Peter Bauer: Winner of the 2002 Milton Friedman Prize

Peter BauerThe Cato Institute and The Milton Friedman Prize for Advancing Liberty International Selection Committee are proud to announce that the first recipient is the distinguished British economist Peter Bauer, a professor emeritus at the London School of Economics.

Professor Bauer was chosen for his pioneering work in the field of development economics, where he stood virtually alone for many years as a critic of state-led development policy with its emphasis on central planning and external foreign aid.

From 1948 when The Rubber Industry was published to the publication in 2000 of From Subsistence to Exchange, Bauer wrote books that challenged the prevailing development orthodoxy, including the myth that poverty is self-perpetuating.

Through a half century of scholarship, Bauer was an outspoken champion of global economic liberty. Like classical liberals before him, Bauer recognized the dynamic gains from trade and emphasized that countries that fail to establish commercial contacts will inevitably perpetuate poverty.

Bauer demonstrated that the so-called Third World was not immune to wealth accumulation. He wrote that economic achievement was well within the reach of poor societies, a view that was contrary to that of development officials who argued that there was a “vicious circle of poverty” and that poor countries on their own were not capable of sufficient capital formation. Bauer’s study of small holdings in the Malaysian rubber industry and the importance of small-scale traders in West Africa convinced him that wealth accumulation was possible, notwithstanding the experts.

The collapse of the Soviet Union and the worldwide movement toward more open markets have changed development economics and vindicated Bauer’s market-liberal vision. In 1997 the World Bank conceded as much in its development report: “State-led intervention emphasized market failures and accorded the state a central role in correcting them. But the institutional assumptions implicit in this world view were, as we all realize today, too simplistic.”

Bauer’s adherence to the liberal principles of free trade and free people reflects his deep respect for the dignity, rationality, and capabilities of poor people around the world. It stands in sharp contrast to the patronizing undertones of the development experts who made up “the spurious consensus.”

Born to the son of a Budapest bookmaker in 1915, Peter Bauer came to Britain in 1934 to study economics at Gonville and Caius College in Cambridge, where he later became a fellow. He taught at the London School of Economics and Political Science from 1960 to 1983. He is currently emeritus professor of economics. In 1982 he was made a life peer and is a fellow of the British Academy. He is 86 years old.

Edward H. Crane, president of the Cato Institute, welcomed the recognition of Professor Bauer. “Peter is not only a longtime friend of Cato,” said Crane, “he is a hero to many of us for his courageous commitment to sound economic theory and the promotion of human liberty.”

Informed that he won the Friedman prize, Prof. Bauer said “I can’t think of a greater distinction than to be the first recipient of the Milton Friedman prize for advancing liberty. I am truly honored. I have long admired the Cato Institute and Milton Friedman and recognition by both could not be more delightful.”

Members of the 2002 International Selection Committee

Margaret Thatcher, former British prime minister
Václav Klaus, president of the Czech Parliament and former Czech prime minister
Antonio Martino, Italian defense minister
Jimmy Lai, Hong Kong/Taiwan entrepreneur
Hernando de Soto, Peruvian author
Frederick W. Smith, Chairman & CEO, FedEx Corporation
John Blundell, General Director, Institute of Economic Affairs in London
Edward H. Crane, president of the Cato Institute
Rose D. Friedman, economist, wife of Milton Friedman and coauthor of Free to Choose

R.I.P. Peter Bauer

We regret to announce that Peter Bauer, the pioneering development economist and recipient of the first Milton Friedman Prize for Advancing Liberty, died on May 2, 2002 at his home in London. He was 86.