The Daily Hatch

TEMIN: We don’t think the big capital arose before the government did?

VON HOFFMAN: Listen, what are we doing here? I mean __ defending big government is like defending death and taxes. When was the last time you met anybody that was in favor of big government?

FRIEDMAN: Today, today I met Bob Lekachman, I met __

LEKACHMAN: But that’s not to say __ with discrimination __not per se.

VON HOFFMAN: You’re in favor of certain functions __

FRIEDMAN: I make a living by making distinctions, after all. Certainly not without qualification.

MCKENZIE: Von Hoffman, you have the floor.

VON HOFFMAN: What I was going to say is, I think most of us are not in favor of big government as a theory. The question that keeps haunting me here is, how do you, going back to your question of just the monetary regulation, how do you make __ and let’s assume that you can really, we’ll go a step further and we’ll say __ we’ll go all the way with you. We will install that mechanism. What makes you think that when the storms arise that, that the people running that mechanism are not going to misread, just as they did in the past?

FRIEDMAN: Because I’m gonna have __ if I had my way I would have a mechanism which didn’t require them to read anything.

VON HOFFMAN: In other words, simply a money formula.

FRIEDMAN: Absolutely.

VON HOFFMAN: Is cranked out in relation to the GNP regardless.

FRIEDMAN: Right.

TEMIN: The question is: How are you going to keep from tampering with this black box? Would you have a thing __

FRIEDMAN: I’m not gonna have a black box; I’m gonna have a very visible system. I have written out, as you know __

TEMIN: No, I know. Yeah, but the question is, no, you have the rule __

FRIEDMAN: __ at relative great length and precise details on what I would do.

TEMIN: __ it will calculate this, but then there’s going to be someone who’ll come in, the people that you dislike, they’ll say, “But we could do it a little bit better by doing it this way or that way.”

FRIEDMAN: Of course. Of course.

TEMIN: How will you keep them from doing it?

FRIEDMAN: Well, in the only way in which you can do it in a democratic society, by establishing both a written and an unwritten __ and the unwritten is just as important as the written __ an unwritten constitution on the part of the public at large, an acceptance of the view, that this is not what people in government ought to be doing. That it’s their problem

VON HOFFMAN: A highly sacred measure of __

FRIEDMAN: Well, if you want, but not necessarily sacred in the theological sense.

JAY: It’s unfair of people to say, Professor Friedman, he’s a bad doctor because people won’t actually take his medicine. I mean that is, that is not fair. But it does seem to me, and I say it again, that to reduce the whole debate to one, are you in favor of big government or small government, as though that is the only interesting or important political-economic choice we had to make, is very foolish.

FRIEDMAN: That is very foolish. I agree.

JAY: But __ and if you put it in that form, in practice in democratic societies, people will go on backing, supporting, and paying for big government. Because unless you __ in addition to pointing out the errors, defects, weaknesses, fallibilities, failures or government, you also describe in some detail, and to some attraction, the other changes that you’re going to make in the nongovernmental sector of the economy, which are going to give people the kind of protection, the kind of opportunities, the kind of fulfillment, the kind of stability, the kind of prosperity that they want. They are not going to buy it because you’re offering them a pig in the poke, and they will see it, whether or not you approve of the phrase, or whether or not I approve of the phrase, there’s going back to something which they’re glad to have got away from.

TEMIN: The question of how you draw the lines, and where you draw the lines is a difficult one, and I can’t see any possible way of somehow making a decision on that will stand like __ like the Rock of Gibraltar against all comers.

LEKACHMAN: I don’t think that the public is going to, nor should it, choose ideologically. I think it’s going to favor and disfavor certain activities of government out of its experience, by its perception of what’s good in its own interests and so on. And my __ I don’t preclude the possibility that there will be a different mixture of perceptions by the public which will lead to a shift in the functions of government. But I think it’s at least as possible that after the shift occurs, government will be perceived to have more functions as that it will have fewer functions.

VON HOFFMAN: It seems to me also that you could have the monetary policy that you are talking about, and have the very big HEW etcetera.

OFF SCREEN: Absolutely. Oh, yes.

VON HOFFMAN: And more easily.

FRIEDMAN: Unfortunately, you’re right.

VON HOFFMAN: Now could you dilate on that?

FRIEDMAN: No, no I __

VON HOFFMAN: No, I mean it, seriously.

FRIEDMAN: I agree with you. I agree with Nick. These are separable issues. And Peter Jay will agree with that, too. In fact he and I are in almost complete agreement on the desirable monetary policy. Where we differ is on these other policies, and there is certainly no doubt that you could have an essentially automatic stabilizing monetary policy of the kind which I’ve suggested, of a fixed rate of monetary growth, no discretionary intervention for cyclical purposes, and at the same time have a very big government on HEW, have all sorts of regulation, have tariffs and all other things. With respect to Peter Jay’s more general statement, it’s impossible not to agree with his statement, because it’s __ it concentrates on objectives and not on means. And the real issue has to do with means. What are the most appropriate and effective means which will give people the greatest assurance __ you can’t give them certainty __ but the greatest assurance that they will have a reasonably stable society with opportunity for themselves and their children, for their needs, for their wants. Of course.

MCKENZIE: We must end the discussion for this week and hope you’ll join us again for the next edition of Free to Choose.