Reflections on Peter Bauer's contributions to development economics.

• Author: Friedman, Milton
• Position: Panel Discussion

This discussion was recorded at the Hoover Institution for use at a conference at Princeton University, "How Does Development Happen? A Conference in Tribute to Peter Bauer," May 6-8, 2004--Ed.

Friedman: Tom Sowell and I are glad to be able to participate in your discussion of Peter Bauer's work at long distance. Peter was a close personal friend of mine and we are all upset at his early demise. His work was important and will live on.

Sowell: The thing that strikes me most about Peter Bauer is how he stuck to his guns through decade after decade--when he was outside the mainstream, all by himself. And then, by the end of his life, the mainstream had moved over to where he was.

Friedman: It reminds me of what's happened to you, Tom. You've gone through essentially the same process.

Sowell: I think I'm a few decades away.

Friedman: Well, no. At any rate, there are still elements of the opposition to Peter's views that are not negligible--I guess the same thing goes with respect to your views.

Sowell: Absolutely. There are many people who have a vested interest in being opposed to his views, because if you understood the message of Peter Bauer then you would begin to question such things as foreign aid. Or, you'd begin to question the World Bank, the International Monetary Fund. And, these are more than just people with a set of ideas; these are people with a huge amount of money and a huge vested interest in the continued imposition of their ideas on countries that need that money.

Friedman: The thing is, you have to distinguish between what people say and what they do. Almost everybody now agrees in principle with the proposition that there are defects in aid. If go you back, the initial dictum that Peter fought against was the vicious cycle of poverty--the idea that was widespread and essentially conventional wisdom in the study of lesser developed countries: that they were poor, and because they were poor they couldn't generate capital, and because they couldn't generate capital they couldn't develop, and that kept them poor. And that the only way they could get out of it was if capital was brought in from outside.

Sowell: I mean, I must say it sounds plausible even now. It's only the fact that you have to ask the question: if that's true, how did any other rich countries ever become rich, because they all started out poor?

Friedman: And once you say that, the view becomes silly. It's hard to see how anyone could ever have set it forth. And yet, there is no doubt that it was the dominant view within the profession of development economists for many years.

Sowell: Well, it's one of many silly ideas that become conventional wisdom. There are so many things that people simply don't think about. And I often think, it really doesn't matter how smart they are. If you don't really stop and think about things, it doesn't matter whether you're a genius or a moron.

Friedman: People get into patterns of thinking and it's very hard to get out of those patterns. I think very few people today in the profession would maintain the vicious cycle of poverty argument, because there have been so many counterexamples.

Sowell: One of the things that he mentioned in one of his later books was that people were saying things like: "We took all the rubber from Malaysia"; "We took all the tea from India." And he pointed out that this was the direct opposite of the truth. The...