on September 29, 2009
Milton Friedman was a highly visible economist, statistician, and policy
commentator during the Twentieth Century. Before he died in 2006, he wrote
and co-wrote several books relating economic theory, policy studies, and
statistics. He was the recipient of the Nobel Prize in economics in 1976.
I just finished reading "Free To Choose: A Personal Statement," written by
Thomas Friedman and his wife, Rose Friedman. The book is dense and full of
well thought-out arguments for free markets, smaller government, and how
policies that adhere to these principles will result in greater liberty and
freedom for the people that live under them.
This book is almost thirty years old and it shows. Many of the numbers
the Friedmans use in the book are laughable today, especially those they use as
salaries for the common man or the cost of an average home.
It's fascinating, however, they write at the end of the Carter
administration that "the tide is turning."
"The failure of Western governments to achieve their proclaimed objectives
has produced a widespread reaction against big government. In Britain the
reaction swept Margaret Thatcher to power in 1979 on a platform pledging
her Conservative government to reverse the socialist policies that had
been followed by both Labour and earlier Conservative governments ever
since the end of World War II."
"Free To Choose" is organized in chapters that each spend a liberal amount
of print on a specific category of policy thinking. The first chapter, "The
Power Of The Market" spends nearly 30 pages covering the ideals of a free
market, the dangers of price controls, and the role of government with
respect to markets. The second chapter is devoted to governments' role in
free trade and overall liberty and economic growth. Hint: Friedman isn't a
fan of tariffs or any other kind of government meddling with trade between
nations. He offers a compelling historical argument for free trade by
examining the governance and trade policies of Japan during the latter half
of the 19th century and India during the latter half of the 20th century.
The third chapter, "The Anatomy of Crisis," is perhaps the most relevant to
readers today. It examines the modern banking system in the United States
from the inception of the Federal Reserve in 1913, the depression nobody
remembers from 1920-21, and the Great Depression of the 1930s. For those
who believe we are currently at risk of suffering from the same mistakes or
making greater ones today in our vulnerable financial status, this chapter
offers some brilliant insights.
In the conclusion of this chapter, the Friedmans write:
"In one respect the (Federal Reserve) System has remained completely
consistent throughout. It blames all problems on external influences
beyond its control and takes credit for any and all favorable
occurrences. It thereby continues to promote the myth that the private
economy is unstable, while its behavior continues to document the reality
that government is today the major source of economic instability."
The fourth chapter, "Cradle to Grave," examines the development of the
*welfare state* beginning in Europe in the late 1800s and then in the
U.S. in the 1920s. Friedman spotlights health, education, and welfare in
this chapter because at the time the book was written, they fell under a
single department within the federal government.
"The waste is distressing, but it the least of the evils of the
paternalistic programs that have grown to such massive size. Their major
evil is their effect on the fabric of our society. They weaken the
family; reduce the incentive to work, save, and innovate; reduce the
accumulation of capital; and limit our freedom. These are the
fundamental standards by which they should be judged."
The following chapter challenges the popular notions of what "equality"
means. The Friedmans distinguish between the following:
* Equality of outcome
* Equality of opportunity
* Equality before God
Concerning *equality of outcome*, they write:
"Life is not fair. It is tempting to believe that government can rectify
what nature has spawned. But it is also important to recognize how much
we benefit from the very unfairness we deplore."
This chapter goes on to examine the effects of egalitarian policies as
practiced in the US and in other modern societies.
"... a society that puts freedom first will, as a happy by-product, end up
with greater freedom and greater equality. Though a by-product of
freedom, greater equality is not an accident. A free society releases the
energies and abilities of people to pursue their own objectives. It
prevents some people from arbitrarily suppressing others. It does not
prevent some people from achieving positions of privilege, but so long as
freedom is maintained, it prevents those positions of privilege from
being institutionalized; they are subject to continued attack by other
able, ambitious people. Freedom means diversity but also mobility. It
preserves the opportunity for today's disadvantaged to become tomorrow's
privileged and, in the process, enabled almost everyone, from top to
bottom, to enjoy a fuller and richer life."
Next, the Friedmans attach "What's Wrong with Our Schools?"
It's no surprise their position is that centralized planning is a
substantial culprit of the problem with schools. Again, freedom is the
answer, they say. Vouchers, for example, tied with freedom to choose
public schools, are an ideal way to encourage competition between private
and public schools and drive education quality up.
I found this passage about public subsidies of higher education shocking
considering what we have observed in 2009:
"When we first started writing about higher education, we had a good deal
of sympathy for the (justification that public subsidies was an
investment in future productivity and economic growth of society). We no
longer do. In the interim we have tried to induce the people who make this
argument to be specific about the alleged social benefits. The answer is
almost always simply bad economics. We are told that the nation benefits
by having more highly trained people, that investment in providing such
skills is essential for economic growth, that more trained people raise
the productivity for the rest of us. These statements are correct. But
none is a valid reason for subsidizing higher education. Each statement
would be equally correct if made about physical capital (i.e., machines,
factory buildings, etc.), yet **hardly anyone would conclude that tax money
should be used to subsidize the capital investment of General Motors or
Milton Friedman is undoubtably spinning in his grave today.
Following education is the question of "Who Protects the Consumer?" This
chapter discusses the development of the Interstate Commerce Commission,
The Food and Drug Administration, The Consumer Products Safety Commission,
The Department of Energy and the Environmental Protection Agency. The
Friedmans raise some very valid questions about the government's role in
establishing these authorities and whether they are effective in their
For example, many are familiar with Ralph Nader's book, "Unsafe at Any
Speed," in which he supposedly documents the safety risk the Chevrolet
Corvair was to its occupants. This book ignited a firestorm that eventually
crushed the Corvair out of production and resulted in new government
regulations pertaining to the manufacture of automobiles. It's difficult to
argue that the outcome was a bad thing, but what about the original
premise? Was the Corvair that bad? My dad was a Corvair collector and had
two that he tinkered with, restored, and drove around on occasion. I always
thought they were odd cars because the engine was in the back. The
Friedmans point out that ten years after Nader's book landed, "one of the
agencies that was set up in response to the subsequent public outcry
finally got around to testing the Corvair that started the whole thing.
They spent a year and a half comparing the performance of the Corvair with
the performance of other comparable vehicles and they concluded, 'The
1960-63 Corvair compared favorably with the other contemporary vehicles
used in the tests.'"
Next is "Who Protects the Worker?" Here labor unions land square in the
crosshairs. Also addressed are government interventions into work such as
regulations against child labor, minimum wage laws, OSHA oversight, workers
compensation, and more.
Chapter 9 is about inflation. This isn't very relevant right now, but
likely will deserve a re-read in a year or so.
Here, Friedman puts his statistician muscles to work and establishes
through numbers a strong correlation between monetary control and consumer
prices. When the the Treasury and the Federal Reserve flood the market
with money, prices respond by going up.
The final chapter is a nice capstone on the book and discusses how the U.S.
Constitution relates to many of the policies discussed and how it is eroded
Appendix A is an interesting inclusion. It is the party platform from the
Socialist party during the 1928 presidential campaign. The Friedmans go
through each of the 14 items in the platform and demonstrate that despite
the Socialist Party not having a chance in Hell of ever having a candidate
elected, since 1928, just about each and every one of these ideas put forth
by the Socialist Party has been enacted.
That's something to think about.
[...]. It's not a
quick read, but definitely an informative and educational one.