Category Archives: Milton Friedman

Friedman Friday” Free to Choose by Milton Friedman: Episode “What is wrong with our schools?” (Part 2 of transcript and video)

November 11, 2011 – 12:50 am

Here is the video clip and transcript of the film series FREE TO CHOOSE episode “What is wrong with our schools?” Part 2 of 6.

 
Volume 6 – What’s Wrong with our Schools
Transcript:

Groups of concerned parents and teachers decided to do something about it. They used private funds to take over empty stores and they set up what became known as store front schools. One of the first and most successful was Harlem Prep. It was designed to cater to students for whom conventional education had failed. Many of the teachers didn’t have the right pieces of paper to qualify for employment in public schools. That didn’t stop them from doing a good job here. A lot of the students had been misfits and dropouts. Here they found the sort of teaching they wanted. After all, they had made a deliberate choice to come to Harlem Prep. It was a very successful school. Many students went on to college and some to leading colleges.

But after some years, the school ran short of cash. The board of education offered Ed Carpenter, the head of the school and one of its founders, tax money, provided he would conform to their regulations. After a long battle to preserve independence, he finally gave in. The school was taken over by bureaucrats.
Ed Carpenter, Former Principal, Harlem Preparatory School: I felt that a school like Harlem Prep would certainly die and not prosper under the rigid bureaucracy of a board of education. We had to see what was going to happen. I didn’t believe it was going to be good. I am right. What has happened since we have come to the board of education is not all good __ it is not all bad __ but it is more bad than good.
Friedman: The school may not look different yet, but 30 of the former teachers have gone. Ed Carpenter has resigned. The school is being moved to a traditional school building. No one, except maybe the bureaucrats, is very optimistic about its future.
Unfortunately, the strangling of successful experiments by bureaucrats is not unusual. The same thing happened in California, at a place called Alum Rock. For three years parents at this school could choose to send their children to any of several specially created mini-schools, each with a different curriculum. The experiment was designed to restore a choice to those who were most closely involved, the parents and the teachers.
Don Ayers, Former Principal, Millard McCollam Elementary School: Probably the most significant thing that happened was that the teachers, for the first time, had some power and they were able to build the curriculum to fit the needs of the children as they saw it. The state and local school board did not dictate the kind of curriculum that was used in the McCollam School. The parents became more involved in this school. They attended more meetings. They also had a power to pull their child out of that particular mini-school if they chose another mini-school
Friedman: Giving parents greater choice had a dramatic effect on educational quality. In terms of test scores, this school went from 13th to 2nd place among the schools in its district, but the experiment is now over. When school resumed after the summer vacation, this was just another public school, back in the hands of the bureaucrats.
Giving parents a choice is a good idea, yet it always meets with opposition from the educational establishment. This is Ashford, a town in the south of England. For four years, there have been efforts here to introduce an experiment in greater parental choice. Parents would be given vouchers covering the cost of schooling. They could use the voucher to send their child to any school of their choice. I have long believed that children, teachers, all of us, would benefit from a voucher system. But the head master here, who happens also to be secretary of the local teacher’s union, has very different views about introducing vouchers.
Mr. Dennis Gee, Headmaster, Newtown Primary School: We see this as a barrier between us and the parent. This sticky little piece of paper in their hand, coming in and under due writ you will do this or else. We make our judgment because we believe it is in the best interest of every Willy and every little Johnny that we have got, and not because someone is going to say, if you don’t do it, we will do that. It is this sort of philosophy of the marketplace that we object to.
Friedman: In other words, Mr. Gee objects to giving the customer, in this case the parent, anything to say about the kind of schooling his child gets. Instead, the bureaucrats should decide.
Mr. Gee: We are answerable to parents and to our government bodies, through the inspectorate of the county council and through her Majesty’s inspectorate to the secretary of state. These are professionals who are able to make professional judgments.
Friedman: But things look very different from the point of view of parents. Jason Walton’s parents had to fight the bureaucracy, the professionals, for a year before they could get him into the school that they thought was best suited to his needs.
Maurice Walton, Parent: As the present system stands, I think virtually parents have got no freedom of choice whatsoever. They are told what is good for them by the teachers and are told that the teachers are doing a great job, and I just got no sign at all. If the voucher system were introduced, I think it would bring teachers and parents together, I think closer. A parent that is worried about his child would remove their child from the school that wasn’t giving a good service and take it to one that was. And if a school is going to crumble because it’s got nothing but vandalism, it is generally slack on discipline, and the children aren’t learning well, then it is a good thing from my point of view.
Friedman: Even good schools like this would benefit from a voucher system. From having to shape up or see parents take children elsewhere, but that is not how it looks to the head master.
Gee: I am not sure that parents know what is best educationally for their children. They know what is best for them to eat, they know the best environment they can provide at home, but we’ve been trained to ascertain the problems of children, to detect their weaknesses, and put light in things that need putting light, and we want to do this freely, with the cooperation of parents, and not under any undue strains.
Walton: I can understand the teacher saying yes, it is a gun at my head, but they have got the same gun at the parents’ head at the moment. The parent goes up to the teacher and says, well I am not satisfied with what you are doing, and the teacher can say, well tough, you can’t take him away, you can’t remove him, you can’t do what you like so go away and stop bothering me. That can be the attitude of some teachers today __ it often is. But now that the positions are being reversed and the roles are changed, I can only say tough on the teachers __ let them pull their socks up and give us a better deal and let us participate more.
Friedman: In America there is one part of education where the market has had extensive scope, that is higher education. These students attend Dartmouth College, a private school founded in 1769. The college is supported entirely by private donations, income from endowment, and student fees. It has a high reputation and a fine record. Ninety-five percent of the students who enroll here complete their undergraduate course and get a degree.
The students here pay high fees, fees which cover most of the cost of the schooling which they get. Most of them get the money from their parents, but some are on scholarships provided either by Dartmouth or by outside sources. Still others take out loans to pay the costs of schooling, loans which they will have to pay back years later. Still others work either during the school year or during the summer to pay the costs. Many students work in the college’s own hotel. This girl is helping to pay her own way which is pretty good evidence that she is serious about getting an education.
Parents of perspective students come here on shopping expeditions to check out the product before they buy.
What you have here is a private market in education and the college is selling schooling. The students are buying schooling. And as in most such markets, both sides have a strong incentive to serve one another.
For the college, it has a strong incentive to provide the kind of schooling that its students want. 
By Everette Hatcher III | Also posted in Vouchers | Comments (1)

Free to Choose by Milton Friedman: Episode “Created Equal” (Part 7 of transcript and video)

November 11, 2011 – 12:32 am

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 [7/7]. Milton Friedman’s Free to Choose (1980)

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PIVEN: __ because of the free enterprise system.

FRIEDMAN: Excuse me. You’ve got to compare __

MCKENZIE: Milton.

FRIEDMAN: __ you’ve got to compare something with something. Will you tell me the alternative which has improved the lot of the ordinary people? What is the system which in your mind has been successful? Most people through most history have lived in tyranny and misery. It’s only a very tiny minority, at any time, that have been able to escape from it. That’s the real beauty. That’s the real achievement. Now will you tell me what the alternative system is which has achieved __

PIVEN: You say that’s an achievement, though, of the free enterprise system and I say that __

FRIEDMAN: Excuse me.

PIVEN: __ elsewhere in the world__

SOWELL: What is the alternative?

FRIEDMAN: What’s the alternative? What’s the alternative? What’s your alternative?

PIVEN: The free enterprise system is of itself not an alternative because as you agree it does not exist. We are arguing really to defend those interventions which have been made by government on the behalf of people in an effort to reduce inequality in an effort to reduce oppression.

FRIEDMAN: And tell me which of those __

PIVEN: We are arguing to defend __

FRIEDMAN: __ which of those are you defending in which of these countries where those interventions have benefited the masses. In most of the countries where you have departed from the free enterprise system. You have had a small class benefited at the expense of the masses. If you take the African countries, which have become one-party dictatorships, are you going to tell me they have benefited the masses?

SOWELL: I’m astounded by the examples of the third world that are brought into here. Those parts of the noncapitalist world in which the capitalist system has penetrated are typically higher income places than those parts where they haven’t. Are you talking any kind of testable hypothesis or it’s just axiomatic that it’s so. Because the studies that I’ve seen indicate that those countries where capitalists have never gone near them are poorer than they’ve ever been. They were poor before the capitalists got there; they were poor while the capitalists were there and they are poor after capitalists have left.

PIVEN: Your measures of wealth are not measures __

SOWELL: I haven’t __

PIVEN: __ of the wealth of a people. They are measures, rather, of gross national product __

SOWELL: Give me your measures then.

PIVEN: __ which reflect, as in the case of Chile which you don’t want to discuss, which reflect the great advances that have been made by the middle classes and the upper classes in Chile as of this date, at the expense of the sharp decline in the income of working people. The catholic church __

FRIEDMAN: Those are not the facts.

JAY: But I still think Milton has not told us the answer to the question, “what is he saying?” And it’s very important we should know what he’s saying. It seems to that he should accept the fact that nobody is arguing for absolute equality and disregarding all other social and human objectives. He should accept that it is perfectly reasonable, widely endorsed and perfectly logical for people to say, amongst other social, political objectives reducing inequality is a perfectly sensible one and that in those cases where you can show that you can get a big gain in equality for only a very small loss in freedom or only a very small loss in efficiency. That is a sensible and legitimate thing to do and if it involves government actions by, for example, income tax or negative income tax that is a perfectly proper and sensible thing to do. And if he’s denying that then I still say he has given us no moral or ethical arguments to explain why he is denying that then I still say he has given us no moral or ethical arguments to explain why he is denying that perfectly proper concern with equality along with freedom, efficiency and other human objectives.

FRIEDMAN: The answer to that is that you can only serve one God. And that stating that there is __

JAY: You have lots of objectives in you life.

FRIEDMAN: __ excuse me. Stating that there are many, many of these objectives is evading the fundamental issue. In addition__

JAY: Common sense.

FRIEDMAN: __ as an empirical matter, the attempts to achieve equality along you line to lessen inequality have generally backfired. They have generally reduced freedom without in fact __

JAY: In Germany?

FRIEDMAN: Yes.

JAY: In Japan?

FRIEDMAN: Yes.

JAY: In France?

FRIEDMAN: Take the Japanese case which is a marvelous case, not now, but 1867 after the major restoration.

JAY: No right now, right now. Hell with 1867.

FRIEDMAN: Well, the reason for taking it then is because you had a far greater measure of free enterprise then than you have had more recently.

JAY: That’s my point.

FRIEDMAN: In almost all cases the way to promote equality is the same as the way to promote __ as an outcome __ is the same as the way to promote freedom. If you promote freedom, if you remove arbitrary obstacles, you open the way for people to use their resources. You will end up, in my opinion, and I think the empirical evidence is overwhelmingly on this side, you will end up with both more freedom, more prosperity and more equality.

JAY: You’re a closet egalitarian. You’re a closet egalitarian, really, then. You __

FRIEDMAN: I am not.

JAY: __ you support the objective the.

FRIEDMAN: I would like __ there’s an enormous difference between liking to see a result and being in favor of a particular method of achieving that result.

JAY: You’re willing to__

FRIEDMAN: Because if I were wrong, if freedom led to wider inequality, I would prefer that to a world in which I got artificial equality at the expense of freedom. My objective, my god, if you want, is freedom. The freedom of human beings and the individuals to pursue their own values. That will also generally be the result __

MCKENZIE: Well, there we leave this discussion at the University of Chicago. I hope you’ll join us for another edition of Free to Choose.

By Everette Hatcher III | Comments (0)

Liberals’ solution for the poor is more welfare, but that will not work

November 8, 2011 – 9:10 pm

Milton Friedman’s solution to limiting poverty

Liberals like Michael Cook just don’t get it. They should listen to Milton Friedman (who is quoted in this video below concerning the best way to limit poverty).

New Video Shows the War on Poverty Is a Failure

Posted by Daniel J. Mitchell

The Center for Freedom and Prosperity has released another “Economics 101″ video, and this one has a very powerful message about the federal government’s so-called War on Poverty.

As explained by Hadley Heath of the Independent Women’s Forum, the various income redistribution schemes being imposed by Washington are bad for taxpayers — and bad for poor people.

Free Markets, Not Redistribution, Is Best Way to Reduce Poverty

Uploaded by  on Oct 3, 2011

The so-called War on Poverty has failed. Making government bigger and creating more federal redistribution programs has been bad news for taxpayers. But the welfare state also has been a disaster for the less fortunate, creating a flypaper effect that makes it difficult for people to lead independent and self-reliant lives. This Center for Freedom and Prosperity Foundation video shows how the poverty rate was falling after World War II — but then stagnated once the federal government got involved. www.freedomandprosperity.org

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___________

The video has a plethora of useful information, but the data on the poverty rate is particularly compelling. Prior to the War on Poverty, the United States was getting more prosperous with each passing year and there were dramatic reductions in the level of destitution.

But once the federal government got involved in the mid-1960s, the good news evaporated. Indeed, the poverty rate has basically stagnated for the past 40-plus years, usually hovering around 13 percent depending on economic conditions.

Another remarkable finding in the video is that poor people in America rarely suffer from material deprivation. Indeed, they have wide access to consumer goods that used to be considered luxuries – and they also have more housing space than the average European (and with Europe falling apart, the comparisons presumably will become even more noteworthy).

The most important message of the video, however, is that small government and economic freedom are the best answers for poverty. As Hadley explains, poor people can be liberated to live meaningful, self-reliant lives if we can reduce the heavy burden of the federal government.

Last but not least, the video doesn’t address every issue in great detail, and there are three additional points that should be added to any discussion of poverty.

  1. The biggest beneficiaries of the current system are the army of bureaucrats that receive very comfortable salariesadministering various programs.
  2. The Obama Administration is looking to re-define poverty in a way that would expand the welfare state andincrease the burden of redistribution programs.
  3. The welfare reform legislation of the 1990s was a small step in the right direction because it eliminated a federal entitlement and shifted responsibility back to the state level. This success story should be replicated for programs such as Medicaid.

This last point is worth emphasizing because it is also one of the core messages of the video. The federal government has done a terrible job dealing with poverty. The time has come to get Washington out of the racket of income redistribution.

Related posts by Milton Friedman. Pay attention to posts about poverty or FREE TO CHOOSE episode on “Cradle to Grave.”

Friedman Friday” Free to Choose by Milton Friedman: Episode “Created Equal” (Part 3 of transcript and video)

Friedman Friday” Free to Choose by Milton Friedman: Episode “Created Equal” (Part 3 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 […]

Free to Choose by Milton Friedman: Episode “Created Equal” (Part 2 of transcript and video)

Free to Choose by Milton Friedman: Episode “Created Equal” (Part 2 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 […]

Milton Friedman Friday: (“Free to Choose” episode 4 – From Cradle to Grave, Part 4 of 7)

 I am currently going through his film series “Free to Choose” which is one the most powerful film series I have ever seen. PART 4 of 7 The massive growth of central government that started after the depression has continued ever since. If anything, it has even speeded up in recent years. Each year there […]

Debate on Milton Friedman’s cure for inflation

If you would like to see the first three episodes on inflation in Milton Friedman’s film series “Free to Choose” then go to a previous post I did. Ep. 9 – How to Cure Inflation [4/7]. Milton Friedman’s Free to Choose (1980) Uploaded by investbligurucom on Jun 16, 2010 While many people have a fairly […]

Milton Friedman addressed the belief that inflation can cure unemployment, implicit in the Obama administration’s spending blowout

Ep. 9 – How to Cure Inflation [1/7]. Milton Friedman’s Free to Choose (1980) Cochrane’s Kinky Curves Posted by Jim Powell The doctrine that inflation can cure unemployment, implicit in the Obama administration’s spending blowout, goes way back. The modern version originated with William Phillips, a New Zealand-born economist who, in 1958, wrote a paper […]

Milton Friedman Friday: (“Free to Choose” episode 4 – From Cradle to Grave, Part 3 of 7)

 I am currently going through his film series “Free to Choose” which is one the most powerful film series I have ever seen. PART 3 OF 7 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 […]

Free to Choose by Milton Friedman: Episode “Created Equal” (Part 1 of transcript and video)

 Milton Friedman and Ronald Reagan Liberals like President Obama (and John Brummett) 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. […]

Ernest Istook of the Heritage Foundation speaks in Little Rock on 6-22-11 (Part 2)

The third monthly luncheon with featured speaker Ernest Istook was excellent. First, we got to hear from Dave Elswick of KARN   who came up with the idea of this luncheon, and then from Teresa Crossland of Americans for Prosperity. Below is a portion of Istook’s biography from the Heritage Foundation: Ernest Istook Distinguished Fellow Government Studies Ernest […]

Milton Friedman Friday:(“Free to Choose” episode 4 – From Cradle to Grave, Part 2 of 7)

 I am currently going through his film series “Free to Choose” which is one the most powerful film series I have ever seen. For the past 7 years Maureen Ramsey has had to buy food and clothes for her family out of a government handout. For the whole of that time, her husband, Steve, hasn’t […]

The poor in the USA have best chance in the world to go up

I love Milton Friedman’s film series “Free to Choose.” In that film series over and over it is shown that the ability to move from poor to rich is more abundant here than any other country in the world. This article below reminded me of that that. Are Poor Really Helpless Without Government? By Michael […]

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

99th anniversary of Milton Friedman’s birth (Part 21) (“Free to Choose” episode 3 – Anatomy of a Crisis. part 7of 7)

November 8, 2011 – 12:08 am

Milton Friedman was born on July 31, 1912 and he died November 16, 2006. I started posting tributes of him on July 31 and I hope to continue them until his 100th birthday. Here is another tribute below:

TEMIN: We don’t think the big capital arose before the government did?
VON HOFFMAN: Listen, what are we doing here? I mean __ defending big government is like defending death and taxes. When was the last time you met anybody that was in favor of big government?
FRIEDMAN: Today, today I met Bob Lekachman, I met __
LEKACHMAN: But that’s not to say __ with discrimination __not per se.
VON HOFFMAN: You’re in favor of certain functions __
FRIEDMAN: I make a living by making distinctions, after all. Certainly not without qualification.
MCKENZIE: Von Hoffman, you have the floor.
VON HOFFMAN: What I was going to say is, I think most of us are not in favor of big government as a theory. The question that keeps haunting me here is, how do you, going back to your question of just the monetary regulation, how do you make __ and let’s assume that you can really, we’ll go a step further and we’ll say __ we’ll go all the way with you. We will install that mechanism. What makes you think that when the storms arise that, that the people running that mechanism are not going to misread, just as they did in the past?
FRIEDMAN: Because I’m gonna have __ if I had my way I would have a mechanism which didn’t require them to read anything.
VON HOFFMAN: In other words, simply a money formula.
FRIEDMAN: Absolutely.
VON HOFFMAN: Is cranked out in relation to the GNP regardless.
FRIEDMAN: Right.
TEMIN: The question is: How are you going to keep from tampering with this black box? Would you have a thing __
FRIEDMAN: I’m not gonna have a black box; I’m gonna have a very visible system. I have written out, as you know __
TEMIN: No, I know. Yeah, but the question is, no, you have the rule __
FRIEDMAN: __ at relative great length and precise details on what I would do.
TEMIN: __ it will calculate this, but then there’s going to be someone who’ll come in, the people that you dislike, they’ll say, “But we could do it a little bit better by doing it this way or that way.”
FRIEDMAN: Of course. Of course.
TEMIN: How will you keep them from doing it?
FRIEDMAN: Well, in the only way in which you can do it in a democratic society, by establishing both a written and an unwritten __ and the unwritten is just as important as the written __ an unwritten constitution on the part of the public at large, an acceptance of the view, that this is not what people in government ought to be doing. That it’s their problem
VON HOFFMAN: A highly sacred measure of __
FRIEDMAN: Well, if you want, but not necessarily sacred in the theological sense.
JAY: It’s unfair of people to say, Professor Friedman, he’s a bad doctor because people won’t actually take his medicine. I mean that is, that is not fair. But it does seem to me, and I say it again, that to reduce the whole debate to one, are you in favor of big government or small government, as though that is the only interesting or important political-economic choice we had to make, is very foolish.
FRIEDMAN: That is very foolish. I agree.
JAY: But __ and if you put it in that form, in practice in democratic societies, people will go on backing, supporting, and paying for big government. Because unless you __ in addition to pointing out the errors, defects, weaknesses, fallibilities, failures or government, you also describe in some detail, and to some attraction, the other changes that you’re going to make in the nongovernmental sector of the economy, which are going to give people the kind of protection, the kind of opportunities, the kind of fulfillment, the kind of stability, the kind of prosperity that they want. They are not going to buy it because you’re offering them a pig in the poke, and they will see it, whether or not you approve of the phrase, or whether or not I approve of the phrase, there’s going back to something which they’re glad to have got away from.
TEMIN: The question of how you draw the lines, and where you draw the lines is a difficult one, and I can’t see any possible way of somehow making a decision on that will stand like __ like the Rock of Gibraltar against all comers.
LEKACHMAN: I don’t think that the public is going to, nor should it, choose ideologically. I think it’s going to favor and disfavor certain activities of government out of its experience, by its perception of what’s good in its own interests and so on. And my __ I don’t preclude the possibility that there will be a different mixture of perceptions by the public which will lead to a shift in the functions of government. But I think it’s at least as possible that after the shift occurs, government will be perceived to have more functions as that it will have fewer functions.
VON HOFFMAN: It seems to me also that you could have the monetary policy that you are talking about, and have the very big HEW etcetera.
OFF SCREEN: Absolutely. Oh, yes.
VON HOFFMAN: And more easily.
FRIEDMAN: Unfortunately, you’re right.
VON HOFFMAN: Now could you dilate on that?
FRIEDMAN: No, no I __
VON HOFFMAN: No, I mean it, seriously.
FRIEDMAN: I agree with you. I agree with Nick. These are separable issues. And Peter Jay will agree with that, too. In fact he and I are in almost complete agreement on the desirable monetary policy. Where we differ is on these other policies, and there is certainly no doubt that you could have an essentially automatic stabilizing monetary policy of the kind which I’ve suggested, of a fixed rate of monetary growth, no discretionary intervention for cyclical purposes, and at the same time have a very big government on HEW, have all sorts of regulation, have tariffs and all other things. With respect to Peter Jay’s more general statement, it’s impossible not to agree with his statement, because it’s __ it concentrates on objectives and not on means. And the real issue has to do with means. What are the most appropriate and effective means which will give people the greatest assurance __ you can’t give them certainty __ but the greatest assurance that they will have a reasonably stable society with opportunity for themselves and their children, for their needs, for their wants. Of course.
MCKENZIE: We must end the discussion for this week and hope you’ll join us again for the next edition of Free to Choose.
By Everette Hatcher III | Comments (0)

Milton Friedman discusses government spending

November 7, 2011 – 8:28 am

Milton Friedman – Do-Gooders And Special Interest

Uploaded by on Nov 4, 2011

An effective alliance to grow government. http://www.LibertyPen

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Great article that quotes Milton Friedman:

‘Government Efficiency’: Trying to Turn Cats into Dogs

Posted by Tad DeHaven

I’ll have more to say later on Mitt Romney’s speech on federal spending, but his banal call for making government more “efficient” gave me an opportunity to share some good commentary on the subject. In a recent piece criticizing Indiana’s Republican-led state government for not doing “anything substantive to improve Indiana’s budgetary, fiscal or economic position,” Craig Ladwig, editor of the Indiana Policy Review, nails it:

Most troubling of all is that few in the leadership of either party share our belief that government must be kept small for smallness’ sake. The goal is not to run it “like a business” or make it more efficient (consolidate), but to ensure that government is simple enough that average citizens can understand and monitor its workings. The constitutional ability to do that and a passion for self-government (governing one’s self), thereby reaping the rewards and accepting the consequences, are what is meant by American exceptionalism.

Nor does the current leadership appreciate that government cannot by nature be proactively involved in prosperity, that it cannot create wealth but only refrain from taking it away or destroying it. Even Republicans busy themselves in such neo-mercantile schemes as tax rebates for politically favored companies and industries, or training programs to win more contracts from the federal government. At the same time, they slap a tax on entrepreneurial activity as soon as it finds success, most recently in Internet commerce.

Look, Democrats already work tirelessly to extract from us the revenue to support a bloated, systemically flawed and misguided state government. Do they need Republican help?

Milton Friedman famously described those trying to reform government without changing its makeup as being engaged in an attempt to transform a cat into a dog. This General Assembly may learn to bark, but it will still be a cat.

The “government efficiency” snake-oil salesmanship from politicians has become tiresome, especially when it comes from high-profile Republicans like Mitch Daniels and Mitt Romney. Unfortunately, I don’t see too many people “on the right” taking these people to task for it. So kudos to Craig.

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

Free to Choose by Milton Friedman: Episode “Created Equal” (Part 6 of transcript and video)

November 4, 2011 – 12:31 am

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 [6/7]. Milton Friedman’s Free to Choose (1980)

(Laughter)

PIVEN: If you look at the leadership of the black __

(Applause)

FRIEDMAN: But I want to go back to the __

MCKENZIE: Yeah.

FRIEDMAN: __ I want to carry it back to an earlier point. Number one, there’s no question but what equality of results, if it comes about through a framework of freedom, is a desirable result. Number two, I argue in the film I’ve argued here that in point of fact you get greater equality of actual results by a system under which people are free to achieve unequal results. That for the poor people of the world that Frances Fox Piven was talking about, the most effective mechanism for enabling them to improve their status is not a governmental program which seeks to ascribe to them certain positions which seeks to provide them with certain goods and services, but a governmental program which tries to eliminate arbitrary barriers to advancement. I would say that in this world the greatest source of inequality has been special privileges granted by government. That government, you may talk a great deal, there may be a lot of talk about how we’re going to eliminate inequality. But if you look at __ go back to your case of Britain. Is there any doubt that one of the effects of governmental intervention in Britain has been to create new opportunities for special classes. That the way to get wealthy in a society that supposedly is aiming at equality, that the way to get wealthy is to get a special government permit to import __ to get foreign exchange or to import goods or to __ in this country to set up a television station. Those are the ways in which you get inequality.

JAY: Well I think, Milton, you grossly misrepresent the British experience and here perhaps I might make the point. First of all, the burden of taxation in Britain is lower then it has been for many years than in any other of the countries of the European community, the overall burden of taxation. Secondly, you will immediately come back and say, “Aaah, but the marginal rates of personal taxation have been extremely high.” Perfectly true, but not as high as they were in the United States until the early 1960s. It’s interesting to note in passing that when the United States reduced its ninety percent maximum personal rate to fifty percent, the rate of economic growth in the United States, and I’m not suggesting cause and effect, fell from the previously very low rate of 2 percent a year to about naught-point-four percent in the period since. So that any notion that there is an absolutely one-to-one relationship between the degree of personal taxation and efficiency is wholly mythical. Thirdly it__ thirdly__

FRIEDMAN: Well I’ll tell you what you can do with statistics.

(Laughter)

JAY: __ now let me, __ well, you ought to read. You ought to look at the facts. It’s easy to make glib remarks about statistics, but look at the facts.

FRIEDMAN: I know, but __

JAY: Look at the fact that in Britain over the last thirty years, during which period according to you Britain has been crushed by egalitarianism, whereas the United States has been soaring away in the glorious state of liberty. The rate of economic growth in Britain has been faster than that of the United States. How do you explain that?

FRIEDMAN: First of all, I have to look at what the figures mean in Britain. I have to look at the way __

JAY: First you ought to look at them.

FRIEDMAN: I have looked at them and you realize that in judging output in the government that’s judged in terms of cost not in terms of product. And what I really ought to look at is not the rate of growth of GNP as the statisticians measure it, but the consumption available to people in forms, as people value it, ultimate consumption, if I look at that I get a very different picture. Statistics are very, very, as you know very well, are very easy to use. They can be __ they can be used to throw light or they can be used to cast confusion.

JAY: Why don’t you look at facts.

FRIEDMAN: I agree with you. And facts __

JAY: The facts are that the amount of goods and services consumed by the government as a proportion of the national output are no higher in Britain than they are in the United States and haven’t been any time since the war.

FRIEDMAN: They have risen very sharply __

JAY: Which may be the explanation of the low rate of growth in the United States.

FRIEDMAN: They have risen very sharply. It has risen very sharply in the war, both __ since the war, in both countries. It is higher in Britain than it is in the Untied States, properly measured.

JAY: Both twenty-five percent in both cases.

FRIEDMAN: The proportion __ excuse me.

MCKENZIE: Well of goods and service.

FRIEDMAN: That again is a statistician’s nightmare. We have to look at total government spending.

JAY: You were the one who was talking about whether or not people have freedom to choose how their money is spent.

MCKENZIE: Yeah.

JAY: The transfers, which is pensions and other payments from government, leave the freedom as to how the money is spent in the hands of private individuals. It’s only the direct consumption of goods and services where the bureaucrats are making the decisions.

FRIEDMAN: It leaves the decision for freedom in the hands of the recipient, but not in the hand

MCKENZIE: Can we __ gentlemen, gentlemen__ I’m back in my Chairman’s role. Can we leave this statistical debate, fascinating I’m sure it is

(Laughter)

MCKENZIE: I want to make the point, Milton, it seems to me and I am not British, I’m Canadian, having lived a great deal in the U.K., it seems to me that you really have most unfairly used the U.K. as a whipping boy in the last third of your film, last third of your film. Because you say for much of the century the British are trying to use the law to impose equality. Now the Conservatives have been in office for sixty-five percent__

FRIEDMAN: I am not a partisan, I am not a partisan.

MCKENZIE: No, no, I now you’re not. But let me finish it. There have been three majority left governments in Britain. And it is not the case at all that unlike other parts of Europe, there has been consistent policies aimed at equality. Taxation is lower. There’s no wealth tax. There’s a wealth tax in eight other western European countries. Capital gains tax came in only, ten, fifteen years ago.

FRIEDMAN: But let me take your case. First of all, Conservative Labor, that’s not the issue. I have argued again and again, I do again __

MCKENZIE: Well, the Conservatives have not pursued equality.

FRIEDMAN: I do in a book which is associated with this series. I make the point that the policy of Britain in the past sixty or seventy years owes more to the philosophical idea of the Torres of the 19th century than it does to the ideas of Karl Marx. In the United States in the 1930s the Socialist Party never garnered more than a few percent of the vote, but it was the most influential political party in America because its policies were adopted by both the Republicans and the Democrats. In the same way, what you have to look at is not whether the Conservatives or the Labor Party is in power, but what were the basic philosophy and ideas? The ideas of Fabian Socialism, of Tory paternalism were being affected by both the Torres __

MCKENZIE: The Torres fought __ Milton, really.

FRIEDMAN: __ and the Labor.

JAY: There will be some very surprised Tory politicians an some very surprised voters to hear what you say. But let me give you another example of the way you’re playing fast and loose with the facts.

MCKENZIE: Yeah.

JAY: You talk about crime in Britain. I mean crime in Britain is a tiny fraction of what it is in the United States and has been throughout that period __

FRIEDMAN: That’s true.

JAY: __ when you say that we’re so egalitarian and you’re so free. You talk about able people being driven out of the country. More qualified people are living and working in Britain than at any time in the last 150 years of our history. Now this is largely because of the granting of independence to the colonies, the loss of empire, as you like, but in fact for example doctors which are endlessly talked about, more British-trained doctors are now working in Britain than at any time in our history.

MCKENZIE: And the final example, Milton __

FRIEDMAN: And it’s also true __ it’s also true that the physicians leaving Britain, emigrating from Britain __

JAY: Tiny, tiny minority.

FRIEDMAN: __ amount to one-third as many as the number of people graduating each year from your medical schools.

PIVEN: I think it’s a mistake to be arguing this.

MCKENZIE: Milton, I ought to take one __

JAY: Ones coming back.

PIVEN: It’s a distortion of the evidence to rest the argument for the free enterprise system by selectively using the example of England when you want to, the United States when you want to. The test of your argument about the free enterprise system and its capacity to produce both freedom and greater equality to relieve poverty, the test of that argument has to be made everywhere that the free enterprise system has been extended, has penetrated. The test of your argument is not only in what happens in England and the ostensible decline or not the decline of the English economy or what happened in the United States. The test of that argument has to look at what the free enterprise system has meant for the majority of people who do not live in England and who do not live in the United States, who do not live in the mother countries, but rather live in that part of the world where most people live and when __ where most people have had their lives disrupted. Peasants have lost their land, traumatic destruction occurs __

FRIEDMAN: Excuse me, excuse me. You’ve got to compare __

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Friedman Friday” Free to Choose by Milton Friedman: Episode “What is wrong with our schools?” (Part 1 of transcript and video)

November 4, 2011 – 12:01 am

Here is the video clip and transcript of the film series FREE TO CHOOSE episode “What is wrong with our schools?” Part 1 of 6.

 
Volume 6 – What’s Wrong with our Schools
Transcript:
Friedman: These youngsters are beginning another day at one of America’s public schools, Hyde Park High School in Boston. What happens when they pass through those doors is a vivid illustration of some of the problems facing America’s schools.
They have to pass through metal detectors. They are faced by security guards looking for hidden weapons. They are watched over by armed police. Isn’t that awful. What a way for kids to have to go to school, through metal detectors and to be searched. What can they conceivably learn under such circumstances. Nobody is happy with this kind of education. The taxpayers surely aren’t. This isn’t cheap education. After all, those uniformed policemen, those metal detectors have to be paid for.
What about the broken windows, the torn school books, and the smashed school equipment. The teachers who teach here don’t like this kind of situation. The students don’t like to come here to go to school, and most of all, the parents __ they are the ones who get the worst deal __ they pay taxes like the rest of us and they are just as concerned about the kind of education that their kids get as the rest of us are. They know their kids are getting a bad education but they feel trapped. Many of them can see no alternative but to continue sending their kids to schools like this.
To go back to the beginning, it all started with the fine idea that every child should have a chance to learn his three R’s. Sometimes in June when it gets hot, the kids come out in the yard to do their lessons, all 15 of them, ages 5 to 13, along with their teacher. This is the last one-room schoolhouse still operating in the state of Vermont. That is the way it used to be. Parental control, parents choosing the teacher, parents monitoring the schooling, parents even getting together and chipping in to paint the schoolhouse as they did here just a few weeks ago. Parental concern is still here as much in the slums of the big cities as in Bucolic, Vermont. But control by parents over the schooling of their children is today the exception, not the rule.
Increasingly, schools have come under the control of centralized administration, professional educators deciding what shall be taught, who shall do the teaching, and even what children shall go to what school. The people who lose most from this system are the poor and the disadvantaged in the large cities. They are simply stuck. They have no alternative.
Of course, if you are well off you do have a choice. You can send your child to a private school or you can move to an area where the public schools are excellent, as the parents of many of these students have done. These students are graduating from Weston High School in one of Boston’s wealthier suburbs. Their parents pay taxes instead of tuition and they certainly get better value for their money than do the parents in Hyde Park. That is partly because they have kept a good deal of control over the local schools, and in the process, they have managed to retain many of the virtues of the one-room schoolhouse.
Students here, like Barbara King, get the equivalent of a private education. They have excellent recreational facilities. They have a teaching staff that is dedicated and responsive to parents and students. There is an atmosphere which encourages learning, yet the cost per pupil here is no higher than in many of our inner city schools. The difference is that at Weston, it all goes for education that the parents still retain a good deal of control.
Unfortunately, most parents have lost control over how their tax money in spent. Avabelle goes to Hyde Park High. Her parents too want her to have a good education, but many of the students here are not interested in schooling, and the teachers, however dedicated, soon lose heart in an atmosphere like this. Avabelle’s parents are certainly not getting value for their tax money.
Caroline Bell, Parent: I think it is a shame, really, that parents are being ripped off like we are. I am talking about parents like me that work every day, scuffle to try to make ends meet. We send our kids to school hoping that they will receive something that will benefit them in the future for when they go out here and compete in the job market. Unfortunately, none of that is taking place at Hyde Park.
Friedman: Children like Ava are being shortchanged by a system that was designed to help. But there are ways to help give parents more say over their children’s schooling.
This is a fundraising evening for a school supported by a voluntary organization, New York’s Inner City Scholarship Fund. The prints that have brought people here have been loaned by wealthy Japanese industrialist. Events like this have helped raise two million dollars to finance Catholic parochial schools in New York. The people here are part of a long American tradition. The results of their private voluntary activities have been remarkable.
This is one of the poorest neighborhoods in New York City: the Bronx. Yet this parochial school, supported by the fund, is a joy to visit. The youngsters here from poor families are at Saint John Christians because their parents have picked this school and their parents are paying some of the costs from their own pockets. The children are well behaved, eager to learn, the teachers are dedicated. The cost per pupil here is far less than in the public schools, yet on the average the children are two grades ahead. That is because teachers and parents are free to choose how the children shall be taught. Private money has replaced the tax money and so control has been taken away from the bureaucrats and put back where it belongs.
This doesn’t work just for younger children. In the 60’s, Harlem was devastated by riots. It was a hot bed of trouble. Many teenagers dropped out of school.
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99th anniversary of Milton Friedman’s birth (Part 20) (“Free to Choose” episode 3 – Anatomy of a Crisis. part 6of 7)

November 3, 2011 – 12:07 am

Milton Friedman was born on July 31, 1912 and he died November 16, 2006. I started posting tributes of him on July 31 and I hope to continue them until his 100th birthday. Here is another tribute below:

worked pretty well for a whole generation. Now anything that works well for a whole generation isn’t entirely bad. From the fact __ from that fact, and the undeniable fact that things are working poorly now, are we to conclude that the Keynesian sort of mixed regulation was wrong __
FRIEDMAN: Yes.
LEKACHMAN: __ or alternatively that we need still more regulation. That’s my conclusion, I might say.
FRIEDMAN: You want the right people manipulating the leaders. But go back. Memory smooths things out. If you really look at that 25_year period you’re talking about, it was not a period of stability; it was a period that was punctuated by the very sharp inflation of the Korean War. It was a period that was punctuated by three recessions in the course of about eight years in the fifties and early sixties. It was a period in which you had a __ inflation really starting to go from creeping to running, in the latter sixties. It was a period which laid the ground work for the kind of situation in which we are now, where you have both higher unemployment and higher inflation. It was __
TEMIN: I don’t think that followed. I mean there were these movements, as we say, but they weren’t the movements like the 1930s. There was a recession in ’58, yes.
FRIEDMAN: I agree.
TEMIN: We all called it a recession. We all worried about it and so on, but it was a small thing, little potatoes.
FRIEDMAN: The same thing was true in earlier periods between The Great Depression. If you take the area between the great depression in the United States of the 1870s and the 1890s, again you had a period like that. If you take it between The Great Depression of the 1890s and World War I, with a minor __ with one minor exception, it was similar to that. So that what you have, and this is a historical fact, is that except for the great depressions, all of which are linked to monetary collapses and to governmental involvement, in the interim period, the society has been reasonably stable.
MCKENZIE: Haven’t we reached the stage, incidentally, where we need not again see anything like the great depression. You say recessions, yes; but it bears no relationship to what we knew __
FRIEDMAN: No.
MCKENZIE: __ in the thirties. Have we solved that problem now? People are deeply __
JAY: No, we haven’t. Because I think the seeds of it remain there. I don’t agree with Professor Lekachman that everything was __ I don’t want to misparaphrase him __ but did pretty well until 1973 and then it suddenly all went wrong. It seems to me that the seeds of the subsequent instability, stagflation, were there before. That each time round the economic cycle inflation went a little faster. Each time around the economic cycle unemployment tended to be a bit higher. But this brings me to what is my disagreement with Professor Friedman. I agree with him that government has failed to correct, and is bound to fail to correct that instability. I do not agree with him that it is the root cause of that instability or simply removing or containing the government will remove that instability. Because his constitution, and I agree with all the things he wants to put into it, but I want to put more into it, leaves big capital entirely free to operate. Now he doesn’t mind that. In response to big capital, you are bound to get __ as a simple, natural reaction __ big labor. He doesn’t mind that. He’s quite happy with that. But my contention is that once you have big labor, you have a way of setting rewards in society, not only by trade unions, but through all sorts of other processes whereby groups get together in order to exploit the political process and legal rights, and to protect themselves from competition, in which, inevitably, people set rewards above what economists call the “market clearing price” for labor. They set levels of rewards which make it impossible that everybody should be employed and you therefore have a built-in tendency to high unemployment. If governments react to that on the Keynesian pattern by trying to inject spending which will enable these people to be employed, then I agree with Professor Friedman that all you get is faster and faster inflation, and that if you like, is caused by the government. But the government is a proximate cause of an original instability that is already there. And there’s nothing in Professor Friedman’s constitution which would correct that inherent, if you like, contradiction or flaw in classical western political economy.
FRIEDMAN: Do you deny, Peter __
MCKENZIE: Let me get the reaction to that __
FRIEDMAN: __no, I want to ask just one question of Peter. Do you deny that big government plays a large part in the rise of big capital and big labor?
JAY: I think they’re interactive. I once said big capital causes big labor, causes big government, causes big failure. That is the tragic story, in my opinion, of the 20th century.
FRIEDMAN: And what about if you start that __
JAY: We have to unravel that.
FRIEDMAN: __ if you start that route with big government. Will it be wrong? Big government causes big capital, causes big labor, causes big failure?
JAY: I don’t think historically that’s what happened. But you and I are agreed, we don’t want big government.
FRIEDMAN: That’s right.
JAY: What we’re disagreed about is what else we need.
LEKACHMAN: I think something is seriously wrong with a beautiful system which develops this big, clumsy, aggressive government, huge corporations, with more influence over their markets than is desirable from the standpoint of free competitive theory, trade unions, which at least according to some opinions, have a similarly malignant influence on their markets. There must be something radically flawed with the capitalist system which allows these institutional developments. This doesn’t alarm me because I’m a socialist, but I would __ I would readily __
FRIEDMAN: There must be something radically wrong with socialist philosophy which allows the __ extraordinary __ the much worse developments that have occurred, wherever there has been any real significant attempt to put a thoroughgoing socialism into practice.
LEKACHMAN: Socialism is a word of many meanings.
MCKENZIE: Now I think we might easily get into a quite serious debate on that point.
VOICE OFF SCREEN: Right.
JAY: I think it’s possible to note in passing that they may both be right.
MCKENZIE: Yes.
JAY: That conventional capitalism, conventional socialism, as conceived in the 20th century, are both wrong and that the polarization of the debate between those simple two alternatives greatly impoverishes the real range of political-economic choices which modern societies have.
FRIEDMAN: But what has happened? Over and over again one claim after another for the kind of socialism __ this kind of socialism or that kind of socialism __ has turned to ashes. And each time the answer has come, “Oh well, it was a wrong brand of socialism that was adopted, or the wrong people were running it.”
VOICE OFF SCREEN: But you’re saying __
JAY: You’re arguing with yourself when you’re saying __
FRIEDMAN: No I’m not.
JAY: The Federal Reserve in 1929 failed to do the right thing. It was the wrong brand of government.
FRIEDMAN: It was the wrong brand, absolutely, but what I’m saying is something different. I can at least point to examples in history of systems of capitalist systems in which the government had a fairly limited role, not my ideal government. Many things, doing many things I would not want it to do. But I’m going to point to such examples over long stretches of history in __ which have been relatively successful. Where the major achievements of humankind, not merely in economics, but in all other areas, have largely arisen. It is very difficult to point to any similar examples __
TEMIN: But then you are pointing back __
FRIEDMAN: __ of where big government has achieved such success.
TEMIN: But you said before you didn’t like to go back. You’re now talking about going back.
FRIEDMAN: No, no. I didn’t say I didn’t like to go back.
TEMIN: They took place in different times.
FRIEDMAN: What I said is going back or forward is irrelevant. What we want to do is __
TEMIN: But it’s not irrelevant to this discussion __
FRIEDMAN: __ the right thing wherever it comes from.
TEMIN: __ because as Bob Lekachman said earlier, things have increased in scale, and the scale of business and increased, and you were saying just before, big government, big labor, big industry, big firms go together, and you didn’t accept it before, when Bob said you’ll accept it now from here.
FRIEDMAN: No, no. I don’t accept it. What I accept is that big government is a major factor promoting big labor and big capital. I did not accept that in the absence of big government you would have the big capital and big labor that worries him.
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99th anniversary of Milton Friedman’s birth (Part 19) (“Free to Choose” episode 3 – Anatomy of a Crisis. part 5 of 7)

November 2, 2011 – 12:06 am

Milton Friedman was born on July 31, 1912 and he died November 16, 2006. I started posting tributes of him on July 31 and I hope to continue them until his 100th birthday. Here is another tribute below:

MCKENZIE: Ah, well, that’s not on our agenda actually. (Laughter)
VOICE OFF SCREEN: Why not?
MCKENZIE: I boldly repeat the question, though, the expectation having been __ having been raised in the public mind, can you reverse this process where government is expected to produce the happy result?
LEKACHMAN: Oh, no way. And it would be very foolish of the public which is on the whole more sensible than academic, to come to this conclusion. They look around them, what do they see? They see a whole collection of visible hands attached to EXXON, other large corporations. These are not small, independent competitors jostling with each other for the patronage of the public. These are large organizations, with substantial influence on their markets. Government’s interference, clumsy as it often is, is an almost unavoidable response to the very visible manipulations of large organizations.
FRIEDMAN: If there again, you’re an academic, we’re talking about fact in history. Now the history is that the growth of government has not been as a result of the things you’re pointing out. It isn’t the large corporations. It isn’t the large unions. It isn’t the technological development that has produced the major growth of government. The major growth of government in our time has come in the redistributive area. It’s come in the area of designing programs which take from some people and give to others. We’re not going to go into those here, because we discuss those in our next two programs which deal with exactly the question of whether the government intervention that was stimulated by The Great Depression has been a success or a failure. But to your point, the grounds that you give for greater government intervention have almost nothing whatsoever to do with the actual factual growth of government. Now at the end of the war, immediately after World War II, it was thought that government was going to get involved, especially in Britain, in France, in central economic planning on a large scale.
JAY: Partly because of the war experience, too, when government was very much involved.
FRIEDMAN: Partly.
MCKENZIE: In Germany and Japan as well.
FRIEDMAN: Germany and Japan as well, it was a war. It created a myth just as the, as The Great Depression created myth.
MCKENZIE: Or rather reinforced the myth of government responsibility.
FRIEDMAN: Yes, but it created a different myth. This is a subject we don’t discuss much in the film. We’ve discussed it in a book that we’re bringing out with the same title to go along with it but __ but the great, but the great myth that was created by the war, was the myth that government was inefficient. And it was.
MCKENZIE: We won the war.
FRIEDMAN: For wartime purposes in, at least in Britain and the United States. It wasn’t so inefficient in Germany and the losing countries. But why is that a myth? It was a myth because it is one thing for government to plan and to control an economy for a single overriding objective. One solitary objective __ win the war. It’s a very different thing for government to control the economy for the many numerous tastes of all us, of a very large number of people in a complex world. And I __ you ask the question of whether people’s opinions can be changed.
MCKENZIE: Yes.
FRIEDMAN: I can’t change their opinions. You can’t change their opinions, but experience is changing their opinions. Is there anybody, anywhere now who believes that government is an efficient way to run an industrial enterprise?
JAY: I think your question, can you get the genie back into the bottle, is a very important one. It is undoubtedly true that in democratic countries there will be a public urge expressed through the political process, for something to be done about anything that seems to be wrong. The one thing that inhibits that is the belief that it can’t be done. There is not politically expressed desire for the government to do something about the weather because it is widely believed that the government does not control the weather. It was widely believed under the gold standard and pre-Keynes that there was nothing the government could do about the kind of economic traits I call in depressions that we had before that time. Since then it is very widely believed, Milton may believe, I may believe wrongly, but nonetheless, it’s very widely believed that is now a manageable thing, and therefore the demand is expressed that unemployment should not rise too high, inflation should not rise too high, and so forth.
MCKENZIE: That we keep a war on want or a war on poverty.
JAY: If you believe, as Milton does, and on this issue I agree with him, that in fact government cannot handle this issue, and you want to get that genie back into the bottle, you can’t simply do it by authorities, or pundits, or academics, or others saying, “Here is a new rule. The government will do nothing. It will not intervene; it will not perform, but will just be a simple monetary rule.” You’ve got politically to persuade people that this is part of a system which they can understand, which will, in fact, deliver for them the minimal economic objectives that they have, which are basically high employment __ high employment and stability of prices, and one of two other things. Now in order to do that you’ve got to describe a political economic system which will in fact deliver that result. And they will not believe, and in my opinion they will rightfully not believe, that simply going back to where we were, or where we imagined that we were in 1930 or 1870, by withdrawing the government form the game and doing nothing else, will produce that result. And they’re right not to believe it.
TEMIN: The kind of pristine view that you appear to be putting up of no government isn’t really a consistent view because if you __
FRIEDMAN: I’m not putting up a view of no government. I’m putting up a view of a limited government. Limited __
TEMIN: Just how do you, how do you impose the limit?
FRIEDMAN: Note __ note that today the budget of HEW is one-and-a-half times the whole defense budget. That is not where the major growth of government has come. Whether we spend too little of too much on the military is very a arguable issue which I’m not competent to discuss.
TEMIN: Okay.
FRIEDMAN: But it is not the cutting edge of the dispute that we’re engaged in. That cutting edge is on all these other functions which government has increasingly taken on its shoulders.
TEMIN: Yes, but the question __
VON HOFFMAN: How do you get from here to there?
FRIEDMAN: By persuading people to do it, and by doing it gradually. You do not get it overnight. CAB was a very, very persuasive element on __ on getting rid of one branch of regulation. The failure of government to produce the full employment and the stable prices that was promised is another. You know what is __ who are we kidding? Is there anybody around any more who really believes that government knows how to prevent by its present methods inflation or unemployment? We’ve had increasing inflation. We’ve had increasing unemployment. Not only in the United States __
VON HOFFMAN: Well we __ we know that this government doesn’t __
VOICE OFF SCREEN: Wait, wait.
LEKACHMAN: It seems to me that we’re talking about at least four kinds of government intervention of different popularity among the public. One is redistributive __ via the Social Security System and so on __ and lots of that is popular. Welfare is unpopular, but Social Security is quite popular. Medicare has a mixed reputation, Medicaid a bad reputation. The redistributive system is a mixed bag from the public’s standpoint. Another kind of intervention deals with unemployment; a third kind deals with prices; and a fourth kind deals with regulation. Now, again, there is a cry about regulation which itself breaks down, it seems to me, into two parts: Partly a safety kind of thing, partly an economic kind of thing. I doubt that the public is prepared, for example, to eliminate the Food and Drug Administration.
FRIEDMAN: Take the way of trying to smooth out the business cycle.
LEKACHMAN: All right, now wait on that. I think that the record of doing this, in its clumsy way, Republicans, Democrats, assorted administrations in England and elsewhere, between 1945 and 1973 was quite good. Average unemployment during this considerable span of years was lower than had been probably in any previous spell of modern economic history. Inflation was not a persistent problem in this. Now I would say, putting the claim at a very modest one, that Keynesian intervention, if we use that as a label,
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99th anniversary of Milton Friedman’s birth (Part 18) (“Free to Choose” episode 3 – Anatomy of a Crisis. part 4 of 7)

November 1, 2011 – 12:05 am

Milton Friedman was born on July 31, 1912 and he died November 16, 2006. I started posting tributes of him on July 31 and I hope to continue them until his 100th birthday. Here is another tribute below:

The massive growth of central government that started after the depression has continued ever since. If anything, it has even speeded up in recent years. Each year there are more buildings in Washington occupied by more bureaucrats administering more laws. The Great Depression persuaded the public that private enterprise was a fundamentally unstable system. That the depression represented a failure of free market capitalism, that the government had to step in to perform the essential function of stabilizing the economy, of providing security for its citizens. The widespread acceptance of these views, sparked the enormous growth in the power of government that has occurred in the decade since and that is still going on. We now know as many economists knew then that the truth about the depression was very different. The depression was produced or at the very least, made far worse by perverse monetary policies followed by the U.S. authorities.
Far from being a failure of free market capitalism, the depression was a failure of government. Unfortunately, that failure did not end with The Great Depression. Ever since, government has been attempting to fine tune the economy. In practice, just as during the depression, far from promoting stability, the government has itself, been the major single source of instability.
DISCUSSION
Participants: Robert McKenzie, Moderator; Milton Friedman; Robert Lekachman, Professor of Economics, City University, New York; Nicholas Von Hoffman, Syndicated Columnist; Peter Temin, Professor of Economics, MIT; Peter Jay, British Ambassador to the United States, 1977_1979
MCKENZIE: And now we join the invited guests here at the University of Chicago, as they discuss Friedman’s interpretation of those events and their implications for today.
LEKACHMAN: The 1929 crash, the succeeding calamities, were not the first of their kind. Capitalism has been subject to severe depressions since the beginning of the industrial revolution. This was the first time, however, government tried to intervene seriously. It did it very badly. The lesson I would draw is a very simple one: Government is unavoidable; the expectations of the public are proper; government ought to do better oddly enough the government did do better until very, very recently. Until, I would say, October 1973, even, government did reasonably well in fulfilling the expectations of the public. I’m an unrepentant proponent of government intervention, intelligent government intervention. But I would describe much of the intervention which has followed the great 1929 crash as quite intelligent.
MCKENZIE: Let’s take a further look, though, at this argument that just as during the depression, far from promoting stability, the government has itself been the major single source of instability.
VON HOFFMAN: I_I don’t think there is any stability this side of the graveyard. I mean, I think __ I don’t think it matters what system you’re working under, you are not going to __ you are not going to have a level and hold it under any system with living human beings.
TEMIN: Governments are larger now and therefore more of a source of an influence for good and for bad. And I think like Mr. Von Hoffman that you can’t get perfect stability, given that you’re going to have governments, given that there are legitimate functions of governments, there are also risks in having the government be as active as it is.
MCKENZIE: Peter Jay.
JAY: I think that government is a god that has failed. I think that we have too much of it and need less of it. I think it has failed to prevent both the modern forms of economic instability and the prewar ones. I do not, however, think that government is the original or primary source of that instability, and I do not think that simply getting rid of the government, or greatly reducing it, which I’m in favor of, will, by itself, remove the instability.
LEKACHMAN: I would put it this way: There was __ there was a great economist, with a suitably esoteric doctrine, which could nevertheless be translated as Dr. Friedman did in the film, into simple English, at the same time as there was the widespread hardship of The Great Depression and the natural yearning of human beings not to repeat anything like it. So you have a coincidence of an appropriate theory, with an appropriate public sentiment, and I suppose the symbol in the United States was the passage of 1946 of the Employment Act of that year. Which, it was a weak measure, but it was nevertheless a public declaration of an obligation of government to do something about employment, and economic prosperity, and a good thing, too.
MCKENZIE: Now that’s the __ really the crux of the matter. Do you agree it was a good thing too, that obligation was accepted by government at that stage?
JAY: I think it’s very important here to distinguish two completely different issues. There is the rather narrow issue as to whether Keynes was right or wrong in believing that you could stabilize the economy with regard to really one essential variable _ unemployment _ by a certain technique which he talked about. We may now think that he was wrong, but that’s a quite separate issue from the broad political philosophical issue associated with socialism, associated with social democrats, and many other so-called left wing political thinkers, that the duty of government, so far as it can, is to concern itself not only with defense and law and order and the traditional things, but also with the social welfare and the economic welfare of a society. Now that’s a broad philosophical __
MCKENZIE: Is that a disaster, as Milton seemed to be implying, or was it a good and helpful, useful thing to happen?
JAY: Well, that is one of the great __ perhaps the greatest of all debates in political philosophy, as to whether or not it is right or is not right to believe that a society, collectively, should concern itself with these things and has the right, having concerned itself, through law and through government and in other ways, to move to try to correct these things.
VON HOFFMAN: Well I just __ it seems to me that Americans have believed that for the last century. I mean William McKinley ran on the slogan of a full dinner pail, so that the notion that this is a government responsibility for prosperity dates from the 1930’s I think is erroneous. What I wonder about after having seen that film is this: We have in 1929 __ we have the man who could have saved it dead two years and in 1946 we’ve got the man who might have saved it dying. So what I have to ask is: Are we doomed to find out the right answer only too late? Is it possible that our __
TEMIN: Or should we just look for somebody who’s recently died.
VON HOFFMAN: Exactly. Rummage the morgues. (Laughter)
MCKENZIE: Well, you asked the question __
FRIEDMAN: No, and I think the question is a very different one. And it goes to much of the discussion to this point. Everybody looks for the right man. You say, “Government __
VON HOFFMAN: You brought’em up.
FRIEDMAN: Those men at that time. Quite right. But a system which depends on the right man is a bad system. The Federal Reserve was a bad system because it depended on the right man working it. The idea of demand management, of the kind of thing we’re talking about where Keynes’ death mattered, was a bad system because it depended on a particular man working it. The notion that the problem that Bob Lekachman brought up, that the problem is not the government interferes, but it does it unintelligently, is again a demand for the right man, the man on the white horse who will know what to do. My whole view is very different. It is that it’s the system that’s wrong, and that we’ve got to have a system that the right way to accomplish these objectives is to have a system which doesn’t depend on whether you happen to have the right man pushing the buttons at the right time.
TEMIN: The problem is somebody has to __
FRIEDMAN: Which relies on the __ on establishing a framework within which an invisible hand, within which the activities of people all over are jointly to produce the kind of result. It won’t produce perfect stability; but it’ll produce a far higher degree of stability, a far greater level of freedom, and a far greater level of prosperity than the kind of thing we’ve had with these governmental interventions.
TEMIN: Somebody still has to design the system. You can’t take the people out of it entirely.
FRIEDMAN: Of course.
TEMIN: Unless you’re in the grave as it says.
FRIEDMAN: Of course, but the __ that doesn’t __
TEMIN: But the question is __ I mean it’s said that generals always fight the last war. How do we know that the system won’t fight the last war? We probably won’t have another depression exactly like 1929 to ’33.
MCKENZIE: But, but __
TEMIN: But that doesn’t say we won’t have another depression or another stagflation or another crisis of some other source.
MCKENZIE: But is this process reversible? Because you argued that the public, having been appalled by The Great Depression, in effect demanded of government that they accept responsibility for wellbeing of the economy, for management of the society and so on. Now, that expectation having been raised, can it be reversed?
VON HOFFMAN: Let me answer a question you didn’t ask and say that it seems to me that what we’re getting here is the question of sort of social astrophysics. And that is, do we have an unseen hand, or are we on the war star where we are trying to design a computer that is going to take care of the navigation of this thing. In other words, it seems to me that’s our central question. Is there a mechanism that you can put right in the center of the spaceship that will operate regardless of who is the captain on the quarterdeck at any one moment in time? I don’t think that’s an economic question. I think that’s a question that goes to religion.
By Everette Hatcher III | Comments (0)