Sunday, November 26, 2006

Milton Friedman: Free to Choose

Over Thanksgiving, I reread Free to Choose in honor of Milton Friedman. The book, first published in 1980, is a classic that lays out a systematic argument for free markets, the tyranny of controls, and the benefits of cooperation through voluntary exchange.

26 years ago, Friedman wrote of the perils of unfunded social security obligations, the sorry state of public education, and of the battle over the definition of equality; i.e, is the goal equality of opportunity or equality of outcome?

Today, his diagnoses of our societal ills remain more valid than ever. In an era marked by the growing power of the Federal government and corresponding erosion of personal freedoms, expanded benefits programs and bureaucracies, and the evergreen debates over the merits of free trade, it is instructive to read Friedman's admonition that increases in government power and control come at great cost to individual and economic freedoms.

Perhaps the most tragic insight is how often good intentions produce deplorable results when government is the middleman. He cites a Theory of Bureaucratic Displacement that helps us understand the juxtaposition between ever growing government budgets, ear marks, and appropriations and the state of public health, education, and welfare. The theory argues that, "in a bureaucratic system increases in expenditure will be matched by falls in production...Such systems will act rather like black holes in the economic universe, simultaneously sucking in resources, and shrinking in terms of emitted production." Education is an excellent example - resources and cost per student continue to go up, while the "production" of well-educated students continues to go down. Poor results lead to increased spending and a vicious cycle is spawned and capital destroyed.

There is no party today that bases its vision on Friedman's work. It is hard to get elected when one argues against the minimum wage and rent control, for school vouchers, against social security where the next generation funds the state's pension guarantees to the prior generation, for self-funded retirement programs, against welfare programs...While politicians opportunistically claim Friedman as their patron saint, it is clear that neither party is willing to follow his precepts for good government.

Laissez-faire arguments that government controls - where someone else spends someone else's money for someone else's benefit - limit freedom and prosperity appear cruel and indifferent to the suffering of hard working people. They are easily dismissed as anti-worker, pro-rich, and impractical. Perhaps more than anyone else in recent history, he helps provide the analysis and human touch that makes free market arguments tangible, while explaining the pernicious impact of government interference of voluntary exchange and collaboration.

Silicon Valley is perhaps the most clear example of the innovation, wealth, and job creation possible when individuals freely cooperate to promote their separate interests. All of us benefit by a system that encourages individuals to pursue their dreams rather than a system that prescribes what jobs we may hold, who we may hire, and what we may work on.

As you read the following, it is hard to imagine a more cogent analysis of our society's condition. Remember this was written in 1979.

Despite massive increases in public spending and the attendant bureaucracy...

"No one can dispute the two superficially contradictory phenomena: widespread dissatisfaction with the results of this explosoin in welfare activities; continued pressure for further expansion.

The objectives have all been noble; the results, disappointing. Social security expenditures have skyrocketed, and the system is in deep financial trouble...As government has paid a larger share of the nation's medical bills, both patients and physicians complain of rocketing costs and of the increasing impersonality of medicine. In education, student performance has dropped as federal intervention has expanded.

The repeated failure of well-intentioned prgrams is not an accident. It is not simply the result of mistakes of execution. The failure is deeply rooted in the use of bad means to achieve good objectives.

Despite the failure of these programs, the pressure to expand them grows. Failures are attributed to the miserliness of Congress in appropriating funds, and so are met with a cry for still bigger programs. Special interests that benefit from specific programs press for their expansion - foremost among them the massive bureaucracy spawned by the programs."

1 comment:

  1. Anonymous11:28 AM

    You blogged: "There is no party today that bases its vision on Friedman's work." What about the Libertarian Party in US and various states, wouldn't you consider them quite pro-Friedman?

    We have been lucky to live in post-Soviet Estonia, which has over the last 15 years been built a lot on Friedman's ideas ( Unfortunately like in most Eastern European countries, the free market economies and attitude of many people are changing towards more government intervention, social welfare and other sins against which Friedman has warned. Capitalism has not been what many people expected and as it takes time to build a strong middle class, many people in lower and middle classes are moving towards more "leftist" ideas.

    Best regards,

    Jüri Kaljundi