English Pages, 17. 4. 1997
Your Magnificence, Dr. Friedman,
Ladies and Gentlemen,
It is for me a great pleasure and, at the same time, a great honor to participate in this ceremony and to have the opportunity to say a few words about Milton Friedman and his role in economic science and in economic policy in the second half of the 20th century. There is no doubt that Milton Friedman, Nobel prize winner, and a laureate of many other prestigious international prizes and awards, is one of the most distinguished economists in this century. His ideas influenced whole generations of economists, not only in his own country, in the United States or in the Western world, but in our part of the world as well. In the communist era, people like me did not have the slightest chance to dream about meeting him but I can confess that there were many spiritual links between Milton Friedman and some of us even at that time. I myself spent years studying his works as well as the works of his colleagues at the University of Chicago.
It is a paradox that in spite of our relative isolation from the rest of the world at that time I have been in the past often called a Friedmanite, a monetarist, or an exponent of the Chicago School. I always took it as an honor, however, those who used such labels meant it as an offence or an accusation.
Reading and studying Milton Friedman’s works helped me and many of us to understand economic reality, to understand economics, to understand its methodology, the role of the market in society, the role of the state in a free market economy, the role of money in the economy etc. Surely there were other influential authors but there was no one comparable in intelectual and human integrity, in firmness of professional and ideological stances and attitudes, in innovative boldness, in simplicity and clarity of exposition and in the scope and quality of important contributions both to economic theory and to the theory of public policy. At the same time I do not know anyone else with such personal charm as well as ability to pay attention to other people and their words and ideas. Meeting him for the first time in 1990 was a real enjoyment and an unforgettable experience.
In the theoretical field I consider as absolutely crucial his 1956 Restatement of the Quantity Theory of Money and the subsequent literature in this field, his theory of the demand for money, his programme for monetary stability, his theory of nominal income, his inflation-unemployment trade-off - to name just a few titles of his articles - which - all of them - represent the most important contributions to the theory of money and monetary policy.
His Essays in Positive Economics were methodologically not less important. Milton Friedman’s clear and persuasive explanation of differences between positive and normative economics as well as his arguments about instrumentalism of scientific assumptions influenced the way of looking at economic theory and economic reality for many of us. I must say that it is also an important methodological advice for everyday’s life in public policy. In the very last days, when discussing - both in the government and in public - the consequenses of recent shifts in monetary policy in this country I used several times his stress on the importance of time-lags, of the so-called recognition, decision-making and implementation lags in economic policy.
Milton Friedman’s persuasive arguments about economic policy, about fixed vs. flexible rules, about monetarism vs. Keynesianism were discussed for many decades in Western countries but I know that he knows that we discussed them in the former communist Czechoslovakia as well. I have to confess that the same disputes stay with us today. Yesterday afternoon I announced the Czech Government’s decision to change the macroeconomic policy as a reaction to the slowing down of economic growth and, as a consequence of it, to the slowing down of state budget revenues. If my analysis is correct and in this respect, I am a good pupil of Milton Friedman because I believe that „money matters“, the problem we face now is connected with the last-summer change in monetary policy. I wish our bankers would have followed the fixed rules proposition of Milton Friedman at that time.
Milton Friedman is, however, not only a theoretician in the very rigorous discipline of economic science. He is, at the same time, a true believer in the unrestricted market economy and I believe that his books Capitalism and Freedom, together with a more recent Free to Choose, opened the eyes of whole generations of not scholars but of ordinary citizens on all continents of this planet.
All that helped us to understand the tenets of the old communist regime and its oppresive character and economic irrationality. With the Milton Friedman’s background we had no dreams about the so-called third ways, about perestroika, about reformability of communism. Milton Friedman helped us to interprete the actual communist economy not as a textbook command economy, based on directives going in the vertical direction from the central planning commision at the top to individual firms but as a very strange and truncated market economy with imperfect, but nevertheless dominant horizontal relations among economic agents at the microlevel. Milton Friedman knew that it was impossible to suppress human behaviour, the spontaneity of exchange, implicit if not explicit prices, wide-spread bargaining etc. It was a very rare attitude at that time.
At the same time, the works of Milton Friedman helped us to understand the logic of the transformation of a communist country into a free society and a full-fledged market economy. Because of him, we had a clear vision where to go and a pragmatic strategy how to get there. We did not want to mastermind the whole process because it would not be possible and definitely not successful. We knew we had to trust free citizens to create the new world - with a moderate help from the above only.
I am sure the Prague School of Economics will be honored to have such a honorary doctor and I believe that to have Milton Friedman as our graduate will be a strong positive motivation for all future students and collaborators of this school.
17 April 1997
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