Monthly Archives: July 2019

The House that Milton Friedman Built

This year, 2019, is the 100th anniversary of the #HooverInstitution, so I thought I’d share a story about how I came to discover the place in my youth ….

“Listen up, young Jedi,” said Lt. Colonel Waller, as he burst into our classroom at the Air Force Academy, “Uncle Miltie is judging a nationwide economics essay writing contest! Here’s the announcement, everybody take one, and here’s my deal with you…” For Colonel Waller, there was no greater economist, no greater American, than Milton Friedman. In the middle of every lecture, after explaining the textbook model, he’d urge us to think critically with the phrase: What would Uncle Miltie say? “So, here’s the deal. Anyone who submits an essay to the contest can also count it as their final thesis paper for this class!  Here’s the question the essay must answer: ‘How can a communist society become free?’

It was January 1990 and the Iron Curtain was crumbling. Even though we were Firsties (seniors) a few months from throwing our white cadet caps in the air, I decided to enter the contest.  To make a long story short, my essay was selected by Milton Friedman himself as one of the best, which I learned when the economics department received a letter inviting me to attend an awards luncheon at someplace called the Hoover Tower in Stanford University. Wow!

That day, meeting my hero, was something I will always cherish. The Hoover Institution was daunting, and inspiring. The lunch was another level of incredible, and I’ll tell you that story someday in the future. Unfortunately, as the years have passed, I lost track of my college papers including the essay I wrote. Who doesn’t lose such things?  But as I am preparing to move back to the Hoover Institution’s main campus this summer, I am opening old boxes and discovering lost gems. That first novel?  Please burn it. But there in one of the musty files was a dot matrix printout of the essay Friedman deemed worthy. It’s embarrassing and wonderful at the same time. I’m still smiling about it.

So, to honor the Hoover Institution and celebrate our greatest Fellow, I thought it might be fun to post that first ever essay of mine that caught the eye of somebody special.

Milton Friedman Tim Kane 1990


Timothy J. Kane
January 1990

 “And ye shall know the truth,
and the truth shall make you free”

St. John 8:32

The bourgeoisie’s “fall and the victory of the proletariat are equally inevitable,”[1] said Karl Marx in the Communist Manifesto. Indeed, it was Marx’s reliance on the “inevitable” vindication of history which allowed him to speak from a moral high ground, impossible to challenge empirically. Ironically, it is history which has shattered the smoke and mirrors of communism. It seems the dialectic progress of history is not moving inevitably toward extreme paternalism, rather the “inevitable” progress of history is in the direction of freedom.

Given the apparent “collapse of communism,” perhaps the presumption of the very question we are asking is incorrect. Rather than how can, we should ask how can’t a communist society become free? The examination of this question will be done with three levels of analysis: economic, philosophic and historic.

Before beginning, I will define the terms. I define Freedom as anarchy, given only the limit of respecting the freedom of others, the balance of which is chosen by each individual society. Communism, I define as the ideal of paternalistic government expressed by its main author, Karl Marx.


I will focus on three reasons which explain how communism has crumbled economically: prices, labor & capital, and trade.

First, the command economy denies that the function of prices is to assign realistic values to goods. Instead, prices are used simply for accounting. This denial has led to uncontrollable deficits, rampant inflation, and a runaway money supply in the USSR. Only by de-collectivizing agriculture has China avoided similar chaos. Thus, the only reconciliation can be the fundamental admission that the free market should allocate resources by letting supply and demand set the prices.

Secondly, Marx promulgated his theory on the Foundations of an inherent conflict in bourgeois society between labor & capital. Yet one of the solid theories of our time is that labor and capital are productive forces (factors) which complement, not contradict, one another. Marx’s (and David Ricardo’s) labor theory of value blatantly disregards the power of capital and has been discredited with a modern analysis of comparative advantage.[2] Moreover, expanding the production of a nation on a macroeconomic scale is now viewed as depending on the relative marginal costs of capital and labor, hence their complementary, not contradictory, tension.

Lastly, modern economic theory of trade exposes the Flaws of Marxism. How can a society participate in free trade (with its gentle push towards factor-price equalization) if it is communist, inherently denying the real power of prices? Herein, we find the great contradiction of Marxism, since trade is based on the exchange of goods for the benefit of both parties, inherently linked to the supply and demand of those goods.

This trade, whether it be founded in bartering or currency exchange, demands the communist society must assign real value to its goods; that it must recognize the correctness of the market. It cannot do so without simultaneously abandoning its communist philosophy and adopting a belief in freedom. I contend such freedom in one aspect of life cannot coexist with tyranny in other aspects. Once tasted and vindicated by the people, freedom will spread from economics to all parts of society.


I have two points of contention with Marxism on a purely philosophical/theoretical level. First, I dispute his view of absolute equality. Secondly, I question his opposition to private property.

According to a recent essay by Francis Fukuyama in the National Interest, Marx’s predecessor and father of the dialectic, G. F. W. Hegel, thought the true “end” of history would be the liberal democratic state (in the literal sense of liberal).[3] In contrast, Marx’s philosophy is based in the materialist dialectic, focusing exclusively on productive forces.

Marx wrote, “The history of all hitherto existing society is the history of class struggles.”[4] Not only is this view a perversion of the dialectic, but the classless society already exists in free America, rather than in any communist utopia. According to Alexis de Tocqueville, the social mobility afforded by “equality of conditions” created equal opportunity, hence destroying stratified class distinctions.[5] Similarly, Fukuyama explains:

…the egalitarianism of modern America represents the essential achievement of the classless society envisioned by Marx.[6]

It is ironic also, that Marx’s historical call to the inevitable was preceded by Tocqueville, who said (26 years before the Manifesto), “the gradual and progressive development of social equality is at once the past and future of [mankind’s] history.”[7]

What this all means is that Marx misunderstood equality on a philosophical level. Happiness from his type of “equality” could not occur by having us all the same sex. True equality is found by letting anyone try anything, allowing everyone equal opportunity to fail and to succeed.

A separate argument can be made against Marx’s most fundamental theoretical claim: the theory of Communists may be summed up in a single sentence: “Abolition of private property.”[8] Covering this foundation, however, many offers the promise of an end of scarcity, an end to poverty and unemployment. Seemingly carries Christian virtues, yet his first assumption is ridiculous. Man is a profit maximizer and scarcity is the foundation of all economic thought.

On a deeper level, when Marx extends a promise that private property will be abolished, he likewise eliminates the incentive to work. If I receive as much reward for failing as I do for succeeding in my ventures, why should I even work at all? Yet, this is the mindset communism creates, evident in the labor situation in Soviet agriculture.

As for Christianity, the love of fellow men is an individual choice; something we give to one another. Marxism perverts this by mandating homage to a state-run ideal, in essence, taking. It sanitizes the virtue of sacrifice, making the ideal a hollow one.

Consequently, I think this must make us question the very foundations of communism: paternalism of all kinds. Here in America, we have finally begun to discarded the idea of “progressive” taxes with the tax reform under Reagan (though not completely). How long until we question the wisdom of minimum wages and the inefficient social welfare programs?

Perhaps we should remember whose philosophy has been proven correct. If so, we will remember John Locke and our very own Thomas Jefferson. Jefferson first proposed the idea of a meritocracy (i.e. rewarding the excellence of virtue and talent in individuals), philosophically organizing our nation with a belief in equal opportunity. Also, Locke’s “natural rights of man” contains something very simple: private property. That, above all else, has been vindicated. It is toward this light which communist societies cannot help but move, for it represents a truth about man’s incentives which cannot be denied.


It is an exercise in redundancy and simplicity to examine the unprecedented destruction and reformation of communist societies in Eastern Europe and the USSR itself. Without further examination, this revolution alone proves that no controls will constrain mankind’s instinctive and natural passion for freedom. But I think we need to examine more than the fact that it is happening, and also examine how.

During his visit to Washington, Lech Walesa remarked, “How did these reforms appear? That’s a result of civilization – of computers, satellite TV [and other innovations] which present alternative solutions.”[9] Here in America, we believe that allowing press to be free brings us closer to the truth, ultimately strengthening us. The vindication of our faith in the power of information can now be seen as it spreads around the world.

Almost thirty years ago, a man named Marshall McLuhan proposed that media would change the world. Likewise, in his Nobel speech, Alexander Solzhenitsyn said that Literature would spread truth, and truth would destroy “the lie.” Both believed in the power of information. The Nation magazine concurs that such events are occurring now:

The global village is growing. Glasnost in the Soviet Union, stirrings in eastern Europe and demands for openness in China all respond in real measure to images of freedom and dignity transmitted by the penetrating networks foreseen by McLuhan.[10]

The fate of paternalistic domination through information controls can only be popular resentment and a hastening of internal downfall. Consequently, the process of the death of communism is clear: truth.

In light of the above analysis and the challenges facing Marxism today, I believe the proper question to ask is how can’t a communist society become free? The fact is that no society can stop the march of freedom. Nothing they can do will stop freedom from invading their country, first through information, then by undeniable economic truths. As for the philosophy of freedom, perhaps communist societies are now realizing that the essence of freedom has been an undeniable and invincible part of their people all this time.


[1] Karl Marx and Frederick Engels. The Communist Manifesto. Ed. Frederick Engels. 100th ed. (New York: International Publishers, 1985), p. 21.

[2] Dominick Salvatore. International Economics. 2nd. ed. (New York: Macmillan Publishing Company, 1987), p. 23.

[3] Francis Fukuyama, “The End of History?” The National Interest. 16 (Summer 1989).

[4] Marx, p. 9.

[5] Alexis de Tocqueville. Democracy in America. (New York: The Modern library, 1981), p. 466-467.

[6] Fukuyama, p. 9.

[7] Tocqueville, p. 8.

[8] Marx, p. 23.

[9] Lech Walesa, “The Wit and Wisdom of Lech Walesa,” Newsweek, November 27, 1989, p. 35.

[10] Ben H. Bagdikan, “The Lords of the Global Village,” The Nation, June 12, 1989, p. 805.


NOTE: Thanks to my research assistant, Ravena Sharfuddin, for converting the old essay to digital form!