Milton Friedman

"When everybody owns something, nobody owns it, and nobody has a direct interest in maintaining or improving its condition. That is why buildings in the Soviet Union — like public housing in the United States — look decrepit within a year or two of their construction."

"The supporters of tariffs treat it as self-evident that the creation of jobs is a desirable end, in and of itself, regardless of what the persons employed do. That is clearly wrong. If all we want are jobs, we can create any number—for example, have people dig holes and then fill them up again, or perform other useless tasks. Work is sometimes its own reward. Mostly, however, it is the price we pay to get the things we want. Our real objective is not just jobs but productive jobs—jobs that will mean more goods and services to consume."

"Believers in aristocracy and socialism share a faith in centralized rule, in rule by command rather than by voluntary cooperation."

"As these remarks indicate, the Social Security program involves a transfer from the young to the old. To some extent such a transfer has occurred throughout history—the young supporting their parents, or other relatives, in old age. Indeed, in many poor countries with high infant death rates, like India, the desire to assure oneself of progeny who can provide support in old age is a major reason for high birth rates and large families. The difference between Social Security and earlier arrangements is that Social Security is compulsory and impersonal—earlier arrangements were voluntary and personal. Moral responsibility is an individual matter, not a social matter. Children helped their parents out of love or duty. They now contribute to the support of someone else’s parents out of compulsion and fear. The earlier transfers strengthened the bonds of the family; the compulsory transfers weaken them."

"When the law interferes with people's pursuit of their own values, they will try to find a way around. They will evade the law, they will break the law, or they will leave the country. Few of us believe in a moral code that justifies forcing people to give up much of what they produce to finance payments to persons they do not know for purposes they may not approve of. When the law contradicts what most people regard as moral and proper, they will break the law—whether the law is enacted in the name of a noble ideal such as equality or in the naked interest of one group at the expense of another. Only fear of punishment, not a sense of justice and morality, will lead people to obey the law."

"In the past century a myth has grown up that free market capitalism—equality of opportunity as we have interpreted that term—increases such inequalities, that it is a system under which the rich exploit the poor. Nothing could be further from the truth. Wherever the free market has been permitted to operate, wherever anything approaching equality of opportunity has existed, the ordinary man has been able to attain levels of living never dreamed of before. Nowhere is the gap between rich and poor wider, nowhere are the rich richer and the poor poorer, than in those societies that do not permit the free market to operate."

"Industrial progress, mechanical improvement, all of the great wonders of the modern era have meant little to the wealthy. The rich in ancient Greece would have benefited hardly at all from modern plumbing — running servants replaced running water. Television and radio — the patricians of Rome could enjoy the leading musicians and actors in their home, could have the leading artists as domestic retainers. Ready-to-wear clothing, supermarkets — all these and many other modern developments would have added little to their life. They would have welcomed the improvements in transportation and in medicine, but for the rest, the great achievements of western capitalism have rebounded primarily to the benefit of the ordinary person. These achievements have made available to the masses conveniences and amenities that were previously the exclusive prerogative of the rich and powerful."

"A society that puts equality—in the sense of equality of outcome—ahead of freedom will end up with neither equality nor freedom. The use of force to achieve equality will destroy freedom, and the force, introduced for good purposes, will end up in the hands of people who use it to promote their own interests. On the other hand, a society that puts freedom first will, as a happy by-product, end up with both greater freedom and greater equality."

"The threat to public schools arises from their defects, not their accomplishments. In small, closely knit communities where public schools, particularly elementary schools, are now reasonably satisfactory, not even the most comprehensive voucher plan would have much effect. The public schools would remain dominant, perhaps somewhat improved by the threat of potential competition. But elsewhere, and particularly in the urban slums where the public schools are doing such a poor job, most parents would undoubtedly try to send their children to nonpublic schools."

"A worker is protected from his employer by the existence of other employers for who he can go to work. An employer is protected from exploitation by his employees by the existence of other workers whom he can hire. The consumer is protected from exploitation by a given seller by the existence of other sellers from whom he can buy."

"The smaller the unit of government and the more restricted the functions assigned government, the less likely it is that its actions will reflect special interests rather than the general interest."

"The proper role of government is exactly what John Stuart Mill said in the middle of the 19th century in On Liberty. The proper role of government is to prevent other people from harming an individual. Government, he said, never has any right to interfere with an individual for that individual's own good. The case for is exactly as strong and as weak as the case for prohibiting people from overeating. We all know that overeating causes more deaths than drugs do. If it's in principle OK for the government to say you must not consume drugs because they'll do you harm, why isn't it all right to say you must not eat too much because you'll do harm? Why isn't it all right to say you must not try to go in for skydiving because you're likely to die? Why isn't it all right to say, "Oh, skiing, that's no good, that's a very dangerous sport, you'll hurt yourself"? Where do you draw the line?"

"It does harm a great many other people, but primarily because it's prohibited. There are an enormous number of innocent victims now. You've got the people whose purses are stolen, who are bashed over the head by people trying to get enough money for their next fix. You've got the people killed in the random drug war. You've got the corruption of the legal establishment. You've got the innocent victims who are taxpayers who have to pay for more and more prisons, and more and more prisoners, and more and more police. You've got the rest of us who don't get decent law enforcement because all the law enforcement officials are busy trying to do the impossible. And, last, but not least, you've got the people of Colombia and Peru and so on. What business do we have destroying and leading to the killing of thousands of people in Colombia because we cannot enforce our own laws? If we could enforce our laws against drugs, there would be no market for these drugs."

"It's a moral problem that the government is making into criminals people, who may be doing something you and I don't approve of, but who are doing something that hurts nobody else. Most of the arrests for drugs are for possession by casual users. Now here's somebody who wants to smoke a marijuana cigarette. If he's caught, he goes to jail. Now is that moral? Is that proper? I think it's absolutely disgraceful that our government, supposed to be our government, should be in the position of converting people who are not harming others into criminals, of destroying their lives, putting them in jail. That's the issue to me. The economic issue comes in only for explaining why it has those effects. But the economic reasons are not the reasons."

"If you look at the drug war from a purely economic point of view, the role of the government is to protect the . That's literally true."

"The term money has two very different meanings in popular discourse. We often speak of someone "making money," when we really mean that he or she is receiving an income. We do not mean that he or she has a printing press in the basement churning out greenbacked pieces of paper. In this use, money is a synonym for income or receipts; it refers to a flow, to income or receipts per week or per year. We also speak of someone's having money in his or her pocket or in a safe-deposit box or on deposit at a bank. In that use, money refers to an asset, a component of one's total wealth. Put differently, the first use refers to an item on a profit-and-loss statement, the second to an item on a balance sheet"

"One reason why money is a mystery to so many is the role of myth or fiction or convention."

"Why should they also be accepted by private persons in private transactions in exchange for goods and services? The short answer—and the right answer—is that private persons accept these pieces of paper because they are confident that others will. The pieces of green paper have value because everybody thinks they have value. Everybody thinks they have value because in everybody's experience they have had value..."

"Analysis of the supply of money, and in particular of changes in the supply of money, is simple in principle but extremely complex in practice, both in our hypothetical world and in the current real world. Simple in principle, because the supply of money is whatever the monetary authorities make if, complex in practice, because the decisions of the monetary authorities depend on numerous factors."

"For both long and short periods there is a consistent though not precise relation between the rate of growth of the quantity of money and the rate of growth of nominal income. If the quantity of money grows rapidly, so will nominal income, and conversely. The relation is much closer for long than for short periods"

"Over short periods, the relation between growth in money and growth in nominal income is often hard to see, partly because the relation is less close for short than for long periods, but mostly because it takes time for changes in monetary growth to affect income. And how long a time is itself variable. Today's income growth is not closely related to today's monetary growth; it depends on what has been happening to money in the past. What happens to money today affects what is going to happen to income in the future"

"Never underestimate the role of luck in the fate of individuals or of nations."

"The business of business is business."

"Corruption is government intrusion into market efficiencies in the form of regulations."

"The concept of freedom, though it appears in the title of the book, is not analyzed. The commonplace idea that poverty is in many ways a restriction of personal freedom is not even mentioned. Implicitly, there are several not completely compatible strands in the Friedmans' analysis. As the title suggests, the Friedmans' advocate an emotional libertarianism. No action is valid which is not the outcome of voluntary action and agreement, the argument made, for example, by Robert Nozick in Anarchy, State, and Utopia. This position does not rest on economic efficiency at all. Still, the Friedmans' training as economists cannot be shed so easily. Economic progress matters a good deal to them, and economic success is a major argument for laissez-faire. They are also aware that economic theory shows that the market cannot always be successful in achieving efficiency, for there are externalities, such as pollution, with which it does not deal."

"The question of criteria of judgment assumes particular force when the Friedmans deal with income distribution. They explicitly and strongly repudiate equality of outcome. But their reasoning is less clear. Part of the argument is that fair allocations are hard to define; but the difficulties of defining freedom are not even mentioned, let alone admitted as an argument against some attempt to achieve freedom."

"The strength of the Friedman's critique of active policy does not lie in general principles or broad sweeps of history. It lies in the itemization of government failures: industrial regulation that is primarily in the interests of the special groups regulated, inefficient post offices, disappointing schools, welfare " messes," the failure of public housing. To some extent the Friedmans document these changes; to a greater extent they rely on current popular perceptions. These failures are in part real, and the Friedmans are not wrong in suggesting that the pursuit of social goals is very apt to be carried on much less efficiently than the pursuit of one's own self-interest. They do not question the theoretical need for internalization of externalities, as in pollution, but argue that the arrangements are bound to be inefficient (actually, they are rather muted on this particular argument, and nowhere flatly assert that the social gains do not exceed the costs). They are strongly opposed to testing drugs for efficacy but do not seem to question testing them for safety. In short, the critique tends to be selective, They are very ingenious at suggesting alternative policies for some problems, such as the voucher system for elementary education, the negative income tax to replace welfare, or the abolition of licensing for physicians. But when advocating comprehensive changes, it is important to consider the effects on the entire system."

"On one hand, they are opposed to any support of academic research by the government, through the National Science Foundation and similar agencies; on the other hand, their book is replete with praise for the voluntary gift-giving for charities and intellectual life by the rich. I assume, then, that they would have no objection to having research in economics and the social sciences solely supported by gifts from the wealthy. That this state of affairs would result in unbiased research is beyond the scope of belief."

"I agree with specific planks in the Friedmans' program, but I remain disappointed at the lack of guiding principles, the casual recommendation of sweeping changes without consideration of their systematic effects, and the one-sided selection of evidence and problems."

"First, I think that his concept of freedom was much too shallow. The idea that low income is a restriction on freedom—something that I think is a fairly elementary point—is something he just never recognized. His idea of somehow equating the market with freedom, well, I don’t think they’re unconnected but to assume it’s a simple matter— as he seemed to assume—is to my mind disregarding the facts of life, and disregarding the values that are put on these ideas. Now Friedman did make some exceptions. He thought extreme poverty was a subject of government policy, but by and large I think this emphasis on freedom is misplaced because it has very little to do with the freedom of the individual, with the individual employee. It was the freedom of the employer, of a minority, that really he was pushing. I think freedom’s important. I certainly wouldn’t say freedom’s an unimportant matter. But the question is: What do you mean by freedom? Expanding the scope by which people can act is an important matter. And it was not just income transfers and other methods. I think Friedman let himself make rather absurd statements, like for example he opposed the licensing of physicians on the grounds that it was a restriction on freedom. So this is an illustration of how his narrow conceptualization of what freedom means led him to kind of absurd statements."

"In fact, the only person to rival Friedman for policy influence in the twentieth century is John Maynard Keynes, who had a strikingly different view of the role of government. Keynes was influential because he advocated more government intervention into what he perceived as poorly functioning private economies caught up in the Great Depression. In contrast to Keynes, Friedman put the main blame for the Depression on government failures, especially of monetary policy. Hence, the Depression did not make Friedman a fan of big government. He also found in the Federal Reserve’s failure to prevent deflation an argument in favor of monetary rules. As the world evolved— with low inflation becoming the major mission of central banks and free markets and secure property rights becoming the main policies to promote economic growth—Friedman surely won the intellectual battle."

"It was actually a gradual process. Certainly Milton Friedman had a great influence on me here. He was by far the greatest living teacher I have ever had. He really opened my eyes to economics as a powerful engine of analysis. Milton Friedman was just number one. He was a great man."

"Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve System. I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again."

"The Bank [of Canada] gave it a college try, it really did. It just doesn't work that way."

"Waiting his time in the 1960s and early 1970s was, however, perhaps the most influential economic figure of the second half of the twentieth century. This was Milton Friedman (1912- ) of the University of Chicago, later of the Hoover Institution on War, Revolution and Peace, a diligent, even indefatigable, advocate of the policy that was to fill the post-Keynesian void, especially in the English-speaking countries. A small, vigorously spoken man, uniquely determined in debate and discussion, entirely free of the doubt that on occasion assails intellectually more vulnerable scholars, Friedman was, as he remains, the leading American exponent of the classical competitive market, which he held still to exist in substantially unimpaired form except as it had suffered from ill-advised government intrusion. Monopoly, oligopoly and imperfect competition played no important part in his thinking. Friedman was a powerful opponent of government regulation and government activity in general. Freedom, he held, was maximized when the individual was left free to deploy his own income as he wished. On the other hand, Friedman, unlike less sophisticated practitioners of his faith, was not wholly indifferent to the freedom that accrues from having income to spend. To this end, he was the author of the most radical welfare proposal in the years following World War II. The income tax, he proposed, should, as always, diminish to zero as the lower income brackets are approached. And then in the lowest brackets it should return income, the amount increasing with increasing impoverishment. This was the negative income tax, a secure minimum income for all. Not many economists of the left could lay claim to such an impressive innovation. Friedman's central contribution to the history of economics was, however, his insistence on the controlling influence of monetary action on the economy and specifically on prices. After a lag of a few months, prices, he held, would always reflect movements in the money supply. So if one controlled the money supply limited its increase to the slowly expanding requirements of trade, the T in Fisher's historic equation prices would remain stable. In a statistically impressive demonstration, Friedman, in company with Anna Jacobson Schwartz, sought to show that this relationship had held, or appeared to have held, long in the past. So, presumably, it must in the future."

"The classical support for as-if models in the social sciences stems from the economist Milton Friedman (1953), who, like the psychologist B. F. Skinner, saw little value in modeling cognitive processes. In contrast, our aim is to understand actual decision processes, not only the outcomes. There is a good reason for this. Without modeling the cognitive blade of Simon's scissors, it is utterly impossible to determine in what environments heuristics succeed, that is, their ecological rationality."

"His views have had as much, if not more, impact on the way we think about monetary policy and many other important economic issues as those of any person in the last half of the twentieth century."

"I don't know what monetarism is. If monetarism just means a good old-fashioned quantity theory, of course it has not failed. If it means the particular version of Milton Friedman, I think it has because he imagines that he can achieve — ascertain — a clear quantity relationship between a measurable quantity of money and the price level. I don't think that is possible. In fact, just about 40 years ago in the opening sentences of my book, Prices and Production, I wrote that it would be a great misfortune if people ever cease to believe in the quantity theory of money. It would be even worse ever to believe it literally. And that's exactly what Milton Friedman does."

"I don't like criticizing Milton Friedman not only because he is an old friend but because, outside of monetary theory, we are in complete agreement. Our general views on what is desired and what is not are almost identical until we get on to money. But if I told him what I said before, that I very much doubt whether monetary policy has ever done anything good, he would disagree. He personally is convinced that a good monetary policy is a foundation for everything."

"You see, in one respect, Milton Friedman is still a Keynesian, not on monetary theory, but on methodology. Keynes, very much against his own intentions, and it still dominates the economic theory, and Milton Friedman is one of the apostles of macroeconomics, which has the effect that while we completely agree on general economic policy, we wholly disagree on monetary policy, because his theory is based on supposed regularities between statistical magnitudes."

"Friedman argued that the sole duty of a company is to its shareholders, not to the interest of workers and surrounding communities. ...Workers may toil their entire lives, communities may tax themselves to create infrastructure a corporation needs, and vendors may invest their entire fortune to supply the corporation—but none of these parties, Friedman said, has significant legal rights or moral claims. The idea was radical. It was not supported by the development of the law, the regulation of business and the advancement of civilization over thousands of years. But in a surprisingly short time, Friedman's ahistorical thinking has come to dominate society."

"Although Humans are not irrational, they often need help to make more accurate judgments and better decisions, and in some cases policies and institutions can provide that help. These claims may seem innocuous, but they are in fact quite controversial. As interpreted by the important Chicago school of economics, faith in human rationality is closely linked to an ideology in which it is unnecessary and even immoral to protect people against their choices. Rational people should be free, and they should be responsible for taking care of themselves. Milton Friedman, the leading figure in that school, expressed this view in the title of one of his popular books: Free to Choose."

"The basic error, which was widespread long before Friedman and the new monetarism, lies in the assumption that regards the money supply as the source of the demand for goods and services."

"Milton Friedman may well be the world's best-known economist. He has turned his unprepossessing stature and manner into a trademark persona; a feisty conservative David battling the Goliath of Big Government. But his influence is not merely a matter of skill at propaganda. It rests on the long campaign that he waged against the ideas of Keynesian economics, a campaign that eventually bore fruit in radical changes in both economic ideology and real-world economic policy."

"On the whole, the monetarism for which Friedman first became famous seems clever, brilliantly argued, but shallow—and perhaps even a bit disingenuous. Friedman's writings from that period have the feel of a smart man who knows what he wants to believe looking hard for supporting arguments."

"Friedman was right, on a very big issue. His insight deservedly raised his prestige and that of the Chicago School of economics to new heights, and gave his earlier, monetarist critique of Keynesianism new respectability. But it is important to realize the limits of what Friedman's analysis of stagflation achieved."

"In the long run, great men are remembered for their strengths, not their weaknesses, and Milton Friedman was a very great man indeed—a man of intellectual courage who was one of the most important economic thinkers of all time, and possibly the most brilliant communicator of economic ideas to the general public that ever lived. But there’s a good case for arguing that Friedmanism, in the end, went too far, both as a doctrine and in its practical applications. When Friedman was beginning his career as a public intellectual, the times were ripe for a counterreformation against Keynesianism and all that went with it. But what the world needs now, I’d argue, is a counter-counterreformation."

"It’s a tribute to the importance of Friedman’s work that questions about his legacy bear so directly on contemporary policy issues. But for that reason it’s also important not to engage in hagiography. Friedman was a great economist, but like every other great economist in history, he was also wrong about some important things."

"Now, I don’t want to put Friedman on a pedestal. In fact, I’d argue that the experience of the past 15 years, first in Japan and now across the Western world, shows that Keynes was right and Friedman was wrong about the ability of unaided monetary policy to fight depressions. The truth is that we need a more activist government than Friedman was willing to countenance. The point, however, is that modern conservatism has moved so far to the right that it no longer has room for even small concessions to reality. Friedman tried to save free-market conservatism from itself — but the ideologues who now dominate the G.O.P. are beyond saving."

"Friedman is the right's Chomsky. Non-experts (can) rarely appreciate the depth of their academic contributions."