Category Archives: Milton Friedman

“Friedman Friday” (“Free to Choose” episode 3 – Anatomy of a Crisis. part 3 of 7)

December 30, 2011 – 12:12 am
Worse still, America’s depression was to become worldwide because of what lies behind these doors.
This is the vault of the Federal Reserve Bank of New York. Inside is the largest horde of gold in the world. Because the world was on a gold standard in 1929, these vaults, where the U.S. gold was stored, provide an excellent test of where the depression originated. If the depression had started in Europe or somewhere else in the world, the U.S. would have lost gold, more gold would have flown out of the country then came in. If, on the other hand, the depression started in the United States, the opposite would happen. More gold would come in from abroad as the effects of our depression spread there then went out abroad, in reality that is exactly what happened.
When the international money system was based on gold, the rules of the game were these. The gold in the United States was supposed to control the amount of money issued by the Federal Reserve. In turn, the amount the Federal Reserve issued controlled the amount of money issued by the commercial banks which in turn controlled the amount of money that individuals, businesses and industry could get from the banks. The result, a monetary structure all supposedly tied to the amount of gold in the vaults in the United States. But in 1930 the Federal Reserve didn’t play by the rules. It stood by as banks started to collapse and with each one that went the money supply fell. Businesses and industry inevitably began to fail. Americans, now poor, bought less from abroad. Britain was one of the countries effected. Like the United States, Britain had its own monetary structure tied to gold. The trouble was that Britain could now sell less abroad. It cut down the amount it bought from abroad but not by enough. Under the rules of the gold standard, it had to pay the difference in gold. With every bar of gold that was shipped out of Britain, the amount of money decreased.
A depression that was already underway in Britain got worse. British gold flowed into the United States, supposedly to form the foundation of a new slice of the monetary structure. But the Federal Reserve didn’t let it. The gold was simply locked away. The results, Britain remained in trouble until in 1931 it went off the gold standard cutting the link between the amount of gold and the amount of money. In the United States, suffering the worst depression in history, there was plenty of gold, but to no avail.
Although these events happened almost 50 years ago, many of our policies today derived directly from them. Central bankers throughout the world, government officials everywhere, are afraid of a new great depression. They, have therefore, moved the opposite direction. Instead of the problem of too little money, we are faced with the problem of too much money. The problems of inflation that plagues us today trace directly from the problem of deflation that plagued us from 1929 to 1933.
People came to believe that free market capitalism had failed. Something was needed to replace it. At Cambridge University in England, a new orthodoxy emerged in the 30’s one that has remained powerful to this day.
It owes its influence to the brilliance of one man. John Manrd Kane was unquestionably one of the greatest economists of all time. Like other economists of his generation, he found The Great Depression both a paradox and a challenge. It was a paradox because it seemed to contradict some of the fundamental principles that economists have come to take for granted. Kane rose to the challenge by constructing a complex and sophisticated hypothesis which not only explained what had been going on, but also offered a way out way to end The Great Depression and to avoid similar episodes in the future. The core of his theory was that what happened to the quantity of money didn’t matter. What really mattered was a particular category of spending. In economists jargon, autonomous spending. What kind of spending is that? It might be investment by business enterprises in building factories and adding to the number of machines and adding to inventories. It might be spending by individuals to build houses. Or, most important of all, it might be deficit spending by government. If private spending on investment, on house building, is not enough to maintain full employment, then government could always step in and spend enough to make up the difference. The theory of pump priming was born. The theory was a godsend to politicians who had been grasping at any expedient. After all, throughout the ages, politicians had been only too willing to spend money provided they didn’t have to tax their citizens to pay for it. And here along came a scientific theory offered under the most responsible of auspices that justified what they had been wanting to do all along. Is it any wonder that government spending has exploded ever since or that deficit spending, even without the excuse of war, and on a large scale, has become the order of the day?
In America, the new Roosevelt administration adopted the Keynesian approach. It authorized massive spending on government projects. It involved government increasingly in the running of the economy. It developed programs designed to provide security for every individual. In England too, the idea that only the government could bolster the economy was firmly established as this film at the time makes clear.
With the assistance of the national government, work was restarted on the great Granada, 534. And we all hope that this is a prelude to a period of increasing prosperity in the industry. Exports of cotton goods to India have increased and as a result of the quota system in the colonies, which the national government introduced in order to diminish the dangers of Japanese competition, exports of cotton good to those colonies have been more than doubled. One of the most important contributions which the national government has made toward the improvement of social conditions has been a housing campaign without parallel in our history.
Though some of these measures may have been useful and indeed needed during the depression years, the length to which they have since then carried would have horrified Kane.
Kane died in 1946. I have always regarded it as a tragedy that they did not live another decade. He was the one man who had the standing, the personality, the force of character to persuade his disciples not to carry too far some ideas which were good for the 1930’s but which did not apply in the post war situation. That he might have done so is suggested by an article he wrote just before his death. The last article he ever wrote published after his death. In that article he expressed strong reservations about the lengths to which some of his disciples had been carrying his ideas. If he had been able, if he had lived another decade, the postwar inflationary explosion might have been av
By Everette Hatcher III | Also posted in Current Events | Comments (0)

“Friedman Friday” (Part 16) (“Free to Choose” episode 3 – Anatomy of a Crisis. part 2 of 7)

December 23, 2011 – 12:07 am

 

George Eccles: Well, then we called all our employees together. And we told them to be at the bank at their place at 8:00 a.m. and just act as if nothing was happening, just have a smile on their face, if they could, and me too. And we have four savings windows and we said, never leave the window. Lunch hour, anything else, we must have every window open all day. But, the important things was we knew you would have a big line so there was no use trying to hurry, because the line was going to continue. So we said, now, when you get a withdraw slip and the passbook, go back and check the signature. Even though you know your friend John Jones, just to delay time, just to mark time and then when you pay the money out, we are not going to pay in $100 bills. We are going to pay in $5, $10 and $20. And count it twice and hand it out with a smile.
Friedman: The banks survived the morning. But they didn’t have enough cash left so in the afternoon they called for more from the Federal Reserve Bank.
George Eccles: So the Federal Reserve sent up the armored car, two big sacks full of currency were brought in by the guard crowded through the crowd and the assistant manager, Morgan Kraft, came in also. So Mariner and my brother grabbed Mr. Kraft and he says, now, get up on this marble counter and tell these people that you brought up a lot of money and there is more where that came from! And he did. And then Mariner got up and said now you’ve heard that story, were not going to close. We’re going to stay open as long as any of you people want your money. So don’t worry about it at all. Well, of course, you had one other bank in the city and we called him and told him he couldn’t close either. He said well I can’t I haven’t got any money to stay open. So we made him a temporary loan. Because if we had another bank close while this run was going on the psychology of the public would be such that they’d, we’d never break the run in our bank. Everybody would come until they got all of their money out. (END)
The bank survived the first day’s run. It was time to change psychology. The second day was to be very different.
George Eccles: So that evening we called our employees all together because we knew that the next day that people had been working during the day and would have heard about this and the next morning we’d have them with us. So we figured now we can’t let a crowd build up in the lobby. So we told our tellers, I say now, you pay out this money just as fast as you can. So when anybody comes in the front door they don’t see a line. You pay out in $100 bills and don’t let any line ever develop at your window. Well it never did. So along about noon time people were just coming and going in a normal fashion and the run was over.
Friedman: It was all a question of reassuring the public that they could get their money. The Federal Reserve System was there to insure that this happened by supplying cash to the banks.
Why didn’t this system prevent The Great Depression after 1929? Because from 1929 to 1930 after the stock market crashed, the Federal Reserve system allowed the quantity of money to decline slowly thereby throttling the monetary structure. By December 1930, the quantity of money had fallen by 3% which may not seem much, but a growing economy needs additional money in order to prevent deflation and problems. Given this throttling of the monetary system, what happened after that was more or less inevitable. If the Bank of United States had not happened to fail, some other bank would have been the victim. It would have failed and would’ve set off the runs. Once the runs started, the Federal Reserve could have prevented them from having the disastrous consequences they did by stepping in and providing the banking system in general through creating new money with the cash it needed to meet the demands of the depositors. After all, once depositors start trying to take their money out of the banks, there is a strong tendency for the quantity of money to fall. Each dollar of cash which is withdrawn from a bank had been backing several dollars of deposits. If the Federal Reserve had stepped in, bought government securities on a large scale, provided the cash, the depositors would have found that they could’ve got their money and they would have stopped asking for it.
Ironically, the people at the New York Reserve Bank knew that this was the right policy. No one had advocated it more forcefully than Benjamin Strong, the first head of the bank. Tragically for America, he died two years before the real crisis.
With the death of Benjamin Strong, a truly remarkable man who not only ran the New York bank but was also the key figure in the entire Federal Reserve system. A struggle for power broke out between New York, the other banks and the Board in Washington. New York lost, the other banks and even more, the Board in Washington, won. That was a little noticed event but it was the first step in that massive move of power to Washington that has dominated our lives ever since. Then and now, this building housed the U.S. Treasury Department. But at that time, the Federal Reserve Board also had its modest offices somewhere in the same building. The shift of power was sealed a few years later when the Board got its own magnificent temple a few blocks away from here on Constitution Avenue. Despite excellent advice from New York, the system refused to buy government bonds, something which would have provided cash to the commercial banks with which they could have met more easily the insisted demands of their depositors. Instead, believe it or not, the system stood idly by while banks crashed on all sides. As the head of one of the banks put it, the reserve system had to keep its powder dry for a real emergency.
But if this wasn’t an emergency, what was? As bank after bank closed a chain reaction was in process destroying money as it went. It’s a process that even today a few bankers understand.
If you ask an individual banker whether he creates money, he’ll look at you as if you are mad. Of course not, he’ll say. I don’t create money, all I do is I accept deposits from high customers, I put a little of that deposit in the vault as a reserve and I lend the rest out. I don’t create money. From the point of view of the economist, the situation is very different. As I explained earlier, most of the deposits on the books of banks were put there by an accountant’s pen. But that simple fact is concealed from the individual banker, because is doesn’t happen here, inside the bank, it happens as a result of the transactions between banks.
As the men who ran the Federal Reserve knew very well, it happens when money loaned by one bank is deposited into another bank, to be loaned out yet again. In the depression the process was working in reverse. The banks were destroying money. Nonetheless, the Federal Reserve let it happen.
The end result was that by the time the whole sorry episode was over, by 1933 the quantity of money in the United States had gone down by a third. The slow throttling had turned into strangulation. For every $3 of currency in deposits the people had in 1929, only $2 were left. For every three banks that were open in 1929, in 1933 only two were left.
The terrible depression that followed was a direct result of bungling by the Federal Reserve System. Their monetary policy starts with any hope of economic recovery.
By Everette Hatcher III | Also posted in Current Events | Comments (0)

“Friedman Friday” (“Free to Choose” episode 3 – Anatomy of a Crisis. part 1of 7)

December 16, 2011 – 12:04 am

Milton Friedman’s Free to Choose (1980), episode 3 – Anatomy of a Crisis. part 1

FREE TO CHOOSE: Anatomy of Crisis
Friedman Delancy Street in New York’s lower east side, hardly one of the city’s best known sites, yet what happened in this street nearly 50 years ago continues to effect all of us today. Wall Street. Most of us know what happened here 50 years ago. Inside the Stock Exchange on October 29, 1929, the market collapsed. It came to be known as Black Thursday. The Wall Street crash was followed by the worst depression in American history. That depression has been blamed on the failure of capitalism. It was no such thing but the myth lives on. What really happened was very different.
Although things looked healthy on the surface, business had begun to turn down in mid 1929. The crash intensified the recession. So did continuing bank failures in the south and Midwest. But the recession only became a crisis when these failures spread to New York and in particular to this building, then the headquarters of the Bank of United States. The failure of this bank had far reaching effects and need never have happened.
It was something of a historical accident that this particular bank played the role it did. Why did it fail? It was a perfectly good bank. Banks that were in far worse financial shape had come under difficulties before it did and had, through the cooperation of other banks, been saved. The reason why it wasn’t saved has to do with its rather special character. First its name, Bank of United States, a name that made immigrants believe it was an official governmental bank although in fact it was an ordinary commercial bank. Second its ownership, Jewish, both its name and the character of its ownership which had so much to do with attracting the large number of depositors from the many Jewish businessmen in the city of New York. Both of them also had the effect of alienating other bankers who did not like the special advantage of the name and did not like the character of the ownership. As a result, other banks were all too ready to spread rumors, to help promote an atmosphere in which runs got started on the bank and which it came into difficulty. And they were less then usually willing to cooperate in the efforts that were made to save it.
Only a few blocks away is the Federal Reserve Bank of New York. It was here that the Bank of United States could have been saved. Indeed, the Federal Reserve System had been set up 17 years earlier precisely to prevent the worst consequences of bank failures.
The Federal Reserve Bank of New York, whose directors today meet in this room, devised a plan in cooperation with the superintendent of banking of the State of New York to save the Bank of United States. Their plan called for merging the Bank of United States with several other banks and also providing a guarantee fund to be subscribed to by still other bankers to assure the depositors that the assets of the Bank of United States were safe and sound. The Reserve Bank called meeting after meeting to try to put the plan into effect. It was on again, off again. But finally, after an all night meeting on December 10, 1930, the other bankers, including in particular John Pierpont Morgan, refused to subscribe to the guarantee fund and the plan was off. The next day the Bank of United States closed its doors, never again to open for business. For its depositors who saw their savings tied up and their businesses destroyed, the closing was tragic. Yet when the bank was finally liquidated, in the worst years of the depression, it paid back 92.5 cents on the dollar. Had the other banks cooperated to save it, no one would have lost a penny.
For the other New York banks, they thought closing the Bank of United States would have purely local effects. They were wrong. Partly because it had so many depositors, partly because so many of the depositors were small businessmen, partly because it was the largest bank that had ever been permitted to fail in the United States up to this time, the effects were far reaching. Depositors all over the country were frightened about the safety of their funds and rushed to withdraw them. There were runs. There were failures of banks by the droves. And all the time the Federal Reserve System stood idly by when it had the power and the duty and the responsibility to provide the cash that would have enabled the banks to meet the insistent demands of their depositors without closing their doors.
The way runs on banks can spread and can be stopped is a consequence of the way our bank system works. You may think that when you take some cash to a bank and deposit it, the bank takes that money and sticks it in a vault somewhere to wait until you need it again to turn it back over to you.
Bank teller: Okay, how would you like this? Two tens, one five and five ones. Okay.
Friedman: The bank does no such thing with it. It immediately takes a large part of what you put in and lends it out to somebody else. How do you suppose it earns interest, to pay its expenses, or pay you something for the use of your money? The result is that if all depositors in all the banks tried all at once to convert their deposits into cash, there wouldn’t be anything like enough cash in the banks of the country to meet their demands. In order to prevent such an outcome, in order to cut short a run, it is necessary to have some way either to stop people from asking for it, or to have some additional source from which cash can be obtained. That was intended to be the purpose of the Federal Reserve System. It was to provide the additional cash to meet the demands of the depositors when a run arose.
A classic example of how this system could and did work properly can be found over 2,000 miles from New York near the great Salt Lake in Utah.
In the early 30’s some banks in Salt Lake City and surrounding towns began to get into difficulties. The owners of one them were smart enough to see what had to be done to keep their banks open and courageous enough to do it. When fearful depositors began to clamor to withdraw all their money, one of George Eccles jobs was to brief his cashiers on how to handle the run.
By Everette Hatcher III | Also posted in Current Events | Comments (0)

Case Study on Chelsea Clinton:Can equality of results be acheived best by punishing those who were born rich?

December 12, 2011 – 3:17 pm
 chelsea_clinton1.jpg

Milton Friedman – Redistribution of Wealth

Uploaded by on Feb 12, 2010

Milton Friedman clears up misconceptions about wealth redistribution, in general, and inheritance tax, in particular. http://www.LibertyPen.com

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Many times in the past our government has tried to even the playing field but the rich and poor will always be with us as Christ reminded us so long ago. Providing people a chance is fine but trying to punish others is not and it does not work.

Max Brantley pointed out that there are many kinds of riches. You are rich if you have two parents who love you enough to teach you the importance of education like Max’s parents taught him.  

Chelsea Clinton is a perfect example of this. She was not born rich in money but she definately got a big headstart in other areas.

Max Brantley of the Arkansas Times noted:

The New York Times carried a glowing profile Sunday about Chelsea Clinton’s decision to step fully from the shadows and seek a public life.

She’s joined a corporate board, gotten a job as a correspondent for NBC and has her pick of gatherings of the mighty or simply important just about anywhere on the globe.

Reactions tended to fall along partisan lines. Fans of Bill and/or Hillary Clinton were happy for their 31-year-old daughter. Non-fans weren’t impressed. She’d done nothing to deserve her good fortune except choose good parents, they said. The really ugly ones criticized everything from her hairstyle to her speech.

I’m not impartial on the subject. I’ve known Chelsea since she was an infant, though most of my exposure came before her move to Washington in junior high. She’s remained friendly with my daughter and has been good to her. That’s enough for me.

But Chelsea is smart and poised. She’s worked hard at demanding schools and jobs. Would she be precisely where she is today without her famous parents? Of course not. She hasn’t claimed otherwise. (I do like how often she credits her Grandmother Rodham for sage advice.)

But she now has made the important decision to accept inheritance of her parents’ considerable public franchise. If nothing else, her growth in the larger public world might position her to someday take leadership of the Clinton Foundation. If she’s lucky — if we’re all lucky — she will continue to amass the resources her father has raised for fighting significant global problems. If she should decide to try politics, she’s been homeschooled by the best and brightest.

Make no mistake. Chelsea Clinton is a one percenter, if not precisely in the net worth category, close enough. She is also, if you prefer, a lucky sperm club member. But she manages to send a signal that she understands how much of her stature is owed to her parents. She signals a generosity of spirit about her good fortune that is more reminiscent of a Buffett than a Koch.

We will always have the 1 percent. There’s nothing inherently evil about being in that small number. The question is how much the 1 percent is willing to allow the 99 percent to share.

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Milton Friedman discusses the inheritance of talent on “Free to Choose”

Uploaded by on Nov 1, 2009

“The inheritance of talent is no different (from an ethical point of view) from the inheritance of other forms of property– of bonds, of stocks, of houses, or of factories. Yet many people resent the one, but not the other.”

From “Free to Choose” (1980), Part V: “Created Equal.”
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Here is an article that shows how silly it is to use government to try and achieve equality of results:

Our Economic Past | Burton W. Folsom Jr.

Equality, Markets, and Morality

September 2008 • Volume: 58 • Issue: 7

Burton Folsom, Jr. is a professor of history at Hillsdale College and author of New Deal or Raw Deal?, to be published by Simon & Schuster this year.

The subject of “equality” is the source of much political debate. Ever since the founding era, free-market thinkers have argued for equality of opportunity in the economic order. Equality, in other words, is a framework, not a result. In modern terms the goal is a level playing field. Government is a referee that enforces property rights, laws, and contracts equally for all individuals.

What the free-market view means in policy terms is no (or few) tariffs for business, no subsidies for farmers, and no racism written into law. Also, successful businessmen will not be subject to special taxes or the seizure of property.

In America this view of equality is enshrined in the Declaration of Independence (“all men are created equal and are endowed by their creator with certain inalienable rights”) and the Constitution (“imposts and excises shall be uniform throughout the United States” and “equal protection of the laws”). Much of America’s first century as a nation was devoted to ending slavery, extending voting rights, and securing property and inheritance rights for women—fulfilling the Founders’ goal of equal opportunity for all citizens.

Progressives and modern critics of equality of opportunity have launched two significant criticisms against the Founders’ view. First, that equality of opportunity is impossible to achieve. Second, to the extent that equality of opportunity has been tried, it has resulted in a gigantic inequality of outcomes. Equality of outcome, in the Progressive view, is desirable and can only be achieved by massive government intervention. Let’s study both of these objections.

To some extent, of course, the Progressives have a valid point—equality of opportunity is, at an individual level (as opposed to an institutional level) hard to achieve. We are all born with different family advantages (or disadvantages), with different abilities, and in different neighborhoods with varying levels of opportunity. As socialist playwright George Bernard Shaw said on the subject, “Give your son a fountain pen and a ream of paper and tell him that he now has an equal opportunity with me of writing plays and see what he says to you.”

What the Progressives miss is that their cure is worse than the illness. Any attempt to correct imbalances in family, ability, and neighborhood will produce other inequalities that may be worse than the original ones. Thomas Sowell writes, “[A]ttempts to equalize economic results lead to greater—and more dangerous—inequality in political power.” Or, as Milton Friedman concluded, “A society that puts equality—in the sense of equality of outcome—ahead of freedom will end up with neither equality nor freedom. The use of force to achieve equality will destroy freedom, and the force, introduced for good purposes, will end up in the hands of people who use it to promote their own interests.”

Failure During the New Deal

Sowell’s and Friedman’s point is illuminated by the failed efforts of the federal government to reduce inequalities during the New Deal. In the early 1930s the United States had massive unemployment (sometimes over 20 percent). In 1932 President Herbert Hoover supported the nation’s first relief program: $300 million was distributed to states. This was not a transfer from richer states to poorer states but a political grab by most state governors to secure all they could. Illinois played this game well and secured over $55 million, more than New York, California, and Texas combined.

Massachusetts, with almost as many people as Illinois, received zero federal money. Massachusetts had much poverty and distress, but Governor Joseph Ely believed states should try to supply their own needs and not rush to Washington to gain funds at someone else’s expense. Ely therefore promoted a variety of fundraising events throughout his state to help those in need. “Whatever the justification for [federal] relief,” Ely noted, “the fact remains that the way in which it has been used makes it the greatest political asset on the practical side of party politics ever held by any administration.”

In 1935 President Franklin Roosevelt confirmed Ely’s beliefs by turning the Works Progress Administration (WPA), which he had established, into a gigantic political machine to transfer money to key states and congressional districts to secure votes. Roosevelt and his cohorts used the rhetoric of removing inequalities as a political cover to gain power. Reporter Thomas Stokes won a Pulitzer Prize for his investigative research that exposed the WPA for using federal funds to buy votes.

The use of tax dollars, then, to mitigate inequality failed because—whatever the good intentions—the funds quickly became politicized.

Presidential (and congressional) authority to tax and to transfer funds from one group to another also proved to be a dangerous centralization of power. Taxation increased both in size and complexity. The IRS thus became a weapon a president could use against those who resisted him. “My father,” Elliott Roosevelt observed of his famous parent, “may have been the originator of the concept of employing the IRS as a weapon of political retribution.”

Sowell and Friedman indeed recognized that efforts to remove inequalities would create new inequalities, perhaps just as severe, and would also dangerously concentrate power in the hands of politicians and bureaucrats. But Sowell and Friedman have readily conceded that when markets are left free, the inequality of outcomes is not necessarily morally justified. In other words, some people—through luck or inheritance—become incredibly rich and others, who may have worked harder and more diligently, end up barely earning a living. Rewards, as F. A. Hayek, among others, has noted, are “based only partly on achievements and partly on mere chance.” Societies are more prosperous under free markets, but individual success and failure can occur independently of ability and hard work.

Progressive Claims in Light of History

What the historical record does seem to demonstrate is that the richest men in American history have been creative entrepreneurs who have improved the lives of millions of Americans and have achieved remarkable upward mobility doing so. For example, the first American to be worth $10 million was John Jacob Astor, a German immigrant and a son of a butcher. Astor founded the largest fur company in the United States, transforming tastes and lowering costs in clothing for people all over the world.

John D. Rockefeller, the first American to be worth $1 billion, was the son of an itinerant peddler. Yet Rockefeller, with little education or training, went into the business of refining oil and did it better than anyone in the world. As a result, he sold the affordable kerosene that lit up most homes in the world. (He had a 60 percent world market share in the late 1800s.)

Henry Ford, the son of a struggling farmer, was the second American billionaire. He used the cheap oil sold by Rockefeller and cheap steel that was introduced by immigrant Andrew Carnegie to make cars affordable for most American families. The most recent wealthiest men in the United States—Sam Walton and Bill Gates—both came from middle-class households and both added much value for most American consumers.

Free markets may yield odd results and certainly unequal outcomes, but the greater opportunities and prosperity have made the tradeoff worthwhile for American society.

By Everette Hatcher III | Also posted in Current Events, spending out of control, Taxes | Comments (0)

Friedman Friday” Free to Choose by Milton Friedman: Episode “What is wrong with our schools?” (Part 6 of transcript and video)

December 9, 2011 – 12:53 am

Here is the video clip and transcript of the film series FREE TO CHOOSE episode “What is wrong with our schools?” Part 6 of 6.

 
Volume 6 – What’s Wrong with our Schools
Transcript:
FRIEDMAN: But I personally think it’s a good thing. But I don’t see that any reason whatsoever why I shouldn’t have been required to pay back that money. Individuals pursuing their separate individual interests also provide public benefits. Of course I think that the public benefited from my getting an education, but the primary beneficiary was me. I was the one who got the benefit from it. I was the one who had the higher income.
COONS: We know you benefited from it.
FRIEDMAN: I know I benefited, I don’t know about the public.
McKENZIE: I’d like others of you to react to the idea of moving from state education at the higher level, which is based upon low fees in state universities, in favor of a loan system. This has been hotly debated in many other countries, too. What’s your own feeling about that?
COONS: Being a tenured professor at a state university I suppose you’ve really put me on the spot. I hope none of my friends are listening. But I tend to agree in general with Milton Friedman that we ought to find a way to open up to all classes, all income classes the kinds of opportunities that the middle class have at my university. And I cannot give you __ we don’t have time to go through all of the kinds of ways in which we would do it, but I would just personally, it seems to me we ought to let people come free at the beginning and pay it back out of their income over their life span, so if they make a lot of money, they pay back a lot of money. Perhaps we can run the whole university in the future on their success, to which we contributed with our teaching. And if they don’t make any money, they don’t pay anything back, and that’s okay too.
FRIEDMAN: And you ought to share in the losses if they don’t.
SHANNON: I can’t think of anything __
COONS: Exactly.
SHANNON: I can’t think of anything that would frighten poor people more than the thought at the end of the four years or six or seven or eight years of higher education, they have this albatross around their neck __
COONS: Only if they’re rich. Only if they become rich.
FRIEDMAN: There’s no albatross __ would you say the same thing about people in this country who start private businesses every year. Many of them lose money. Many of them make money. Would you say that nobody is gonna start a business because he might end up with an albatross? You ought to let people decide that for themselves. What I really want to know is a very different thing. How do you justify taxing the people in Watts, to send the children from Beverly Hills to college? That’s a demagogic statement, but it happens to be empirically a correct statement. How do you justify it?
SHANKER: Well I don’t know how we justify taxing all the people of this country to send the GI’s under the GI Bill, but I’m very grateful that we did it. I don’t know what this country would have done in a postwar period without a huge number of educated people in a whole bunch of fields that opened up after that. I doubt very much that the GI’s would have come back at the age that they were and everything else, and would have decided that now they’re gonna take out loans in order to go to college.
VOICE OFF SCREEN: And a lot of them were poor.
SHANKER: Yes, they were poor, and they went because they had government support to go, and because basically there were a lot of state-supported low-tuition schools, and if you didn’t have the state schools, and if you didn’t have the government support we wouldn’t __ we would have been without those people, and I don’t know what would have happened either to our strength or to our economy.
FRIEDMAN: The history of this country goes back a little bit before 1945. It goes back 200 years. The state schools, universities, were a minor part of the total higher educational system for a long time. That educational system did generate a great many educated and schooled people, a great many people who made great contribution to this country.
SHANKER: What percentage of people went to college before World War II in this country?
FRIEDMAN: The percentage that was going to college was going up and rising. You know __ let me tell you one __ another statistic __ I hate to introduce statistics. But let me tell you one more. Do you know that the percentage of the students at private universities who come from low-income classes is higher than the percentage of students at state universities, at government universities that come from the lowest income families.
SHANKER: Because they are there with government assistance.
FRIEDMAN: Most cases they are there with __
SHANKER: They are there with government assistance which in many cases favors the private as against the public schools.
FRIEDMAN: In most cases they are there with private scholarships that have been contributed by people __
SHANKER: Some of them, some of them, yes.
FRIEDMAN: __ which is all to the good.
McKENZIE: Dr. Anrig on this.
ANRIG: We come back to the point that I tried to make earlier with Dartmouth, the reason the public higher education system developed, the reason that you have the UCLA’s and others is not simple that government went amuck or bureaucrats went that way; but because eight of those students were not getting into Dartmouth, and there was not a place for them. And it was public higher education that opened up its doors to those students. Those are the youngsters that now have an opportunity they wouldn’t have had before. I think on the issue of loans that it’s as with all complex human tasks, it’s not an either/or situation. You need a mix of strategies on the issue of alternatives for youngsters in schools. I think you can have, as indeed you do have, alternatives within public school systems. I think you can have alternatives within schools. I think you can have competition through open enrollment kinds of arrangements. I am fearful, however, always for those eight youngsters than can’t get in to something which is basically selective and exclusive. If you can assure us __
FRIEDMAN: Well, let’s go back __
ANRIG: __ that those eight youngsters all will be provided with equal attention, equal opportunity and equal rights. Then I would begin to be more interested in the alternative.
FRIEDMAN: But I want to suggest to you that we’re not proposing, neither Jack Coons nor I, to dismantle anything. We’re only saying, put up or shut up. Either show that you can produce the kind of education people are willing to go and get, or reduce your size, go out of business. We are only proposing that there be a wider range of alternatives. Now, it is not true __ let me put a different point to you. There are a small minority of people who are problems. Is it desirable to impose a straightjacket on a hundred percent of the people, or ninety percent of the people, in order to provide special assistance or special help to four or five or ten percent of the people? Not at all. I think that there’s a big difference between two kinds of systems. One kind of system in which the great bulk of parents have effective freedom to choose the kind of schools their children go to, whether it’s the lower or the higher level. And there are programs and provisions for a small minority. That’s one kind of a system. That isn’t what we have now. What people in the public school system, people like yourselves do, they do not want to give up the monopoly of the public school system any more than the Post Office want to give up the monopoly of delivering mail.
ANRIG: I think you attribute the monopoly desire to the bureaucrat. And I don’t think that’s right. The concern of the public school is for being sure that every youngster in this country gets access to a public education.
FRIEDMAN: Excuse me. You have had an attempt to introduce voucher experiments around the country. Every one of those attempts, as at Alamrock (phonics) and elsewhere, has been prevented by the opposition of the educational bureaucracy.
ANRIG: Oh, but, no, no, you can’t __ that’s a glittering generality.
FRIEDMAN: That was true in New Hampshire, it was true in Connecticut.
SHANKER: It was not true in Alamrock (phonics) because Alamrock was not what you might call a voucher system, it was a kind of a system of free choice within public schools.
FRIEDMAN: I agree, I agree.
SHANKER: And whether one school did better in its scores, others did worse, and when you measured the whole system when it was all over, the scores were exactly the same as they were before, except that some students had moved to other schools and the grades were better in one school as against another. We do very strongly oppose a voucher system which will end up with public schools being abandoned and thereby destroyed. largely. They will become the schools for those who can’t get in anywhere else, or who are expelled elsewhere.
VOICE OFF SCREEN: So if you had a voucher system __
SHANKER: Because if you compel public schools to educate all children, including the most difficult, and if you have other schools, that have _
FRIEDMAN: It isn’t compelling public schools, it’s compelling parents _
SHANKER: No, no, it’s public schools. The public school cannot say to a parent, “Your child is very difficult. Your child throws things. Your child screams & yells. Your child takes all the attention of the teacher, therefore, get out and go find a private school.” On the other hand, you have hundreds of private schools in this country where when they get a very disturbed child, out that child goes. And where does that child go? The public schools must take him.
FRIEDMAN: But look at __
SHANKER: And that’s what we have. We have one system of schools which cream, and which throw out the most difficult __ you know, it would be like the hospital throwing out all the sick patients and keeping the healthy ones.
McKENZIE: Well, there we leave this week’s discussion. We hope you’ll join us for the next episode of Free to Choose.
By Everette Hatcher III | Also posted in Vouchers | Comments (0)

Ken Aden: Social Security is not a Ponzi Scheme and those who want to cut it are criminals

December 6, 2011 – 3:06 pm

Ken Aden is running for Congress against Steve Womack in Arkansas’ third district. He believes Social Security is not a Ponzi Scheme and those who want to cut it are criminals. I was reading on the leftwing blog “Blue Arkansas” about Ken Alden and I got this video clip which is below:

It is my view that the wise thing would be to allow people to invest in personal retirement funds with a portion of the money that is going to Social Security now.

Saving Social Security with Personal Retirement Accounts

Uploaded by  on Jan 10, 2011

There are two crises facing Social Security. First the program has a gigantic unfunded liability, largely thanks to demographics. Second, the program is a very bad deal for younger workers, making them pay record amounts of tax in exchange for comparatively meager benefits. This video explains how personal accounts can solve both problems, and also notes that nations as varied as Australia, Chile, Sweden, and Hong Kong have implemented this pro-growth reform. http://www.freedomandprosperity.org

____________________

Governor Rick Perry got in trouble for calling Social Security a Ponzi scheme and I totally agree with that. This is a series of articles that look at this issue.

Social Security Demagoguery from Mitt Romney and Michele Bachmann: Economically Wrong, Politically Wrong

Posted by Daniel J. Mitchell

Governor Rick Perry of Texas is being attacked by two rivals in the GOP presidential race. His sin, if you can believe it, is that he told the truth (as acknowledged by everyone from Paul Krugman to Milton Friedman) about Social Security being a Ponzi scheme.

Here’s an excerpt from Philip Klein’s column in the Examiner, looking at how Mitt Romney is criticizing Perry.

Mitt Romney doubled down on his attack against Texas Gov. Rick Perry this afternoon, warning in an interview with Sean Hannity that his critique of Social Security amounted to “terrible politics” that would cost Republicans the election. Romney’s decision to pile on suggests that he’s willing to play the “granny card” against Perry if it will help him get elected, a tactic more becoming of the likes of DNC chairwoman Debbie Wasserman Schultz than a potential Republican nominee.

And here’s a Byron York column from the Examiner looking at how Michele Bachmann is taking the same approach.

…another Republican rival, Michele Bachmann, is preparing to hit Perry on the same issue. “Bernie Madoff deals with Ponzi schemes, not the grandparents of America,” says a Bachmann adviser.  “Clearly she feels differently about the value of Social Security than Gov. Perry does.  She believes Social Security needs to be saved, that it’s an important safety net for Americans who have paid into it all their lives.” … “She strongly disagrees with his position on that…”

Shame on Romney and Bachmann. With an inflation-adjusted long-run shortfall of about $28 trillion, Social Security is a Ponzi scheme on steroids.

But as I explain in this video, that’s just part of the problem. The program also is a terrible deal for workers, particularly young people and minorities.

Here’s what’s so frustrating. Romney and Bachmann almost certainly understand that Social Security is actuarially bankrupt. And they probably realize that personal retirement accounts are the only long-run answer.

But they’re letting political ambition lure them into saying things that they know are not true. Why? Because they think Perry will lose votes and they can improve their respective chances of getting the GOP nomination.

Sounds like a smart approach, assuming truth and morality don’t matter.

But here’s what’s so ironic. The Romney and Bachmann strategy is only astute if Social Security is sacrosanct and personal accounts are political poison.

But as I noted last year, the American public supports personal accounts by a hefty margin. And former President Bush won two elections while supporting Social Security reform. And election-day polls confirmed that voters supported personal accounts.

I’m not a political scientist, so maybe something has changed, but I wouldn’t be surprised if Perry benefited from the left-wing demagoguery being utilized by Romney and Bachmann.

P.S. This does not mean Perry has the right answer. As far as I know, he hasn’t endorsed personal accounts. But at least he’s telling the truth about Social Security being unsustainable.

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By Everette Hatcher III | Also posted in Cato Institute, Social Security | Tagged , , , | Comments (0)

Friedman Friday” Free to Choose by Milton Friedman: Episode “What is wrong with our schools?” (Part 5 of transcript and video)

December 2, 2011 – 12:52 am

Here is the video clip and transcript of the film series FREE TO CHOOSE episode “What is wrong with our schools?” Part 5 of 6.

 
Volume 6 – What’s Wrong with our Schools
Transcript:
Are your voucher schools  going to accept these tough children?
COONS: You bet they are. (Several talking at once.)
COONS: May I answer the question?
SHANKER: If they accept those children, I’ll tell you what’s gonna happen.
COONS: Okay, you tell me and then I’ll tell you.
SHANKER: What’s gonna happen is that the parents of all the other children are gonna move right out and go to another school, because ultimately you’re going to have to deal with hardcore problems__
McKENZIE: John Coons.
SHANKER: __ whether it’s in a private school or whether it’s in a public school.
COONS: In other words, that kid isn’t tough in the school that he’s in because he’s stuck there, he’s just a rotten, tough kid.
SHANKER: He may be a kid with a lot of problems, not rotten, a kid with a lot of problems.
COONS: And it will never __ you can’t imagine a situation where if he were given choice, and allowed to go to a school that he liked, and to which he would connect emotionally that he would no longer be a troublemaker, but that he would like to stay in a place where he has chosen and would therefore do what is necessary to stay there and to learn.
SHANKER: You know, I don’t think you’ve been near schools or classrooms for a heck of a long time.
COONS: Thanks a lot.
(Laughter and applause.)
COONS: I happen to have five kids who’ve done a lot of time in public and private schools both.
SHANKER: We’re not talking about the problems of your children, though.
McKENZIE: Let’s get around the table, I want to __
FRIEDMAN: No, no. I have to get to this point, because I think it’s a very crucial one. I don’t think Mr. Shanker is saying that you should never use a doctor if you have cancer who hasn’t himself had cancer.
SHANKER Oh, I didn’t say that.
FRIEDMAN: Let’s get rid of the idea that the only people who are competent to judge about whether a school is good or bad is a parent who at the moment has children in that school. The plain fact is that children are not born troublemakers. They do not emerge from the womb __ some of them do, of course, but most of them do not. Most of the cases of the tough kids in the schools you’re talking about are tough kids because they’re lousy schools. Because the schools do not evoke their interest. Because the school does not __
SHANKER: You’re dead wrong. You’re dead __
(Several talking at once.)
McKENZIE: Now wait a minute now, Greg Anrig on this one. Milton, let __
ANRIG: It’s not often I have a chance to tell a professor he’s wrong. With all respect, Professor, the problems that you see in the urban schools of this country are not problems of the schools, they are problems of poverty. And they are problems of what do you do when for demographic and sociological and economic reasons, in a country like ours, you begin to concentrate those people who are poor in the inner and older parts of the cities of our country. That’s when the problem comes, and it’s not just a problem with schools. It’s a problem of housing, of jobs, of medical care, of social services, and the same problems crop up, and to say that the answer to that is take one part of that element and say, just set up a competitive marketplace, is not dealing with the problem. The problem is the problem of poverty.
FRIEDMAN: We’ve dealt with the problem __
SHANNON: I am struck the anomaly. The anomaly that rises out of this discussion of the voucher system. The facts are that government support __ call it subventions, call it direct aid, call it grants in aid, call it vouchers, call it anything, will lead ultimately to government control of the private schools, thus undercutting the alternative nature of private schooling and hurting it at its very source.
VOICE OFF SCREEN: Well, then you ought to look at our initiative.
FRIEDMAN: We’ve had long experience with that on the higher education level. You have the whole GI Bill. Did the GI Bill really lead, fundamentally, to control of all the schools. There’s a fundamental difference between government giving money to an institution, to a school, that does lead to control directly, and government giving money to people to use, the food stamps don’t determine what people buy with their food stamps. They may be a good or a bad program, that’s not my point. My point is that don’t underestimate the crucial difference between making money available to parents to spend as they choose to exercise their judgment, and making money available to institutions like schools, which they spend subject to all the conflicts which they have with school teachers and others.
ANRIG: You use Dartmouth as an example, and I think the concerns that I have about the voucher systems, the various ones proposed, is not with the one applicant that can get accepted to Dartmouth, but with the eight applicants that don’t get accepted to Dartmouth. What’s going to happen to those __ or that group of youngsters. You can have a situation in the free marketplace where everybody takes the cream, but what about the youngster that doesn’t measure up? What about the youngster that’s a risk? It seems to me that some of the greatest leaders of this country were people that would have been rejected by Dartmouth, and most of the Ivy League schools.
McKENZIE: Let’s get other views on this, then we’ll come back to you, Milton.
FRIEDMAN: No, no. I just want to comment, because I have to comment on two points, the one he made earlier about poverty and this one. But on this one. Dartmouth is one of the best examples of the private schools. UCLA is one of the best examples of the state schools. That’s why we chose it. There are many other private schools which are not as selective and do not __ are not available to people who can’t make the Dartmouth cut. There are many other public schools, state schools, that are less advanced than UCLA and the California system. There are all sorts of grades of schools. But the difference between the two is the same at lower levels. Now I do want to make one comment going back to your poverty thing; and that is that, first of all, other programs in this series deal with the issues you’ve raised. But, second, do not underestimate the role which bad schooling, provided by our present governmental mechanism has played in creating poverty. It’s been a major source, particularly among black and white teenagers coming up in the slums, it’s been a major source of their difficulties of getting out of the trap of poverty. So it’s not a one-way relation between poverty and the schools, the schools themselves bear a great deal of responsibility.
SHANKER: Well, the reason the schools bear it, and it isn’t the schools directly, it’s that we don’t put enough resources in for children who need special and additional help because they are not getting it in their homes or they’re not getting the same sort of support in home and community as middle class kids do, and then we wait until the child is 16 or 17 and drops out, and then we provide a youth employment program for them where we spend between five and ten thousand dollars to try to undo what could have been undone in the first, second and third grade if we had a decent investment in the public schools.
FRIEDMAN: I have never yet known anybody who was trying to defend a government program who didn’t say all it’s evils came from the fact that it wasn’t big enough. Now the facts are __
SHANKER: Would you think the children with problems need the same amount of education __
FRIEDMAN: No, no.
SHANKER: __ the same amount as children who don’t have special problems?
FRIEDMAN: No, but I just want to tell you some facts. The number of students in schools has been going down. The total expenditures on schools, allowance being made for inflation, after allowing for inflation has been going up. The number of pupils has been going down, the number of teachers have been going up, and by all accounts the quality has been going down.
SHANKER: But I have to explain __
(Several talking at once)
McKENZIE: Milton, just a minute. I want to hold you __ Mr. Shanker, Mr. Shanker. We got onto higher education and I don’t want to leave it without getting the rest of Milton’s thoughts on it. In particular, you seem to be coming to say at the end of the film that the right answer is a system of realistic loans where people, therefore, know what it’s costing, rather than trying to hold down college fees and that kind of thing.
FRIEDMAN: Absolutely.
McKENZIE: Yeah. And__
FRIEDMAN: I think that the higher education is the most disgraceful example on the record. I know of no governmental program that seem to me is so unfair and disgraceful in imposing costs on low income people to benefit high-income people. We in the upper and middle income classes have conned the poor in this country to supporting our children in going through college and university and we don’t __ and we scream to the treetops about how disinterested and how public-spirited we are. We ought to have a system under which everybody who wants to go to college can go there. He has to pay his own way, either now or later on, and the schemes I have in mind, if we developed them more fully, and as I have in other contexts in other areas, are along the line of the educational opportunity bank, that Professor Zacharias of MIT and a commission appointed by President Johnson came up with as a way of enabling students to finance their own higher education without facing the problem you raised of ending up with a large dollar debt.
ANRIG: I do think __
McKENZIE: Dr. Anrig.
ANRIG: With some trepidation, Professor, I raise a question of taxation. That is that I agree that we need better loan systems than we have, but as I understand the American tax system in general, as a generality, it is a graduated system.
FRIEDMAN: Absolutely.
ANRIG: It is an equalizing system.
FRIEDMAN: Absolutely.
ANRIG: And to reach the conclusion that the __
FRIEDMAN: No, no, it is not. It’s on paper, but you’ve got to look at the facts.
McKENZIE: Let him make his point, yes.
ANRIG: Well, I’m trying to __ it is a system which the wealthier get __ or the middle class get taxed more than somebody who’s making a lesser salary. To say then that the poor are funding __
FRIEDMAN: That’s true.
ANRIG: __ public higher education, where middle class youngsters and by the way a lot of poor youngsters go as well, it doesn’t fit with my understanding at least of the tax system. Now I’m not an economist, I admit it.
FRIEDMAN: Well, it turns out that there have been some very careful studies made of exactly what you’re describing. There’s one particularly careful one for California. There’s one for Florida. These show __ it’s not a minor item, that if you take the total receipts from expenditures on higher education going to the lower classes, and the total taxes they pay that are used for higher education, the lower classes are paying more than they’re getting, and the higher classes are getting more than they are paying for.
(Several talking at once.)
FRIEDMAN: Now I myself am a beneficiary of this subsidy. I’m one of the worst cases on record. I went to a state school, Rutgers University. I went on a state scholarship. The poor suckers in the State of New Jersey paid for my going to college. I personally think that was a good thing, there are many people who have different opinions about that. (Laughing)
 
By Everette Hatcher III | Also posted in Vouchers | Comments (0)

Free to Choose by Milton Friedman: Episode “What is wrong with our schools?” (Part 4 of transcript and video)

November 25, 2011 – 12:51 am

Here is the video clip and transcript of the film series FREE TO CHOOSE episode “What is wrong with our schools?” Part 4 of 6.

 
Volume 6 – What’s Wrong with our Schools
Transcript:
It seems to me that if one is truly interested in liberty, which I think is the ultimate value that Milton Friedman talks about, one has to be very careful how he structures the kinds of subsidies that are proposed for education so that you do not wind up with the poor in one kind of school and the rich all in the other, and very little liberty for low-income people left over, which is what is what I think he has in mind. That is, I don’t think he has that result in mind. He has the hope in mind of liberty, but that it’s going to need a certain kind of tailoring before it works that way.
SHANKER: I think your remarks about free competition are very unfair for a very simple reason. You cannot have free competition where one group of schools must accept every single student who comes along, no matter what his physical or emotional handicaps or other problems; whereas the very essence of a private school and your voucher school is that they’re going to be able to keep out the students and the finest schools that you saw in that film were schools that deliberately kept out the most difficult students. Of course you can have a wonderful school if you pick students whose parents __
(Several talking at once)
SHANKER: __ no, no. Whose parents are so highly motivated that they’re willing to spend more money and willing to go out of their way to do something like that. Now the public schools have to take the handicapped, must provide bilingual education, must engage in bussing or other programs in terms of integration, must do all of these things. Whereas the private school can come along and say, well if your child has no problems, you know what we can do? We can offer you a school where you don’t have to sit next a child with these other problems. We’re gonna put you next to other children who are advantaged.
SHANNON: I think in the real world there is no competition between private schools and public schools because private schools, especially parochial schools, do not have to comply with Federal and State mandates and constitutional limitations and things of that sort.
McKENZIE: Dr. Anrig.
ANRIG: I think the part of the film that speaks to the greater parental involvement, I agree with very enthusiastically. However, I think the solution is the wrong solution for the problem that you identify. I think the role of public education in a democracy is not akin to that of the marketplace. The purpose for the common school is not the same as the purpose for the marketplace. We are trying in our public schools to create a democracy, to create an educated electorate. If you’re going to do that, you have to have the common school.
McKENZIE: How far do you accept his analysis of the present condition of the public education system? A pretty drastic analysis.
ANRIG: Well, I think he’s established three straw men that I think have to be challenged with all respect, Professor Friedman. The first is that there is a profession of education out there which has run amuck. We have the most decentralized system in the world in the American education. Sixteen thousand school districts that are governed not by the profession, but by elected citizen representatives, most of whom are parents. Secondly, you long, as I would, for the good old days of the one-room school in Vermont. That school served a small proportion of the youngsters for a short period of time, and those days will never come back. Third, you as an example of American education, a troubled high school in an urban center.
McKENZIE: In your bailiwick.
ANRIG: In my bailiwick, which is not typical of where the American student goes to school, first of all; and secondly is not typical of the City of Boston. And I do think it’s important to point out that that particular school, at the time that you took filming there, or your production crew did, was in the middle of a desegregation process that was not anywhere remarked about in the film. So it was not a typical example either of education in America or of education in Boston.
McKENZIE: The one unsurprising thing about these comments is that all of the opposition to allowing the market work comes from people who have a very strong vested interest in the present public school system. I am not proposing, we are not proposing to destroy the public school system. We are only asking that the public school system should be free to compete, should be open to competition, if it is really as good as you people make it out to be, it has nothing to worry about. Now, in terms of your comment, of course there’s a great deal of decentralization. We showed a very good school in this film as well as a very bad school. There are many good schools, and the more decentralized the control, in my opinion, the more satisfactory is the schooling. The real problem is concentrated in those areas where decentralization is broken down. Where you have moved to much greater centralization, much greater control, and the main trouble areas are in the large cities. That’s why we picked that school to show. In response to the question of the excellence of the schooling that’s coming, I think there is nobody who can question the declining SAT scores, the declining scores on exams, the declining performance in the schools, the fact that there is widespread dissatisfaction, that many schools, not all schools, some schools, in urban areas are more accurately described as centers to keep people off the street than as educational institutions.
SHANKER: When you have a free market, there are dangers that go along with that market. Now, we know that there are people in our society who buy consumer’s reports, and there are people who do a great deal of research before they buy something, and there are other people who are taken in by the Crest commercials and instant appeal to give them some sort of a gimmick with a thing. And I think that the evidence is pretty clear that if you take middle class and wealthier families they are gonna do a good deal of research. They may very well be able to invest some additional money of their own to take some inconvenience. And if you have an open system of this sort it may very well be that the poorest parents are gonna have to take what is most convenient for them. What is going to fit in with their own work schedules, what is not going to require additional sums of money. And there is no doubt in my mind that you set up a system of free choice of this sort, you’re going to end up with the poor in one set of schools of their own on the basis of a good deal of gimmicks that will be offered to them.
COONS: They can’t learn, right? They’re __
FRIEDMAN: Excuse me, Mr. Shanker. I want to ask you one question: How do you explain the fact that there is no area of the free market, no area of the private market, in which the poor people who live in the ghettos of our major cities are as disadvantaged as they are with respect to the kind of schooling they can get. I want you to name me any aspect in the kind of supermarkets they can go to. They’re not as disadvantaged even in the kind of housing they can occupy as they are in respect of the kind of schooling their children can go to. How does __
SHANKER: What’s your evidence for that? I don’t think you have any evidence for that.
COONS: But, they’re trying to get out.
FRIEDMAN: They’re trying desperately to get out. Families with very low incomes are trying to get into the parochial schools that you’re talking about.
SHANKER: Exactly. And they’re trying to get out of the slums, and they’re trying to get into different neighborhoods __
FRIEDMAN: They are trying to, sure.
SHANKER: __ they’re trying to do all sorts of things.
FRIEDMAN: They’re doing better on that. They’re doing better on that. And instead, in a free choice system you would have more heterogeneous schools in my opinion, far less segregation by social and economic class than you now have. Because __
(Several talking at once.)
McKENZIE: Dr. Anrig.
ANRIG: It just doesn’t hold up by the very examples he’s used.
FRIEDMAN: Excuse me. It so happens that right now, the parochial schools are the only alternative really available to low-income people.
SHANKER: Do they take all the children who want to get in?
FRIEDMAN: And the reason for that is that it’s very hard to sell something when other people are giving it away. Anybody who wants to send his child to a nonpublic school has to pay twice for it. Once in the form of taxes and once in the form of tuition. Under the kind of voucher scheme that Jack Coons and I would support, that difficulty would be eliminated. You would now have a situation in which the low-income people would have the kind of bargaining power, the kind of possibility of choice, that those of us who are in the upper-income groups have had all along. (Several talking at once.)
McKENZIE: I want to move __ Jack Coons. Jack Coons, I want you to come in now. I know you’re in principle advocating the voucher system. Could you give us the case as you see it. I know you’ve got your differences with Milton on it, but let’s have the case.
COONS: What we are doing in California is establishing a form of change, possible change, proposing a change, in which lower-income people will get information along with the opportunity to go to any school of their choice and transportation to get there. Of course they need information. Anybody needs information in a market. And they need information from independent sources, not from the schools themselves, and that’s the way the initiative is designed, to come from independent sources. Now, we believe that ordinary people can make the best judgments for their children about where they should go, if they’re given good professional advice. And it also helps teachers because they can, for the first time, be professionals. They can act like real professionals, because they don’t have a captive audience. They don’t dominate their client, they respect their client, and they deal with them on the basis of a contract. What could be better for teachers than for the first time to become people who are dealing in a democratic and respectful way with clientele instead of with captives.
SHANNON: I am concerned that a voucher system will lead towards havens for white flight, will lead towards a duel school system in the sense that you have one school system operating under one set of rules, the other school system, public school system, operating under carefully articulated educational policy in any given state. And that’s why I think it’s __
COONS: Exactly, in Los Angeles County the movement to private schools last year was less, a smaller percentage than in the statewide pattern.
SHANKER: You may have five or ten percent of the students __
FRIEDMAN: Right, right.
SHANKER: __ you have very severe problems and come from families with very severe problems, and those students take up 95 percent of the time of the teachers and the administrators and the other children aren’t getting an education. Now, you’re gonna set up your voucher school. Are your voucher schools going to accept these tough children?
By Everette Hatcher III | Also posted in Vouchers | Comments (0)

Thomas Sowell:Romney not conservative enough

November 18, 2011 – 8:32 am

I have loved reading Thomas Sowell’s articles for many years. I remember when Milton Friedman brought him into the discussion in his film series “Free to Choose.” I have put some links below to some of those episodes.

Many papers across the country carried this story below from Sowell. Basically he points out in the past that the Republicans have a candidate that takes the middle of the road approach (Bush in 1992, Dole in 1996 and McCain in 2008) and the Republicans lose. He fears the same thing may happen this year with Romney.

By: Thomas Sowell | 11/15/11 5:28 PM

Justice Oliver Wendell Holmes said that a good catch phrase could stop thinking for 50 years. One of the often-repeated catch phrases of our time — “It’s the economy, stupid!” — has already stopped thinking in some quarters for a couple of decades.

There is no question that the state of the economy can affect elections. But there is also no iron law that all elections will be decided by the state of the economy.

President Franklin D. Roosevelt was re-elected for an unprecedented third term after two terms in which unemployment was in double digits for eight consecutive years.

We may lament the number of people who are unemployed or who are on food stamps today. But those who give the Obama administration credit for coming to their rescue when they didn’t have a job are likely to greatly outnumber those who blame the administration for their not having a job in the first place.

An expansion of the welfare state in hard times seems to have been the secret of FDR’s great political success in the midst of economic disaster. An economic study published in a scholarly journal in 2004 concluded that the Roosevelt administration’s policies prolonged the Great Depression by several years. But few people read economic studies.

This economy has been sputtering along through most of the Obama administration, with the unemployment rate hovering around 9 percent. But none of that means that Barack Obama is going to lose the 2012 election.

Even polls which show “any Republican” with more public support than Obama does not mean that Obama will lose.

The president is not going to run against “any Republican.” He is going to run against some specific Republican, and that Republican can expect to be attacked, denounced and denigrated for months on end before the November 2012 elections — not only by the Democrats, but also by the media that is heavily pro-Democrat.

We have already seen how unsubstantiated allegations from women with questionable histories have dropped Herman Cain from front runner to third place in just a couple of weeks.

In short, it takes a candidate to beat a candidate, and everything depends on what kind of candidate that is.

The smart money inside the Beltway says that the Republicans need to pick a moderate candidate who can appeal to independent voters, not just to the conservative voters who turn out to vote in Republican primaries. Those who think this way say that you have to “reach out” to Hispanics, the elderly and other constituencies.

What is remarkable is how seldom the smart money folks look at what has actually been happening in presidential elections.

Ronald Reagan won two landslide elections when he ran as Ronald Reagan. Vice President George H.W. Bush then won when he ran as if he were another Ronald Reagan, with his famous statement, “Read my lips, no new taxes.”

But after Bush 41 was elected and turned “kinder and gentler” — to everyone except the taxpayers — he lost to an unknown governor from a small state.

Other Republican presidential candidates who went the “moderate” route — Bob Dole and John McCain — also came across as neither fish nor fowl, and also went down to defeat.

Now the smart money inside the Beltway is saying that Mitt Romney, who is nothing if not versatile in his positions, is the Republicans’ best hope for replacing Obama.

If conservative Republicans split their votes among a number of conservative candidates in the primaries, that can mean ending up with a presidential candidate in the Bob Dole-John McCain mold — and risking a Bob Dole-John McCain result in the next election.

The question now is whether the conservative Republican candidates who have enjoyed their successive and short-lived boomlets — Michele Bachmann, Rick Perry and Herman Cain — are prepared to stay in the primary race to the bitter end, or whether their conservative principles will move them to withdraw and throw their support to another conservative candidate.

There has probably never been a time in the history of this country when we more urgently needed to get a president out of the White House, before he ruined the country. But will the conservative Republican candidates let that guide them?

Examiner Columnist Thomas Sowell is syndicated by Creators.

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“Friedman Friday” Free to Choose by Milton Friedman: Episode “Created Equal” (Part 5 of transcript and video)

Liberals like President Obama want to shoot for an equality of outcome. That system does not work. In fact, our free society allows for the closest gap between the wealthy and the poor. Unlike other countries where free enterprise and other freedoms are not present.  This is a seven part series. Created Equal [5/7]. Milton Friedman’s Free to Choose […]

Free to Choose by Milton Friedman: Episode “Created Equal” (Part 4 of transcript and video)

Liberals like President Obama want to shoot for an equality of outcome. That system does not work. In fact, our free society allows for the closest gap between the wealthy and the poor. Unlike other countries where free enterprise and other freedoms are not present.  This is a seven part series. Created Equal [4/7]. Milton Friedman’s Free to Choose […]

Sweden’s Voucher Program Part 10

HALT:HaltingArkansasLiberalswithTruth.com John Stossel, Walter E Williams and Thomas Sowell comment on how market forces can improve education in America. http://www.libertypen.com I read an excellent article called “School Choice in Sweden: An Interview with Thomas Idergard of Timbro,” (March 8, 2010) by Dan Lips and I wanted to share some of his answers with you below: […]

What does the Heritage Foundation have to say about our potential choices concerning federal spending:Study released May 10, 2011 (Part 5)

   Thomas Sowell – Welfare “Saving the American Dream: The Heritage Plan to Fix the Debt, Cut Spending, and Restore Prosperity,” Heritage Foundation, May 10, 2011 by  Stuart Butler, Ph.D. , Alison Acosta Fraser and William Beachis one of the finest papers I have ever read. Over the next few days I will post portions […]

Sweden’s Voucher System Part 2

HALT:HaltingArkansasLiberalswithTruth.com Dr. Thomas Sowell on schools in USA Over and over you hear people criticizing the Little Rock public school system, but none of the liberals want to try a new approach like vouchers. Here is the second part of the  article “Sweden’s school voucher system is a model for America,” (The Daily Caller, Jan […]

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Friedman Friday” Free to Choose by Milton Friedman: Episode “What is wrong with our schools?” (Part 3 of transcript and video)

November 18, 2011 – 7:08 am

Friedman Friday” Free to Choose by Milton Friedman: Episode “What is wrong with our schools?” (Part 3 of transcript and video)

Here is the video clip and transcript of the film series FREE TO CHOOSE episode “What is wrong with our schools?” Part 3 of 6.

 
Volume 6 – What’s Wrong with our Schools
Transcript:
If it doesn’t, they can simply pick up and go elsewhere. For the students, they want to get their money’s worth. They are customers, and like every customer everywhere, they want to get full value for the money they are paying. And so much of the success here comes from the fact that students understand precisely the cost involved and they are determined to get their money’s worth.
Regina Barreca, Student:. . .they send you sheets saying how much everything costs all the time, so that you know exactly, you can break it down per lecture. And when you see each lectures costing $35, and you think of the other things you could be doing with the $35, you’re making very sure you’re going to that lecture.
Friedman: Many of the buildings and facilities at Dartmouth have been donated by private individuals and foundations. Like other private universities, Dartmouth has combined the selling of monuments with the provision of education and the one activity reinforces the other.
The students, in effect, earn part of their keep by helping to solicit alumni for contributions, knowing full well that they will be solicited in their turn. It is another way in which the real value of education is brought home. This may not be the usual idea of an economic market, but it is nonetheless a marketplace where buyers can choose and sellers must compete for customers.
What happens when the educational market is distorted? Look at state colleges and universities. Their fees are generally very low, paying for only a small part of the cost of schooling. They attract serious students just as interested in their education as the students at Dartmouth or other private schools, but they also attract a great many others. Students who come because fees are low, residential housing is good, food is good, and above all there are lots of their peers, it’s a pleasant interlude for them.
The University of California at Los Angeles __ for those students who are here as a pleasant interlude, going to class is a price they pay to be here, not the product they are buying. Darrell Dearmone,
Lecturer: We frequently wind up with people who cannot compete favorably with even the average person here. There is a magnet here for everything. We have the best weather practically speaking, in the country. Hollywood is here, Beverly Hills is here, the social scene, the television industry in this country is centered here.
Friedman: The justification for using tax money to support institutions like this is supposed to be so that every youngster, regardless of the income or wealth of his parents, can go to college. A few youngsters from poor families are here, but not very many. Most of these students are from middle and upper-income families, yet everybody, whatever his income, pays taxes to help support these institutions. That is a disgraceful situation. It is hardly what public education was all about. These students are being subsidized by people who will never go to college. That means that on the average people who will end up with higher income are being subsidized by people who will end up with lower income. And in addition, the quality of undergraduate education is poor. Undergraduate teaching is not what UCLA is famous for. Besides from its athletic team, UCLA’s reputation is for graduate work and research.
Faculty members have every incentive to do research, that’s the way to advance in their profession. They have much less to gain by good teaching.
Only about half of those who enroll in UCLA complete the undergraduate course. Compare that with the 95% at Dartmouth who finish the work for their degrees. What a waste of student time and what a waste of taxpayers’ money.
What should we do about this disgraceful situation? We must not deny any young man or woman whose desires formal education. Everyone who has the capacity and the desire to have a higher education should be able to do so, provided they are willing to undertake the obligation to pay the cost of their schooling either currently or in later years out of the higher income that their education will make possible. We now have a governmental program of loans which is supposedly directed to this objective but it’s a loan program in name only. The interest rate charged is well below the market rate. Many of these loans are never paid back. We must have a system under which those who are not able or do not go to college are not forced to pay for those who do.
As we have seen the market works in education. When people pay for what they get, they value what they get. The market works in higher education. It can also work at the level of primary and secondary education. Until we change the way we run our public schools, far too many children will end up without being able to read, write, or do arithmetic. That is not what any of us wants.
The system is not working and it is not working because it lacks a vital ingredient. The experts mean well, but a centralized system cannot possibly have that degree of personal concern for each individual child that we have as parents. The centralization produces deadening uniformity, it destroys the experimentation that is the fundamental source of progress. What we need to do is to enable parents, by vouchers or other means, to have more say about the school which their child goes to, a public school or a private school, whichever meets the need of the child best. That will inevitably give them also more say about what their children are taught, and how they are taught. Market competition is the surest way to improve the quality and promote innovation in education as in every other field.
DISCUSSION
Participants: Robert McKenzie, Moderator; Milton Friedman; Albert Shanker, President, American Federation of Teachers; Professor John Coons, Initiative for Family Choice in Education, California; Thomas A. Shannon, Executive Director, National School Boards Association; Gregory Anrig, Commissioner of Dept. of Education in Commonwealth of Massachusetts
McKENZIE: The distinguished guests tonight are all intimately concerned with the world of education; so lets find out how they react to Friedman’s analysis.
SHANKER: I think it’s very foolish to throw out something that you’ve got and that has some shortcomings, but is very, very good in order to try out someone’s pet ideas.
McKENZIE: Well, before we ask Milton to reply to that, lets get other views on the same quotation, “Market competition is the surest way to improve the quality and promote innovation in education.” John Coons.
COONS: Well, of course, there’s enormous evidence that that is exactly right and we see it in the case in California that I observe every day of low income children whose families are making great sacrifices to go to schools that operate at a third of the cost of public education and are turning out kids who are performing and are learning and achieving at very high levels. On the other hand, I wouldn’t want to suggest that unlimited competition is the answer to every problem. And, indeed, the whole definition of competition is very ambiguous. It seems to me that if one is truly interested in liberty, which I think is the ultimate value that Milton Friedman talks about, one has to be very careful how he structures the kinds of subsidies…
By Everette Hatcher III | Also posted in Vouchers | Tagged , , , , | Comments (2)