People From New York City

"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."

"Governments never learn. Only people learn."

"There is no place for government to prohibit consumers from buying products the effect of which will be to harm themselves."

"The society that puts equality before freedom will end up with neither. The society that puts freedom before equality will end up with a great measure of both."

"Society doesn't have values. People have values."

"Whether it is in the slums of New Delhi or in the affluence of Las Vegas, it simply isn't fair that there should be any losers. Life is unfair — there is nothing fair about one man being born blind and another man being born with sight. There is nothing fair about one man being born of a wealthy parent and one of an impecunious parent. There is nothing fair about Muhammad Ali having been born with a skill that enables him to make millions of dollars one night. There is nothing fair about Marlene Dietrich having great legs that we all want to watch. There is nothing fair about any of that. But on the other hand, don't you think a lot of people who like to look at Marlene Dietrich's legs benefited from nature's unfairness in producing a Marlene Dietrich. What kind of a world would it be if everybody was an absolute identical duplicate of anybody else. You might as well destroy the whole world and just keep one specimen left for a museum. In the same way, it's unfair that Muhammad Ali should be a great fighter and should be able to earn millions. But would it not be even more unfair to the people who like to watch him if you said that in the pursuit of some abstract idea of equality we're not going to let Muhammad Ali get more for one nights fight than the lowest man on the totem pole can get for a days unskilled work on the docks. You can do that but the result of that would be to deny people the opportunity to watch Muhammad Ali. I doubt very much he would be willing to subject himself to the kind of fights he's gone through if he were to get the pay of an unskilled docker."

"[I]t is very hard to achieve good objectives through bad means. And the means we have been using are bad in two very different respects. In the first place, all of these programs involve some people spending other people’s money for objectives that are determined by still a third group of people. Nobody spends somebody else’s money as carefully as he spends his own. Nobody has the same dedication to achieving somebody else’s objectives that he displays when he pursues his own. Beyond this, the [welfare] programs have an insidious effect on the moral fiber of both the people who administer the programs and the people who are supposedly benefiting from it. For the people who administer it, it instills in them a feeling of almost Godlike power. For the people who are supposedly benefiting it instills a feeling of childlike dependence. Their capacity for personal decision making atrophies. The result is that the programs involved are misuse of money, they do not achieve the objectives which it was their intention to achieve. But far more important than this, they tend to rot away the very fabric that holds a decent society together."

"The strongest argument for free enterprise is that it prevents anybody from having too much power. Whether that person is a government official, a trade union official, or a business executive. If forces them to put up or shut up. They either have to deliver the goods, produce something that people are willing to pay for, are willing to buy, or else they have to go into a different business."

"Is there some society you know that doesn't run on greed? You think Russia doesn't run on greed? You think China doesn't run on greed? What is greed? Of course, none of us are greedy, it's only the other fellow who's greedy. The world runs on individuals pursuing their separate interests. The great achievements of civilization have not come from government bureaus. Einstein didn't construct his theory under order from a bureaucrat. Henry Ford didn't revolutionize the automobile industry that way. In the only cases in which the masses have escaped from the kind of grinding poverty you're talking about, the only cases in recorded history, are where they have had capitalism and largely free trade. If you want to know where the masses are worse off, worst off, it's exactly in the kinds of societies that depart from that. So that the record of history is absolutely crystal clear that there is no alternative way, so far discovered, of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by the free-enterprise system."

"They think that the cure to big government is to have bigger government... the only effective cure is to reduce the scope of government - get government out of the business."

"There's a sense in which all taxes are antagonistic to free enterprise … and yet we need taxes. We have to recognize that we must not hope for a Utopia that is unattainable. I would like to see a great deal less government activity than we have now, but I do not believe that we can have a situation in which we don't need government at all. We do need to provide for certain essential government functions — the national defense function, the police function, preserving law and order, maintaining a judiciary. So the question is, which are the least bad taxes? In my opinion the least bad tax is the property tax on the unimproved value of land, the Henry George argument of many, many years ago."

"[A] society which is socialist cannot also be democratic, in the sense of guaranteeing individual freedom."

"You can only aim at equality by giving some people the right to take things from others. And what ultimately happens when you aim for equality is that A and B decide what C should do for D, except that they take a bit of commission off on the way.”"

"In my opinion, a society that aims for equality before liberty will end up with neither equality nor liberty. A society that aims first for liberty will not end up with equality, but it will end up with a closer approach to equality than any other kind of system that has ever been developed."

"Keep your eye on one thing and one thing only: how much government is spending, because that is the true tax. Every budget is balanced. There is no such thing as an unbalanced federal budget. You're paying for it. If you're not paying for it in the form of explicit taxes, you're paying for it indirectly in the form of inflation or in the form of borrowing. The thing that you keep your eye on is what government spends. And the real problem is to hold down government spending as a fraction of our income. And if you do that, you can stop worrying about the deficit."

"Let me take the example which is today the greatest sacred cow of them all—Social Security. Was there an overwhelming demand for Social Security in the 1930s when the law was adopted? Far from it. There was no public demand for it, it had to be sold. How was it sold? By the slickest devices of Madison Avenue, by imaginative packaging and deceptive labeling. Social Security was sold as an insurance scheme. It is not an insurance scheme. There is very little relationship to the amount of money any one individual pays and the amount of money he is entitled to receive. Social Security is a combination of a bad tax system with a bad way of distributing welfare… If you look at the tax system, who could defend a wage tax, a tax on wages up to a maximum, a tax on work, a tax which discourages employers from hiring people, and discourages people from going to work; a tax which is borne by the lowest wage group, workers? It is a regressive tax. You could never in a million Sundays… have gotten such a tax passed as a tax."

"The reality is that if you look at every program that the government has adopted in the direction of extending its scope, it took an enormous propaganda campaign by special propaganda groups to get those measures passed. There was no underlining public demand for those measures. On the contrary, the demand had to be created, it had to be developed, it had to be produced. And it was created, it was developed, it was produced, by people… who sincerely wanted to see an expansion in the scope of government."

"The great enemy of human freedom is the Government. By taking money out of our pockets and spending it, it destroys our freedom."

"It's nice to elect the right people, but that isn't the way you solve things. The way you solve things is by making it politically profitable for the wrong people to do the right things."

"That is a widespread myth, that it is possible to spend money with nobody paying for it. You have everybody screaming that we ought to have new, bigger, more generous government programs. Where are we going to raise the money? Tax business. But business corporations can’t pay any taxes. A corporate executive may sign the check, but where does he get the money? From his stockholders or from his customers or from his employees. Unlike the federal government, he doesn’t have a printing press in his basement. So the only way he can pay money to the government is imposing a burden on somebody. Government cannot spend money at nobody’s expense."

"This leads to my next myth—the myth that government can spend money at nobody’s expense. What was really involved in that last story was that somehow the local people do not pay out the money coming down from Washington somebody else does. Of course, the truth is that the money makes a round trip between Florida and Washington, and there is a discount taken off for cash as it passes through Washington. Some of you may remember that wonderful description of government by the French economist, Frederic Bastiat, who said that government is that fiction whereby everybody believes that he can live at the expense of everybody else."

"The elementary truth is that the Great Depression was produced by government mismanagement. It was not produced by the failure of private enterprise, it was produced by the failure of government to perform a function which had been assigned to it."

"In this day and age, we need to revise the old saying to read, "Hell hath no fury like a bureaucrat scorned.""

"One of the great mistakes is to judge policies and programs by their intentions rather than their results."

"If we have system in which government is in a position to give large favor - it's human nature to try to get this favor - whether those people are large enterprises, or whether they're small businesses like farmers, or whether they're representatives of any other special group. The only way to prevent that is to force them to engage in competition one with the other."

"I say thank God for government waste. If government is doing bad things, it's only the waste that prevents the harm from being greater."

"I want people to take thought about their condition and to recognize that the maintenance of a free society is a very difficult and complicated thing and it requires a self-denying ordinance of the most extreme kind. It requires a willingness to put up with temporary evils on the basis of the subtle and sophisticated understanding that if you step in to do something about them you not only may make them worse, you will spread your tentacles and get bad results elsewhere."

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

"They had cliche answers but only to their self-created straw-men. To exaggerate only slightly, they had never talked to anyone who really believed, and had thought deeply about, views drastically different from their own. As a result, when they heard real arguments instead of caricatures, they had no answers, only amazement that such views could be expressed by someone who had the external characteristics of being a member of the intellectual community, and that such views could be defended with apparent cogency. Never have I been more impressed with the advice I once received: "You cannot be sure that you are right unless you understand the arguments against your views better than your opponents do.""

"Inflation is the one form of taxation that can be imposed without legislation."

"The problem in this world is to avoid concentration of power - we must have a dispersion of power."