Arnold Schwarzenegger did  the opening introduction to the film series “Free to Choose” by Milton Friedman, but then  Arnold abandoned the principles of Friedman!!!!

Ep. 4 – From Cradle to Grave [4/7]. Milton Friedman’s Free to Choose (1980)

Many people want the government to protect the consumer. A much more urgent problem is to protect the consumer from the government.
Milton Friedman

In this series I want to both look  closely at who Milton Friedman was and what his views were about Social Security reform. Here is the fourth portion of an autobiography from Nobelprize.org:

Thanks to Henry Schultz’s friendship with Harold Hotelling, I was offered an attractive fellowship at Columbia for the next year. The year at Columbia widened my horizons still further. Harold Hotelling did for mathematical statistics what Jacob Viner had done for economic theory: revealed it to be an integrated logical whole, not a set of cook-book recipes. He also introduced me to rigorous mathematical economics. Wesley C. Mitchell, John M. Clark and others exposed me to an institutional and empirical approach and a view of economic theory that differed sharply from the Chicago view. Here, too, an exceptional group of fellow students were the most effective teachers.

After the year at Columbia, I returned to Chicago, spending a year as research assistant to Henry Schultz who was then completing his classic, The Theory and Measurement of Demand. Equally important, I formed a lifelong friendship with two fellow students, George J. Stigler and W. Allen Wallis.

Allen went first to New Deal Washington. Largely through his efforts, I followed in the summer of 1935, working at the National Resources Committee on the design of a large consumer budget study then under way. This was one of the two principal components of my later Theory of the Consumption Function.

The other came from my next job – at the National Bureau of Economic Research, where I went in the fall of 1937 to assist Simon Kuznets in his studies of professional income. The end result was our jointly published Incomes from Independent Professional Practice, which also served as my doctoral dissertation at Columbia. That book was finished by 1940, but its publication was delayed until after the war because of controversy among some Bureau directors about our conclusion that the medical profession’s monopoly powers had raised substantially the incomes of physicians relative to that of dentists. More important, scientifically, that book introduced the concepts of permanent and transitory income.

The catalyst in combining my earlier consumption work with the income analysis in professional incomes into the permanent income hypothesis was a series of fireside conversations at our summer cottage in New Hampshire with my wife and two of our friends, Dorothy S. Brady and Margaret Reid, all of whom were at the time working on consumption.

I spent 1941 to 1943 at the U.S. Treasury Department, working on wartime tax policy, and 1943-45 at Columbia University in a group headed by Harold Hotelling and W. Allen Wallis, working as a mathematical statistician on problems of weapon design, military tactics, and metallurgical experiments. My capacity as a mathematical statistician undoubtedly reached its zenith on V. E. Day, 1945.

Ep. 4 – From Cradle to Grave [5/7]. Milton Friedman’s Free to Choose (1980)

Milton Friedman wrote an excellent article, “Speaking the truth about Social Security Reform,” April 12, 1999, Cato Institute and I will posting portions of that article in the next few days.  Milton Friedman, winner of the 1976 Nobel Prize in Economics, was a senior research fellow at the Hoover Institution. Originally published in the New York Times January 11, 1999. Here is the fourth portion:

Should Social Security Be Mandatory?

Should a privatized system be mandatory? The

present system is; it is therefore generally taken

for granted that a privatized system must or

should be as well.

The economist Martin Feldstein, in a 1995

article in the

Public Interest

, argued that contributions

must be mandatory for two reasons. 

“First, some individuals are too shortsighted to  

provide for their own retirement,” he wrote.  

“Second, the alternative of a means-tested program  

for the aged might encourage some lowerincome  

individuals to make no provision for their  

old age deliberately, knowing that they would  

receive the means-tested amount.”  

The paternalism of the first reason and the  

reliance on the extreme cases of the second are 

equally unattractive. More important, Professor  

Feldstein does not even refer to the clear injustice  

of a mandatory plan.  

The most obvious example is a person with a  

terminal disease who has a short life expectancy  

and limited financial means, yet would be  

required to use a significant fraction of his or her  

earnings to accumulate what is almost certain to  

prove a worthless asset.  

More generally, the fraction of a person’s  

income that it is reasonable for him or her to set  

aside for retirement depends on that person’s circumstances  

and values. It makes no more sense  

to specify a minimum fraction for all people than  

to mandate a minimum fraction of income that  

must be spent on housing or transportation. Our  

general presumption is that individuals can best  

judge for themselves how to use their resources.  

Mr. Feldstein simply asserts that in this particular  

case the government knows better.  

In 1964, Barry Goldwater was much reviled  

for suggesting that participation in Social Securi-

ty be voluntary. I thought that was a good idea

then; I still think it is.

 Barry Goldwater’s picture

I find it hard to justify requiring 100 percent of

the people to adopt a government-prescribed

straitjacket to avoid encouraging a few “lowerincome

individuals to make no provision for their

old age deliberately, knowing that they would

receive the means-tested amount.” I suspect that,

in a voluntary system, many fewer elderly people

would qualify for the means-tested amount from

imprudence or deliberation than from misfortune.

_______________________________________

The problem with social security  

David John, a Senior research Fellow at the Heritage Foundation, explains his position on Social Security as it relates to taxes and health care. He suggests it would be a good solution for the government to raise the age of retirement.

____________________________________________

I have no illusions about the political feasibility

of moving to a strictly voluntary system. The

tyranny of the status quo, and the vested interests

that have been created, are too strong. However,

I believe that the ongoing discussion about

privatizing Social Security would benefit from

paying more attention to fundamentals, rather

than dwelling simply on the nuts and bolts of privatization.

Who was Milton Friedman and what did he say about Social Security Reform? (Part 2)

I am favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it’s possible.
Milton Friedman

Ep. 4 – From Cradle to Grave [1/7]. Milton Friedman’s Free to Choose (1980)

Since the Depression years of the 1930s, there has been almost continuous expansion of governmental efforts to provide for people’s welfare. First, there was a tremendous expansion of public works. The Social Security Act followed close behind. Soon other efforts extended governmental activities in all areas of the welfare sector. Growth of governmental welfare activity continued unabated, and today it has reached truly staggering proportions.

In this series I want to both look  closely at who Milton Friedman was and what his views were about Social Security reform. Here is the first portion of an autobiography from Nobelprize.org:
I was born July 31, 1912, in Brooklyn, N.Y., the fourth and last child and first son of Sarah Ethel (Landau) and Jeno Saul Friedman. My parents were born in Carpatho-Ruthenia (then a province of Austria-Hungary; later, part of inter-war Czechoslovakia, and, currently, of the Soviet Union). They emigrated to the U.S. in their teens, meeting in New York. When I was a year old, my parents moved to Rahway, N.J., a small town about 20 miles from New York City. There, my mother ran a small retail “dry goods” store, while my father engaged in a succession of mostly unsuccessful “jobbing” ventures. The family income was small and highly uncertain; financial crisis was a constant companion. Yet there was always enough to eat, and the family atmosphere was warm and supportive.

Along with my sisters, I attended public elementary and secondary schools, graduating from Rahway High School in 1928, just before my 16th birthday. My father died during my senior year in high school, leaving my mother plus two older sisters to support the family. Nonetheless, it was taken for granted that I would attend college, though, also, that I would have to finance myself.

I was awarded a competitive scholarship to Rutgers University (then a relatively small and predominantly private university receiving limited financial assistance from the State of New Jersey, mostly in the form of such scholarship awards). I was graduated from Rutgers in 1932, financing the rest of my college expenses by the usual mixture of waiting on tables, clerking in a retail store, occasional entrepreneurial ventures, and summer earnings. Initially, I specialized in mathematics, intending to become an actuary, and went so far as to take actuarial examinations, passing several but also failing several. Shortly, however, I became interested in economics, and eventually ended with the equivalent of a major in both fields.

_________________________________

Milton Friedman wrote an excellent article, “Speaking the truth about Social Security Reform,” April 12, 1999, Cato Institute and I will posting portions of that article in the next few days.  Milton Friedman, winner of the 1976 Nobel Prize in Economics, was a senior research fellow at the Hoover Institution. Originally published in the New York Times January 11, 1999. Here is the second portion:

Introduction

The journalist Michael Barone recently summed up the conventional wisdom about reforming Social Security. “The content of the reform is fairly clear—individual investment accounts to replace part of the government benefits financed by the payroll tax, later retirement ages, adjusted cost of living increases,” he wrote in the American Enterprise. And, he added, “suddenly the money to pay for the costs of transition is at hand, in the form of a budget surplus.” I have italicized “part” and “costs of transition” because they epitomize key defects in conventional wisdom. Social Security has become less and less attractive as the number of current recipients has grown relative to the number of workers paying taxes, an imbalance that will only get bigger. That explains the widespread support for individual investment accounts. Younger workers, in particular, are skeptical that they will get anything like their money’s worth for the Social Security taxes that they and their employers pay. They believe they would do much better if they could invest the money in their own 401(k)s or the equivalent. But if that is so, why replace only part and not all of government benefits? The standard explanation is that this is not feasible because payroll taxes—or part of them—are needed to pay benefits already committed to present and future retirees. That is how they are now being used, but there is nothing in the nature of things that requires a particular tax to be linked to a particular expenditure. _______________________________________________

If you know anything about me, then you know that in 1980 my political life was forever changed by a man by the name of Milton Friedman. He could take tough questions that I could not answer and provide easy answers backed up with facts. My liberal professors were strong believers in high inheritance taxes.

Milton Friedman  shows that this tax does hurt families and our society. The questioner suggests a 100% inheritance tax but that would destroy a society. Liberals try to downplay the harmful effects of the tax by saying it is alright since less than 1% of the USA will be affected, so lets stick it to them despite the harm it causes to family businesses. Milton Friedman shows them how foolish that is!!!

Below are some other posts I did about Milton Friedman’s ideas:

Who was Milton Friedman and what did he say about Social Security Reform? (Part 1)