in The Cynic’s Lexicon : A Dictionary Of Amoral Advice‎ (1984), by Jonathon Green, p. 77
  • With some notable exceptions, businessmen favor free enterprise in general but are opposed to it when it comes to themselves.
  • The broader and more influential organisations of businessmen have acted to undermine the basic foundation of the free market system they purport to represent and defend.
    • Lecture “The Suicidal Impulse of the Business Community” (1983); cited in Filters Against Folly (1985) by Garrett Hardin
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