Raise the right issues

CORES’s arguments against the MFI do not engage with the real issues at hand

By John Cochrane

In Tuesday’s Maroon, and online at miltonfriedmancores.org/cores/petition, the Committee for Open Research on Economy and Society (CORES) published a new petition opposing the Milton Friedman Institute (MFI). This Wednesday there will be a meeting of all University faculty to discuss this issue. I offer the following response to the Committee, in an effort to guide this discussion to a productive end. Though I am a member of the Friedman Institute’s faculty committee, this column expresses my personal views only, and not those of the committee or anyone else.

Most of all, the University community needs to know what specific actions the committee thinks the University should take. The petition says “we oppose the establishment of the Milton Friedman Institute in the form that has been proposed.” The institute is not “proposed”; it exists. It was created following the standard yearlong process, which included approval by the faculty’s representatives on the Committee of the Council.

Does the committee think that the University should dissolve the Institute? Consider all that this step implies: giving donors back their money, publicly disavowing the University’s connection with Milton Friedman, and censuring the administration and council that created and approved this institute. If this is what the committee wants, it should propose that course explicitly, and then we can productively discuss whether this is a wise course of action.

The petition closes with “We intend to…propose substantial changes.” What are these changes? Unleashing a request for “substantial changes” at the last minute, in a meeting of the entire University faculty, is not a good way to conduct a productive debate. Furthermore, “changes” will need to be applied even-handedly and coherently to all institutes, centers, initiatives, and perhaps even departments, which will not be a trivial task.

One charge is absolutely correct: “…[T]he MFI will engage issues of policy and not limit itself to matters of academic theory.” Should we not ask what economic analysis—driven by experience, made coherent by theory, and confirmed in data—can do to improve policies? Does the committee really believe that institutes, centers, and departments should, in writing, be limited to “academic theory” and be prohibited from addressing “issues of policy?” Or does it propose a special limitation for this institute, and, if so, why?

Alas, most of the petition repeats false, undocumented, and unfounded charges against the Institute, the ethics of the faculty and administration, and Milton Friedman’s views.

The petition charges that there will be “donor/corporate control” over the MFI. Nowhere in this University do donors ever control the nature of research and certainly not its outcome. Every part of the University publicizes its research to the outside world and to donors, without violating this rule. This is a completely unfounded insult to the professional ethics of the faculty and administration involved with the Institute.

The petition charges that the Institute research findings are “predetermined,” adding, “[P]resumably then, to take one example, the question of whether to privatize Social Security would be moot; the only reasonable question is how.” Undertaking research with “predetermined” outcomes is a gross violation of scholarly ethics. If the authors of the petition were to do a quick search, rather than “presume,” they would find that U of C economists conduct a wide range of analyses of Social Security—and, more importantly, the underlying economic issues needed to evaluate Social Security, such as the changes in the distribution of income across people and generations, and the incentive effects of tax and transfer policies. They would also see how economic research at this University is driven by careful theoretical and empirical analysis, not by a politically desired result.

The petition states: “The proposal ignores the…problems, including state terror, crony capitalism, declining life expectancy, food shortages, etc., that have arisen where he [Friedman] and his disciples implemented those views (Chile, Argentina, the post-Soviet republics, e.g.).” As a matter of fact, Milton Friedman and others of the “Chicago School” decried “crony capitalism.” George Stigler (Citizen and the State) won the Nobel Prize for showing how regulators become “captured” by the industries they regulate, creating “cronies.” Friedman (Capitalism and Freedom) argued for free markets precisely as the antidote to “state terror.” His main point was that a politically free society requires economic freedom, since you cannot dissent against a government that controls your job. I can think of no logical connection between Milton Friedman and post-Soviet republics. Some of them (Russia) embody everything he argued against. He is a hero in others. Moreover, this sentence implies that the committee approves of pre-fall Soviet republics. Is the committee asking the University as a whole to endorse such a worldview? What do its members think about North vs. South Korea or East vs. West Germany, the best controlled experiments we are ever likely to see in the social sciences? Will we debate how well Chile is doing now?

The petition closes with, “We intend to raise these issues.” No matter which side one takes, “raising these issues” clearly will lead us a long way from a productive discussion of the function of the MFI and of the other research institutes, centers, and initiatives.

The proposal to establish the Institute is available at mfi.uchicago.edu. I encourage our faculty to read that proposal before the discussion on Wednesday, and not just this slanted caricature.

John Cochrane is the Myron S. Scholes Professor of Finance at the Graduate School of Business.