Academics From The United States

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

"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."

"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."

"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."

"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."

"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."

"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."

"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."

"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 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."

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

"The business of business is business."

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

"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"

"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"

"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."

"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..."

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

"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"

"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."

"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."

"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."

"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?"

"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."

"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 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 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."

"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."

"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."

"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."

"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."

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

"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."

"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 price system transmits only the important information and only to the people who need to know."

"Prices perform three functions in organizing economic activity: first, they transmit information; second, they provide an incentive to adopt those methods of production that are least costly and thereby use available resources for the most highly valued pur poses; third, they determine who gets how much of the product—the distribution of income. These three functions are closely in terrelated."

"The price system works so well, so efficiently, that we are not aware of it most of the time. We never realize how well it functions until it is prevented from functioning, and even then we seldom recognize the source of the trouble."

"The average income of blacks here is far higher than the average income of all the people in the Soviet Union. The official government definition of the poverty line in the U.S. is higher than the average income in the Soviet Union; it’s higher than the income received by 90 percent of the people on the world’s surface. Now, that doesn’t mean blacks aren’t subject to injustice; of course they are."

"Even the most ardent environmentalist doesn’t really want to stop pollution. If he thinks about it and doesn’t just talk about it, he wants to have the right amount of pollution. We can’t really afford to eliminate it—not without abandoning all the benefits of technology that we not only enjoy but on which we depend. So the answer is to allow only pollution that’s worth what it costs, and not any pollution that isn’t worth what it costs."

"The essence of the problem is that once we begin to allow exceptions for special interests, we move from a system of private arrangements to a political system where everyone’s freedom is limited and government becomes a matter of trying to balance those interests. Nobody really wins under these terms."

"Although I wish the anarchists luck, since that’s the way we ought to be moving now. But I believe we need government to enforce the rules of the game. By prosecuting anti-trust violations, for instance. We need a government to maintain a system of courts that will uphold contracts and rule on compensation for damages. We need a government to ensure the safety of its citizens–to provide police protection. But government is failing at a lot of these things that it ought to be doing because it’s involved in so many things it shouldn’t be doing."

"Just as banks all around the country were closing, the Fed raised the discount rate; that's the rate they charge for loans to banks. Bank failures consequently increased spectacularly. We might have had an economic downturn in the thirties anyway, but in the absence of the Federal Reserve System—with its enormous power to make a bad situation worse—it wouldn't have been anything like the scale we experienced."

"How much attention is paid to agreement between Galbraith and myself in opposing a draft and favoring an all-volunteer armed force, or in opposing tariffs and favoring free trade, or on a host of other issues? What is newsworthy is that Galbraith endorses wage and price controls, while I oppose them."

"Perfect competition is a theoretical concept like the Euclidian line, which has no width or depth. Just as we’ve never seen that line there has never been truly free enterprise."

"We want the kind of world in which greedy people can do the least harm to their fellow men. That’s the kind of world in which power is widely dispersed and each of us has as many alternatives as possible."

"The government solution to a problem is usually as bad as the problem and very often makes the problem worse."

"What kind of society isn’t structured on greed?... So the problem of social organization is how to set up an arrangement under which greed will do the least harm. It seems to me that the great virtue of capitalism is that it’s that kind of system. Because under capitalism, the power of any one individual over his fellow man is relatively small."

"The political principle that underlies the is unanimity. In an ideal free market resting on private property, no individual can coerce any other, all cooperation is voluntary, all parties to such cooperation benefit or they need not participate. There are no values, no "social" responsibilities in any sense other than the shared values and responsibilities of individuals. Society is a collection of individuals and of the various groups they voluntarily form. The political principle that underlies the political mechanism is conformity. The individual must serve a more general social interest — whether that be determined by a church or a dictator or a majority. The individual may have a vote and say in what is to be done, but if he is overruled, he must conform. It is appropriate for some to require others to contribute to a general whether they wish to or not. Unfortunately, unanimity is not always feasible. There are some respects in which conformity appears unavoidable, so I do not see how one can avoid the use of the political mechanism altogether. But the doctrine of “social responsibility” taken seriously would extend the scope of the political mechanism to every human activity. It does not differ in philosophy from the most explicitly collectivist doctrine. It differs only by professing to believe that collectivist ends can be attained without collectivist means. That is why, in my book “Capitalism and Freedom,” I have called it a “fundamentally subversive doctrine” in a free society, and have said that in such a society, “there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”"

"I have been impressed time and again by the schizophrenic character of many businessmen. They are capable of being extremely far‐sighted and clear‐headed in matters that are internal to their businesses. They are incredibly short sighted and muddle‐headed in mat ters [sic!] that are outside their businesses but affect the possible survival of business in general. This short sightedness is strikingly exemplified in the calls from many businessmen for wage and price guidelines or controls or incomes policies. There is nothing that could do more in a brief period to destroy a market system and replace it by a centrally controlled system than effective governmental control of prices and wages. The short‐sightedness is also exemplified in speeches by business men on social responsibility. This may gain them kudos in the short run. But it helps to strengthen the already too prevalent view that the ptirsuit [sic!] of profits is wicked and im moral [sic!] and must be curbed and controlled by external forces. Once this view is adopted, the external forces that curb the market will not be the social consciences, however highly developed, of the pontificating executives; it will be the iron fist of Government bureaucrats. Here, as with price and wage controls, business men seem to me to reveal a suicidal impulse."