FRIEDMAN FRIDAY “The Tyranny of Control” Milton Friedman’s FREE TO CHOOSE Part 1 of 7 (Transcript and Video) “Adam Smith’s… key idea was that self-interest could produce an orderly society benefiting everybody, It was as though there were an invisible hand at work”

In 1980 I read the book FREE TO CHOOSE by Milton Friedman and it really enlightened me a tremendous amount.  I suggest checking out these episodes and transcripts of Milton Friedman’s film series FREE TO CHOOSE: “The Failure of Socialism” and “What is wrong with our schools?”  and “Created Equal”  and  From Cradle to Grave, and – Power of the Market. In this episode “The Tyranny of Controls” Milton Friedman shows how government planning and detailed control of economic activity lessens productive innovation and consumer choice.

In this first episode Milton Friedman asserts, “Adam Smith’s flash of genius was to see how prices that emerged in the market, the prices of goods, the wages of labor, the cost of transport, could coordinate the activities of millions of independent people, strangers to one another, without anybody telling them what to do. His key idea was that self-interest could produce an orderly society benefiting everybody. It was as though there were an invisible hand at work. The invisible hand is a phrase that was introduced by Adam Smith in his great book, The Wealth of Nations, in which he talked about the way in which individuals, who intended only to pursue their own interests, were led by an invisible hand to promote the public welfare which was no part of their intention. He was talking about the economic market. About the market in which people buy and sell. He was pointing out that in order for a butcher or a baker or a candlestick maker to make an income, he had to produce something that somebody wanted to buy. Therefore, in the process of promoting his own interests and looking to his own profit, he ended up serving the interests of his customers.”

Milton Friedman’s Free to Choose – Ep.2 (1/7) – The Tyranny of Control

Last week in this film series the distinguished economist Milton Friedman took us to Hong Kong to see a free market system in which he had a great deal of confidence and faith. This week he takes us traveling again to India, Japan and to Europe to see what happens in his view when governments think they can plan and control the economic activities of their peoples.

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FREE TO CHOOSE 2: “Tyranny of Control” (Milton Friedman)Free to Choose ^ | 1980 | Milton Friedman
Posted on Tuesday, July 18, 2006 3:02:09 PM by Choose Ye This Day

FREE TO CHOOSE: Tyranny of Control

Friedman: It is harvest time and Japanese farmers gather their crops for the rice market in Kyoto. Of course, they will try to get as much for it as possible and the buyer’s will try to buy it as cheaply as possible. That is how markets are supposed to work. That is what Adam Smith, the Scotsman who turned economics into a modern science, observed 200 years ago. He observed something else too.

Adam Smith: In every country it is always and must be in the interest of the great body of people to buy whatever they want of those who set it cheapest. The proposition is so very manifest that it seems ridiculous to take any pains to prove it. Nor could it ever have been called in question had not the interested sophistry of merchants and manufacturers, confounded common sense of mankind. Their interest is, in this respect, directly opposite to that of the great body of people.

Friedman: Adam Smith’s flash of genius was to see how prices that emerged in the market, the prices of goods, the wages of labor, the cost of transport, could coordinate the activities of millions of independent people, strangers to one another, without anybody telling them what to do.

His key idea was that self-interest could produce an orderly society benefiting everybody. It was as though there were an invisible hand at work.

The invisible hand is a phrase that was introduced by Adam Smith in his great book, The Wealth of Nations, in which he talked about the way in which individuals, who intended only to pursue their own interests, were led by an invisible hand to promote the public welfare which was no part of their intention. He was talking about the economic market. About the market in which people buy and sell. He was pointing out that in order for a butcher or a baker or a candlestick maker to make an income, he had to produce something that somebody wanted to buy. Therefore, in the process of promoting his own interests and looking to his own profit, he ended up serving the interests of his customers.

When Adam Smith published The Wealth Of Nations, Britain was still a largely rural and placid place. But the Industrial Revolution was already getting started and standards of life were beginning to rise. One obstacle was that trade with other nations was still tightly controlled. Merchants in the home market had persuaded the government of the day to impose heavy duties and taxes on all foreign imports in order to insure themselves a protected market.

One of the results was to turn Britain into a nation of lawbreakers. Smuggling was a national past time: brandy, wines, tobacco, anything with a heavy customs duty on it. For years, the revenue men fought a losing battle along the shores and inlets of the British Isles.

In 1846, after years of argument and partial success, the followers of Adam Smith finally persuaded the British Parliament to remove all duties on goods imported from abroad. Britain embarked on complete free trade, giving a further push to the rising standard of life.

What happened in Britain as a consequence of releasing the tremendous force of self-interest, had the unintended effect of benefiting millions of people all over the world, and by 1851 the evidence was proudly on show at the great Crystal Palace Exhibition.

Free trade enabled Britain to become the work place of the world. But was it all an accident? I don’t think it was. Consider what happened in 1868 on the other side of the world in Japan. For the preceding 300 years, the Japanese had lived in almost complete isolation. They had discouraged visitors from other nations, especially from the West. The result was that by the standards of the West, Japan was backward. It was a feudal society with lords and serfs and woe betide anyone who tried to change the order of things. Women were third class citizens.

In 1868, a new generation of rulers decided that the time had come for Japan to make contact with the outside world. And with the arrival of the first foreign traders from the West, things began to change. The Japanese followed the British trading pattern because Britain was a leading nation of the world. So free trade came to Japan. Japan became a magnet for other people’s ideas and developments.

One of the first traditional industries to feel the effects was weaving. From Europe, the Japanese imported the jacquard method __ a way of programming a loom to control the accuracy of the weave, and so the standardized output. Workers did well in the new atmosphere and so did their employers. The adoption of mass production techniques meant that workers were able to move out of the traditional industries and into the new industries, which all added to the trade boom. None of us can help being effected by the intellectual atmosphere that we breathe. In the middle of the 19th century, when Japan ended her self-imposed isolation and entered the modern age, it never occurred to her leaders to follow any other course than that of free enterprise and free markets. That was the intellectual atmosphere of the time, created by Britain’s success in applying the principles of Adam Smith.

In 1948, when India achieved independence, her leaders had all been trained in Great Britain. They had sat at the feet of Harold Laski and his associates at the London School of Economics, or of their counterparts at Oxford and Cambridge. It never occurred to them to follow any other course than that of central planning and government control. That was the intellectual atmosphere of the time. The intellectual seed took root. As it grew, it needed to be honored, even worshiped.

Every year on the anniversary of Gandhi’s birth, people all over India do just that __ in homage to the great Mahatma, they sit and spin using methods handed down through the centuries.

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