1 - The Invisible Hand in Economics and Politics

Summary

Milton Friedman, Nobel laureate in economics and Professor of Economics at the University of Chicago, delivered the inaugural Singapore Lecture on 14 October 1980. He was introduced to the audience by Singapore Deputy Prime Minister Dr Goh Keng Swee. A proponent of free market capitalism with minimal governmental involvement, Professor Friedman's influential ideas helped to move economic consensus to the right, leading to the free market revolutions in Britain and America in the 1980s. They also had strong influence in other parts of the world. Professor Friedman's lecture, followed by a Q&A session, was a stimulating exposition of his ideas.

I am going to talk tonight about some very broad issues, but issues that I believe have a direct bearing on the prospects of much of the world over the coming decade. My comments will be divided into three parts. I want to talk, first, about the changing trends that have dominated developments in the world over the past several centuries, and that I think foreshadow the developments that we shall see in the coming decades. I want then to examine a bit more carefully the nature of the forces that produced those trends; finally, I want to conclude by looking at what developments are likely in coming decades in response to those forces.

In 1899, a famous British constitutional lawyer, A.V. Dicey, gave a series of lectures at Harvard University, which were later collected and published in a book under the title: Lectures on the Relation between Law and Public Opinion in the Nineteenth Century. That book contains a profound analysis of the forces that determine the government policies and of the role of public opinion in shaping those policies. Dicey's main thesis was that legislation affecting public policy follows public opinion but only after a long lag. If public opinion moves, then some ten or twenty years later, that movement in public opinion is reflected in policy. This idea was expressed later in a famous paragraph by John Maynard Keynes when he talked of “madmen in authority … distilling their frenzy from some academic scribbler of a few years back”.