MILTON FRIEDMAN LECTURE

WEST VIRGINIA PUBLIC POLICY FOUNDATION

WHEELING, WEST VIRGINIA

JULY 30, 2007

To day would have been Milton Friedman’s 95^th Birthday.  When he died in November of 2006 he was the world’s best know economist.  Probably no single individual had exerted more influence during the last half of the 20^th Century than did he.  It was not just his academic brilliance which won his the Nobel Prize in Economics in 1976, but his ability to explain the most complicated ideas in the most understandable fashion.

After his graduate career ended in 1936 unable to find an academic position he worked for Franklin Roosevelt’s New Deal and during World War II in economic planning.  Like most economists of his day he was indoctrinated with Keynesian economics and the belief that markets needed significant help from the government if the public good was to be served.  That is why beginning in 1947 people who knew him were surprised when he began a life long quest to educated the public on the benefits of free markets and the problems with government economic intervention.

 I do not have time to review all his works and ideas but will confine myself to what are, in my opinion his most basic concepts which I will allow him to express in his own words.  Most of these quotations I have taken from his two best known works Capitalism and Freedom (1962) and Free to Choose (1979).  Both these works were completed with his wife Rose.  Free to Choose in 1985 became a public television series which remains as the most watched series of its type.

MILTON FRIEDMAN’S MOST FUNDAMENTAL BELIEF WAS THAT ECONOMIC FREEDOM WAS DEFENSIBLE BECAUSE IT WAS THE SOURCE OF HUMAN PROGRESS.

"Industrial progresses, mechanical improvement, all of the great wonders of the modern era have meant relatively 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 actors as domestic retainers. Ready-to-wear clothing, supermarkets all these and many other modern developments would have added little to their life. The great achievements of Western Capitalism have redounded 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."

“Because we live in a largely free society, we tend to forget how limited is the span of time and the part of the globe for which there has ever been anything like political freedom:  the typical state of mankind is tyranny, servitude and misery.  The nineteenth century and early twentieth century in the Western world stand out as striking exceptions to the general trend of historical development.  Political freedom in this instance clearly came along with the free market and the development of capitalist institutions.”

AT THE HEART OF A MARKET ECONOMY IS PRIVATE PROPERTY

 I think that nothing is as important for freedom as recognizing in the law each individual’s natural right to property, and giving individuals a sense that they own something that they’re responsible for, that they have control over, and that they can dispose of.

 Nobody spends somebody else's money as carefully as he spends his own. Nobody uses somebody else's resources as carefully as he uses his own. So if you want efficiency and effectiveness, if you want knowledge to be properly utilized, you have to do it through the means of private property.

THE MARKET ECONOMY DISPERSES POWER AND PROTECTS INDIVIDUAL FREEDOM

The preservation of freedom is the protective reason for limiting and decentralizing governmental power. But there is also a constructive reason. The great advances of civilization, whether in architecture or painting, in science or in literature, in industry or agriculture, have never come from centralized government."

The central reason why this is true is because such a form of economic organization separates economic power from political power and in this way enables the one to be an offset to the other. I cannot think of a single example at any time or any place where there was a large measure of political freedom without there also being something comparable to a private enterprise market form of economic organization for the bulk of economic activity

"Government power must be dispersed. If government is to exercise power, better in the county than in the state, better in the state than in Washington. If I do not like what my local community does, be it in sewage disposal, or zoning, or schools, I can move to another local community, and though few may take this step, the mere possibility acts as a check. If I do not like what Washington imposes, I have few alternatives in this world of jealous nations."

It is important to emphasize that economic arrangements play a dual role in the promotion of a free society. On the one hand, "freedom" in economic arrangements itself a component of freedom broadly understood, so "economic freedom" is an end in itself to a believer in freedom.

In the second place, economic freedom is also an indispensable means toward the achievement of political freedom.
ESSENTIAL TO A MARKET ECONOMY IS EQUALITY OF OPPORTUNITY

 "I define Equality of Opportunity as the following: Equality before the Law. It is a career open to the talents. No arbitrary obstacles should prevent people from achieving those positions for which their talents fit them and which their values lead them to seek. Not birth, nationality, color, religion, sex, nor any other irrelevant characteristic should determine the opportunities that are open to a person - only his abilities. Equality of opportunity, like personal equality, is not inconsistent with liberty; on the contrary, it is an essential component of liberty. If some people are denied access to particular positions in life for which they are qualified simply because of their ethnic background, color, or religion, that is an interference with their right to "Life, Liberty, and the pursuit of Happiness.

 "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. 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. Freedom means diversity but also mobility. It preserves the opportunity for today's less well off to become tomorrow's rich, and in the process, enables almost everyone, from top to bottom, to enjoy a richer and fuller life."

“It is a striking historical fact that the development of capitalism has been accompanied by a major reduction in the extent to which particular religious, racial or social groups have operated under special handicaps in respect of their economic activities, have, as the saying goes, been discriminated against.  The substitution of contract arrangements for status arrangements was the first step toward the freeing of the serfs in the middle ages.  The preservation of Jews through the middle ages was possible because of the existence of a market section in which they could operate and maintain themselves despite official persecution.  Puritans and Quakers were able to migrate to the New World because they could accumulate the funds to do so in the market despite disabilities imposed on them in other aspects of their life”.

 "The long-range solution to high unemployment is to increase the incentive for ordinary people to save, invest, work, and employ others. We make it costly for employers to employ people; we subsidize people not to go to work.  We have a system that increasingly taxes work and subsidizes no work."

THE MARKET ECONOMY DOES NOT PROMOTE SELFISHNESS BUT COOPERATION

“Selfishness is not myopic selfishness. It is whatever it is that interests the participants, whatever they value, whatever goals they pursue. The scientist seeking to advance the frontiers of his discipline, the philanthropist seeking to bring comfort to the needy, the missionary seeking to convert infidels to the true faith - all are pursuing their interests, as they see them, as they judge them by their own values."

 “The person who buys bread doesn't know whether the wheat from which it was made was grown by a honest farmer or by a dishonest one, by person whose skin is black or whose skin is white. The market is an impersonal mechanism that separates economic activities of individual from their personal characteristics. It enables people to cooperate in the economic realm regardless of any differences of opinion or views or attitudes they may have in other areas”.

 “So the question is, do corporate executives, provided they stay within the law, have responsibilities in their business activities other than to make as much money for their stockholders as possible? And my answer to that is, no they do not”.

 GOVERNMENT PROVISION IS FUNDAMENTALLY FLAWED

 Deficits are bad--but not because they necessarily raise interest rates. They are bad because they encourage political irresponsibility. They enable our representatives in Washington to buy votes at our expense without having to vote explicitly for taxes to finance the largesse. The result is a bigger government and a poorer nation. That is why I favor a constitutional amendment requiring Congress to balance the budget and limit taxation.

I can spend somebody else’s money on somebody else. And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get. And that’s government. And that’s close to 40% of our national income.

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.

 DISTRUST OF THE MARKET STEMS FROM ELITEST CONCEIT

“What most people really object to when they object to a free market is that it is so hard for them to shape it to their own will. The market gives people what the people want instead of what other people think they ought to want. At the bottom of many criticisms of the market economy is really lack of belief in freedom itself”.

The reason it is important to emphasize this point is because intellectuals in particular have a strong bias against regarding this aspect of freedom as important.  They tend to express contempt for what they regard as material aspects of life and to regard their own pursuit of allegedly higher values as on a different plane of significance and as deserving special attention.  But for the ordinary citizen of the country, for the great masses of the people, the direct importance of economic freedom is in many cases of a least comparable importance to the indirect importance of economic freedom as a means of political freedom.

CLOSING

Shortly prior to his death, Milton Friedman was asked how he felt about all the honors he had received and the fame which he had accumulated.  He responded, “The true test of any scholar’s work is not what his contemporaries say but what happens to his work in the next 25-50 years.  And the thing that I will really be proud of is if some of the work I have done is still cited in the text books long after I am gone.”.  There is no doubt in my mind that 25 and 50 years from now he will still be revered and quoted.