Milton Friedman @ 93 vs. The "Anointed Rose" 2005 Interview on China, Inflation, The Federal Reserve

joining me now is milton friedman he is one of the most influential economist and public intellectuals of our time a champion of the free market economy his research into monetary and price theory has changed the way we think about issues like inflation unemployment the money supply he was awarded the nobel prize for economics in 1976 served as an economic advisor to barry goldwater and presidents nixon and reagan he and his wife rose have also been tireless advocate for issues such as drug legalization social security reform and education especially school choice and vouchers this year they celebrate their 50th anniversary of his idea to create school vouchers he is currently a senior research fellow at the hoover institution and professor emeritus at the university of chicago it is an honor to have him back on this program because he is a very young 93. welcome glad to be here it's great to see you i want to look ahead first and then we'll look back for for for the rest of this program tell me how you see today the american economy where there's been some growth beyond expectation and how it fits within the global economy with the dollar gaining more than people expected it to the euro doing worse the rise of china give us a sense of how we look at this well the the united states is at the peak of its performance in its history there has never been a time in the united states when we've had the state of prosperity it's level and it's spread that we've had in the last 10 or 15 years there's never been a 15-year period in which there has been a little as little fluctuation in in prices in in the inflation inflation has stayed around two or three percent or less for the last 15 years it's unprecedented and you give great credit to alan greenspan for that i certainly do i think monetary policy is primarily responsible for it are you surprised uh that the economy has done as well as it has when we are having a record trade deficit the current accounts deficit and record fiscal deficits not at all because neither of those it necessarily impedes our progress the first of all the trade deficit is not it's it's not a deficit in another sense it's a capital surplus you look at the so-called trade deficit and on the books the u.s is a borrower we owe money to the rest of the world but that's because the books are kept in a misleading way if you look not at the capital not at the balance sheet but at the income account and ask how much income are we getting from foreign owned assets from assets that we own abroad right and how much do we have to pay people who own assets here it turns out that the outflow of funds from our to foreigners is exactly equal or i say exactly roughly equal to the inflow although on the books the value of our assets of the assets that we own abroad is less than the value of the assets that they own here on the books it yields as high in income but there are constantly people saying making this argument we don't save enough we borrow too much and we consume too much on the other hand countries in asia especially which have a lot of american dollars lend don't spend and they're in a better position than well but the statement that we don't save as much is because we measure savings not by the these income flows we don't value our assets appropriately or there our foreign owned assets are worth more than they are valued on the books because they are yielding a higher return they are risky assets and that's why the thing the united states has it's a one place in the world where people around the world can go for security for political security and nobody who invests his money in the united states is afraid that it's going to be taken away from them by the government except through legal taxes and so they want our debt because they think the american economy is more stable politically and economically than any other they want no risk money you're let's say you're a chinese entrepreneur and you've got a uh you you've been one of those lucky people who have built up a lot of money do you want to keep it all in china don't you think you want to have an a little no risk fund in the united states you know then i think we are we are the a market for people who want no risk funds okay but there are many people who will argue that it's great danger for us that that that south korea and japan and the united states and and taiwan hold so many american dollars because if you've gone this enchanted they might dump it how would they dump it they would sell it back so what the entry the debt that they have the dollars they have to whom would they sell your point is that there's no buyer well there are buyers of course there's always a buyer at what price but wouldn't that be stable who would lose money on that wouldn't that be destabilizing wouldn't that suggest a lack of confidence in the american economy yes it might but the people who would lose by it would be the foreigners who held that and who dumped those dollars well then are they in a frozen position then so that they they have no closing position they're in a position they want to be in because that's why they're holding these assets because they are free of risk of political risk what happens if they would allow and in general let's suppose foreigners start dumping their assets here they would dump them at distressed prices they would have once it started this line who would buy them the people at home here the people in the united states who had confidence in the united states so what you would have would be that the assets would go from weak hands to strong hands it isn't going to happen because there's no reason for foreigners to dump the dollars but nothing is certain is it i mean certainly in economics of course not nothing is absolutely certain but you can be pretty damn sure of what's likely to happen and what isn't what might put argue the other side what might cause someone to say we're holding too many dollars and and we don't think it's healthy there's only one thing that would cause them to do that and that's if we engage in an inflation but hasn't been monetary authority did not lost its good behavior and started to print too much money that might do it but that's not going to happen some argue that the dollar has been stronger because american interest rates have gone up and that has put uh greater added strength to the dollar do you see it that way yes that has been a factor that has added strength to the dollar but the dollar was rising before that you know the dollar is fundamentally a strong currency and the euro is fundamentally at the moment it depends on the occasion uh right now it's getting it's getting back to where it's it's in it it should be it's been too strong a dollar it's been overvalued the dollar has been undervalued and the euro has been overvalued and that's changing in the recent months that's right and you think that's a long-term trend not a long-term trend but it's a medium-term trend medium is what six years eight years five ten years right when you look around the world what is the impact of the growth rates in china and india on the rest of the world it's all to the good for the rest of the world if you you we are better off if we have prosperous partners than if we have poor partners whom do we want to deal with better who who would you rather deal with someone who has no money and can't buy your stuff or someone who's pretty well off and has something to sell so you'd rather deal with china than south north korea absolutely and there's no political instability at the moment yeah after all there's a fundamental problem in china you have a economic area that is developing in a free-market way you have a political system which is fundamentally collective as an authoritarian and those two clash to tiananmen square and there will be future tiananmen squares those two are incompatible with one another and you have argued that they ought to grow together they ought to go together they will go together i believe one way or the other either you see if you if if if china rejects the free market pattern it faces the fate of north korea if it if on the other hand it moves increasingly toward a free society free political society toward human freedom as well as economic freedom freedom of speech freedom of assembly all of the things we we praise we pray are we cherish and value right now do you believe that because i recently read an article in foreign affairs magazine where two professors tried to just to to argue against the idea that free markets encourage political freedom free markets tend to lead to for political freedom well it's partly you have to be careful about what you mean by political freedom for example consider the case of hong kong before the chinese took it back they had complete economic freedom no tariffs no restrictions on imports they're absolutely complete economic freedom low taxes on the other hand they had zero political freedom in one sense they had eager they had civil freedom they had freedom of speech freedom of talk all of those but they could not vote they were a colony britain and the homeland was britain right and britain was running hong kong but it but it ran it in a free-market way it gave it complete freedom the result of that was that hong kong ended up with both economic freedom and civil freedom but no political freedom is is there going to be a race between japan and between china and india and one is more likely to dominate the other because of the institutions of government i don't see any race between them but i think that the competition then i know i don't china has been much more effective in promoting free markets so far than india has and china has had great results they've had 10 years of 10 per year economic growth india is coming to this late and india it's an interesting case because it has political freedom democracy democracy but it does not have economic freedom meaning what economic freedom meaning that the government that's government there's government control of the commodity a kind of command economy absolutely it's it's a very uh i spent a month or so once in india this was 50 years ago 1955 just exactly yeah 50 years ago i was there supposedly to serve as an economic advisor for the minister for the minister of economics economic finance minister and i wrote a my evaluation in which i said in the paper that was not published until 40 years later that india had tremendous potentials but it was wasting them throwing them all away dissipating them by its government controls but they have government controls in china i mean the oil company that was in trying to take over unicol as you know was 70 owned by the government i know but 70 ownership of the thing nonetheless they do not they do not have the kind of economic controls that they had in india at that time but but telling they don't have price controls they don't have wage controls they don't have controls on what they can produce or not produce and very it's not complete economic freedom by any manner or mean and the government-owned segment of the productive apparatus has been going down very sharply take the example of japan right around 1999 2000 you said japan's coming back in the next several years it hasn't come back as fast as you imagined at that time that's right but it's been coming back and you think the future for japan today as it's beginning to show some muscularity in its economy is what future for japan is pretty good but the fundamental difficulty japan faces is that it has a very low birth rate has no immigration essentially no immigration its population is going to go down sharply and so it's a fresh it's a new thing to observe when a wealthy country starts losing population what's going to happen to it but what about china they had a very strict birth control policy yes they did have a very they do have a very strict birth control policy but china nonetheless is not losing population it's a young country in in japan it's it's getting to be an old country that is a p the number of people being low the the youngsters are getting fewer relative to the old people is there no impact china with its aggressiveness around the world in terms of economic aggressiveness it is now competing with the united states uh to get to sew up energy sites and all of those kinds of things and that's wonderful competition is good wherever you find it it's good absolutely how there's no other way in which you get economic improvement and efficiency absolutely and productivity and productivity right if you look now at oil you know you see look we people worry about we lose workers they say to china that we go and get china but they don't look at what what happens back here if you look at the united states we have a higher the income per capita is higher than it has ever been in our history the stability of the economy is greater than it has ever been in our history we really are in remarkably good shape it's amazing that people go around and and uh write stories about how bad the economy is how it's in trouble how uh his foreign debt is going to kill it or its domestic deficit is going to kill it neither one is going to is going to kill it and the domestic deficit is a bad thing if it reflects an increase in government spending which it partly does the real problem with government is not the deficit the real problem with government is the amount of of our money that it spends how do you feel about the fact that george bush the president of the united states has increased government spending more than bill clinton did i think that's terrible on the other hand i improve his cutting the taxes yeah but you have said in fact you have never seen a time and you want to see taxes cut no that's right what is magical about cutting taxes holding down government spending what's really magical is holding down governments but it doesn't happen look at ronald reagan you're a great friend he cut taxes and spending went up military spending especially but he also brought inflation down he and he laid the groundwork it it's the the improvement in the in our economy dates from the reagan era and it dates from the fact that he we entered the reagan's area in 1980 at with an inflation rate in double digits 10 and 12 percent we had come through the 70s which were a period was a period of stagflation right in which you had high inflation well overall inflation never went to 18 to 20 but some special parts did and interest rates at some points did right and uh then volcker came in or had been in but became chairman and changed policy and volker and and reagan between them no other president in my mind in my opinion would have stood behind volcker to hold down and break the back of inflation the way reagan ronald reagan had the political courage to take the pain his standings his polls went way down yeah and everybody says though if you're going to have to do something like that do it at the beginning of your administration rather than at the end that's right but and he did do it at the beginning and by the time 1083 and two or three came along you set the stage for the really remarkable 20 years that have followed why did you once say that the worst mistake ronald reagan ever made was selecting george bush as his vice presidential running mate because it was no that's not an answer as you would say to your class that's not an answer you're right because at the time in nine this is 1980 and remember we're talking about the first george bush not the current one the uh and in in his campaign for the primary in the primary campaign for the presidential nomination he dubbed economic policy voodoo economics right he was against what reagan wanted to do supply side economics and things like that that's right he said that was voodoo economics and it wouldn't work and if we come to his administration when he became president he promised he said uh read my read my lips but he ended up raising taxes but some will say that raising taxes is what led to contributed to the economic gains made during the clinton administration the eight years of the clinton administration on the contrary the those gains came in spite of having raised the taxes not because of it having raised the taxes you think alan greenspan as i said was the greatest federal reserve chairman ever ever that's right the federal reserve was started in 1914 1913 and there has been no chairman since who said anything like as good and a good an outcome because he was a believer in the impact of monetary policy and because he carefully uh calibrated interest rates and used monetary policy to keep a lid on inflation absolutely because he took the containing inflation as the chief task of the fed he didn't let him see the the fed got into trouble every time in the past and the fed has done you know let me put it this way in the first 75 years of its history the fed on the average was a was a major negative feature in the economy we never would have had the great depression if there hadn't been a fed since then since 1982 or three the fed has been a beneficiary for the economy so that uh i had never had any i had very seldom had anything good to say about the fed before the 1980s but i since alan greenspan took over i've had very little but good to say and what do you think of his successor i think his successor is a very able man and he like greenspan takes keeping stable prices as the major function of the fed and i have a good deal of confidence that he will continue in alan greenspan's path and what is his most important challenge to do just that to make sure that they keep a lid on inflation because it's rising in america well we have been we have been having a little rising it's a good uh you can make a good argument to the fed over ditty some easy money a little that they kept the uh the fund rate down at one percent a little too long uh and you know it's a natural tendency that you you overdo things you almost never go right along like this you go up you go too far because it's hard to calibrate it as well as you might work too hard to and that's his genius that was greenspan's genius and that's the kind of genius that i think he has to have i think that uh he'll have his successor uh ben bernanke will have the same effect well he's a big fan of yours too and we'll forgive him for that i can't blame him for that i don't hold that against him uh you mentioned immigration you're an immigrant yeah my parents were never you born in 1912 they came here they came here from well they came here from what was the hungary when they came here but it was hungry then it was later czech slovakia it is now the ukraine some worry that in the aftermath of 9 11 two things are happening one is that we're keeping out some people that could really contribute to the american uh economy and the american way of like in the way that your parents did and you have and your kids have i think that's true i think the immigration problem is a very difficult problem and there's no easy answer to it at the time my parents came the u.s had completely free immigration and come in from all over the world right you can have that and we should have it if you did not have a welfare state if you have a welfare state and you have welfare arrangements so that people come for well not necessarily for to make a living not necessarily the way our parents and your great grandparents did because they saw better opportunity here but if they come to feed on the state as it were you cannot have infinite you cannot have completely free immigration in principle i'd like to see free immigration but you can't do it in a welfare state are you more libertarian than you are republican i always say i am republican with a capital r and libertarian with a small l all right i want to talk i want to talk about some big questions here beyond the specifics you think this american economy is in good shape do you think the dollar's going to continue to be strong you think the productivity and and the american uh economic model is still to be the the most admired in the world you think the economic machine that is america continues to be strong uh you're not worried about uh whatever shift that might be taking place to asia you think that's good because it'll make for a more competitive environment all of that is where you are that's right and and you have never seen a tax code you don't like right right and you and there's way too much government spending and way too much government power eve for your taste still in 2005. absolutely all right did you win the great intellectual battle you uh as sort of coming out of chicago and the conflict with say john kent galbraith in the area sort of public intellectuals uh and and the conservative movement did you win that great struggle uh that began say with you and then barry goldwater and then ronald reagan and continues through george bush 43. we wanted sure in the intellectual realm because you made what was the minority position the acceptable position yeah it's the acceptable position in words yes but not in practice and moreover the fall of the berlin wall did more than any books that i or anybody else has written to persuade people that that was not the way to run an economy look at what's happened to the asking about the intellect the the whether we won the position socialism used to be defined it's defined today in any dictionary as government ownership of the ownership and operation of the means of production does anybody believe that anymore um that that's the definition of socialism or that that's what so that's a better system i don't think anybody believe that's a better system anybody believe that that's a better system fidel castro but who else very few right right is there anything nobody in russia believes it nobody in russia believes it and russia isn't run that way anymore there's no country in the world that has run that way except for north korea north korea and venezuela maybe well venezuela not yet but it's on the way all right um so in that sense we've won the intellectual battle on the other hand if you look at practice what do you observe around the world that in this respect practice has improved enormously in the countries that were formerly under the soviet soviet union and it's improved enormously in east asia with south korea with china and with others but if you look at the at the west what used to be called the west if you look at practices improved in britain but if you look at the at the continent the germany france italy the social model is of a is of a a promising role for the state is what it is i mean it's a very pride and that role for the state has been growing and not declining even though they're i mean it's one of the great questions in europe today the re-examination of that model and some people say that model has to be ruptured people like nikolai sarkozy who's running for the presidency in france if you look at the situation in the united states government spending in the united states as a fraction of income was about 10 to 12 before world war ii for a century right two centuries other than during wars since the war it was about in the something like 20 or so percent in 1946-78 it is it rose steadily at fl to 40 percent when ronald reagan came into office in 1980 40 of the income and the national income right that's by both federal state and local government and it since reagan was here it's been horizontal it stayed at around 40 or a little under so that what has it done from the time that president bush president president bush took office and today it's gone up gone up yeah boy this can't make you happy no it doesn't you that's what you were citing is right extra spending but uh taken as a whole that period they would argue 911 they would argue in terms of practice we've not so much won the battle that stopped stopped the deterioration but we haven't yet licked it we haven't yet started bringing it down where we want to go where we would like to go where the people the united states would be passed off would be it can cut government spending down from 40 percent of national income to something more like 15 percent of national income does the country have the political will to do that no that's why i'm saying and i'm trying to answer your question of whether we've won that battle and i'm saying in on one level yes but in terms of practice now but there has been this change in mindset so to speak you've been a change big change nobody wants a collectivist as you would argue that's right now do you consider did you consider britain before margaret thatcher a socialist country i mean that would be winston churchill that would be a lot of other people who winston churchill was certainly not okay but he wasn't he was kicked out prime minister well but he came back well came back but very briefly and britain moved increasingly in a socialist direction and it in particular was putting into effect the ownership and operation of the means of production it nationalized the steel industry it nationalized the railroads and so on margaret thatcher denationalized them and turned them back and they've been much more successful and tony blair came in and supported many of her economic policies well blair is a thatcherite in policy blair wright in in in talks so he acts conservative and and talks liberal so to speak uh when you the role of governor is is the world freer today the world is unquestionably fair nobody can deny that so when the berlin wall came down when the soviet union collapsed by definition the world became free the world couldn't become anything other than people in poland and lithuania and in the czech republic in slovakia hungary every one of those every one in every country that was formerly under the soviet union maybe there are some exceptions in those along the border but the irony is a lot of those former communists and their parts of these new governments that are non-commerce of course because after all the communist ability will rise will tend to rise in any kind of a society and able people will tend to play an important role and many of those people were able in this economy in this country and moving back to economics for a second we still have farm price supports that has been something that has been disgraceful to you forever but we now have a trade negotiators trying to do something about it well i'll tell you but he's got a congress to deal with there's been most recently supposedly a success in the central american trade agreement i was asked some time ago if i would write out if i would write a kafta i would ask some time ago if i would write a letter in support of it so before i did that i thought i ought to look at the treaty and so fortunately today with internet it's very easy to do that i downloaded i brought up the treaty i discovered it's a thousand pages long right and every page has exceptions to free trade it's no free it's not a free trade and you could give a one-line definition of what free trade is free trading is you can make absolutely restrictions on trade right you can buy from whoever you want and whatever price is mutually agreeable to you you can sell to whomever you want whether he's in this country or some other country and whatever price is mutually agreeable to you we'll talk about three or four ideas other than that which that's one of the places you have not prevailed changing the mind about price supports of the world and america and the world about price support no no i mean farm supports farm prices we have certainly not prevailed privatization of social security something you've been arguing since gold barry goldwater was running for that's right you haven't succeeded in that it doesn't look like it's going to see in this administration either you you're illustrating what i say when i say we've prevailed in the mindset but not in practice okay let's continue down the list you want to see drugs legalized that's right still do absolutely treat it like alcohol and tobacco right i think people i know in the involved in the world of drugs say i mean by that people are trying to do something about our addiction to drugs and they say it would lead to the destruction of so much human life that would be awful and what's happening now is leading to the destruction of so much human life that's awful how do they justify the united states causing thousands of deaths in colombia in latin america because of our demand for drugs because we cannot enforce our own laws we have laws against the consumption of drugs and we can't enforce them and as long as we don't enforce them there's going to be an inflow of drugs and most of it is going to get through and in the process of doing it we we go to colombia and kill fields right destroy the the the life for livelihood of thousands of people in this country look at the number of people who are in jail uh you know it's it seems to me it's disgraceful see if you legalize it you wouldn't have you wouldn't have people going to prison you wouldn't have you'd have much more closer ability to to deal with as a medical issue absolutely as we deal with tobacco's medical issues no question that more a lot more people more lives are lost from tobacco and come closer than any of the drugs alcohol kills more people a year if there's a good case for prohibiting the use of what are now called illegal trails drugs there's a better case for prohibiting the use of alcohol and tobacco let me talk about that you were in favor of all kinds of deregulation has airline deregulation work for america yes it has it's broad wages it's brought fares down look much of the deregulation is best for the low-income people and not for the high-income people airlines are less attractive as a way to travel for people for you and me but it's more attractive for the great bulk of the people okay uh you also were in favor of eliminating progressive taxation yeah a kind of flat tax you're still in favor of that absolutely that would be better even though some say the more you make the more you ought to pay well you would under a flat tax you play and pay more because 18 of a million is more than eighteen percent of a vibration and now and they don't take account of the fact that it's progressive in name only that in fact there are so many loopholes in the law so many ways of getting around it that very high income people pay less a smaller portion of their income than low-income people do let me go to what many people consider your important contribution to and i assume this is part of why you won the nobel prize you were the recipient of the nobel prize is because you argued and and persuasively that monetary policy was central to the economy to the successful efficient economy and you argued something i remember something called the quantity theory of monetary policy in fact you used to have a license plate that said what i still do we still do all right what is it m v equals p m which is a formula for that money times velocity equals price times output exactly all right but is that the central contribution you have made to economic thought well i have a little that is a part that is part of it i don't like to judge my own i like to leave that to other people this is from the new federal chairman said before you were he was appointed ben bernanke friedman's monetary framework has been so influential that in its broad outlines it has nearly become identical with modern monetary theory it says it right there yeah i think that's a correct statement and that is the principal contribution that well that's a contribution that probably has the most practical effect but you see when you talk about a contribution to economic theory the the things i i've done in the field of uh uh of consumption the theory of consumption right uh things i have done about uh choices under uncertainty uh there are various technical things i've done in economics that from the point of view of economic theory are probably more important you've argued that consumption theory is more important you think is the most important thing you've done no not that it's the most important that is scientifically the best thing ever okay let me talk about people uh i want you to assess people i mean someone said to me if you're 93 you've got nothing to worry about i've got a hell of a lot to worry about yeah but neither to talk i want to mention names and tell me what you think tell me what what their value is why you what's it sum them up ronald reagan he was a great man no question because he was a man of principle and he stuck by his principles and lived by his principles and he was as a person of course he was a charming person and everybody who knew him loved him he nobody who could tell stories of what he could tell them how important is he to the success of quote the conservative movement in america in the last 25 years well i think he's previous century he's tremendously important i think he and margaret thatcher between them are the most have been the most influential uh proponents of free markets and free enterprise in the last century in the last century the most where is barry goldwater well barry goldwater was in a original barry goldwater like ronald reagan was a person of principle who was willing to stick to principles and not uh it was a tragedy uh jfk got got assassinated because a uh if it had been goldwater versus jfk john f kennedy it was they they they were good friends they liked one another right it would have been a good spirited thing it would not have been a mean nasty kind of an election as it actually was with with johnson and who do you think would have what i think kennedy would have won yeah but it would have been a much closer thing but you know goldwater almost pulled out of the race after kennedy was assassinated i know he did and uh but i think he was a great man richard nixon one of the smartest people i've ever met there's no doubt that if you if you were to judge the presidents by pure iq i think nixon would come at the top not very much above reagan reagan had a very high iq too he was much maligned by the people who thought he was uh who was a movie actor couldn't be very smart but uh nixon however did not have the same [Music] same was not as principled as he uh i used to say that our principles were his uh prejudices your principles were his prejudices that if nothing was at stake he would he would go do that but it only took a low price in a low reward in terms of politics for him to will willing to to to go above his principles you never forgave him for wage and price control never no i never did i mean you thought it was just a sellout of the highest order well the last time i saw him was uh not long after wage and price controls and that was the only that was the last time i saw him right after that right after uh jimmy carter well i never hadn't had any contact with jimmy carter i have not got no competence to judge you admires post-presidency some parts of it uh the house building is yeah they have a habitat in the habitat bill clinton president clinton who presided over eight years of economic success yes he did and dramatically reduced the deficit yes left a surplus yes that's right that's a good thing yeah let's see what the reason behind it was the reason behind it was you had a democrat as a president and you had republicans in command at least of the uh of at least one house and then of both houses right uh for during his regime and so you had gridlock and that's why you had such good fiscal performance because there wasn't that much pending yeah because they could they couldn't agree see the best the best thing for to hold down spending is to have a democratic president in a republican congress i saw someone last night i said i'm going out to see you and george olson and they said you lucky man that's what they said to me because you two were viewed as integrity and and people disagree or agree with your ideas but you have been strong in your beliefs and and uh and have an engaging personality the one thing that seems to me you have cared passionately about and i don't where it stands but tell me why you're so committed to vouchers and changing public education well you know i'm no more committed to that than i am to a hundred other things oh really not i mean i thought that was sort of one of some that that was the topic but it's one thing in which i happen to have gotten involved in which i see some chance of doing something no but i think it's a very important issue because i think the us is suffering greatly from the from the from the defects of its educational system we're innocent we have a system in which a quarter or more of the youngsters never graduate from high school we're creating an underclass by the the defects of our educational system and it's not the uh and the reason for those defects the fundamental reason for those defects is that we have a government monopoly that uh something like 85 percent of our kids go to government school run schools no competition no competition it's a monopoly and it's a monopoly that's been taken over by the teachers unions which have a tremendous influence probably the strongest political force in the united states today or the teachers unions something like a quarter or so of the delegates to the presidential democratic presidential nominating convention were teachers who were members of the team how many i think about nearly 25 it may be a little less than that i i won't say but a very large fraction and and and it's so obvious how you ought to cure it because after all what government wants to do in this case is a valid function of government is to promote education it doesn't want to promote buildings it doesn't want to promote schools it wants to promote schooling well if your karma promotes cooling then you're going to spend money if you're going to subsidize it you ought to subsidize the school and not the schools but the students instead we subsidize schools look at it in general you want to subsidize anything do you want to subsidize the producers of that thing or the consumers if you subsidize the producers teachers the teachers the the schools right yeah suppose you want to give people food subsidize food do you want to subsidize the grocery stores or do you want to subsidize the the people who are going to eat the food you ha see food stamps are a form of voucher right and but they don't you're saying subsidize the people who use the goods absolutely so you'd subsidize food stamps subsidizing people who need the food buy the food no no what's the food stamps you are subsidizing the people who buy that's what i mean people who buy the food right and you're not subsidizing the grocery towards itself and and and choice you are subsidizing and vouchers you're subsidizing the people who are getting the education rather than the people who are providing the education you should be but we're we are in fact subsidizing the people who provide the education we're subsidizing the schools not the students and the schools can choose their own students they have a monopoly mostly by as you know by geography and the way to introduce competition in schooling is to say well look the government is willing to spend eight thousand to ten thousand dollars a year on each child for schooling let the let's give each parent a voucher not necessarily for ten thousand say for five thousand because we know that anything government does private enterprise can do for half the cost so and moreover it's a good thing for parents to have some responsibility too and so suppose you gave every parent a voucher for five thousand dollars six thousand dollars something of that order of magnitude and said you can take this and go to school any school you want if you take it to a government school they'll take it as full cost full tuition if you take it to a private school it'll be five thousand dollars and if they charge more you'll have to pay that extra if they charge less we'll put that money in a in a fund for for use later on for college if you did that you would change the character of the education why do you think it's failed because the power of the teachers union that the idea of the performance failed because it's probably teaching you every time we've tried a uh a public [Music] vote on this thing a public poll right your side wins no nine months after the real election after the election before the election our side wins right at the election time it loses okay in between times the teachers unions throw out millions of dollars and go and make all sorts of wrong and false statements they they misrepresent the situation and they're tremendously successful what do you think has been and where have you changed your mind where has milton friedman said i was wrong or i changed my mind new evidence makes me look at this in a new light well i'll tell you one place i used to believe that there was some virtue of an anti-trust action i used to believe breaking up yeah and now i don't really believe it i believe now that the attempt the antitrust actions have on the whole done more harm than good and that the only place where you have real monopolies is where government provides them a number so you look at att or you look at no they didn't win that one though that was the courts that didn't didn't win that yeah well the atnt was broken up and and it was a good thing that it was broken up but the att the almost monopolies uh can prevail only because government supports them the teachers may not the union the teachers unions have a monopoly because of government laws that are favorable to them because mankind humankind's initiative is to be free and to be competitive i think that humankind has it well it's hard to say what humankind's initiative is yeah instinct is though don't you believe that i believe that people want to be free i believe that people want to be responsible for themselves that's what gives them the most satisfaction that they don't like to be run by controlled by other people of course they also like gifts they also like to be uh given things they like to have free lunches and there are no free touches what do you want your legacy to be well i guess i want my legacy to be twofold on the one hand i regard my life as a technical economist as a professional economist as different from my life as a public intellectual those are two very different aspects and i want them to be judged separately when i was asked when i received the nobel prize and i learned at it but learned learned of it by by an accident and that is uh not in the face through official channels normally they give you a call or something yeah they give a call but in this case i wasn't home he gave a call i was on my way to a to michigan to engage in propaganda for a tax and spending limitation amendment to the michigan constitution and we had the group that was that i was going for had a press conference in the detroit athletic club and we came to the park i flew in we came in a car drove in and as i got out of the car we were surprised that there was a big crowd there we didn't think we were going to draw anything like that number of reporters and a reporter stuck a microphone into my mouth and said what do you think about the prize and i said what prize because i hadn't heard anything and one of the things he said what what do you think about the is this the high point of your life is this a a great achievement of your life and i said said i want to be judged not by eight or nine people in sweden but by the economist 25 or 30 or 50 years from now whether they still find my work useful that will be my great the great my great desire so that's one aspect of my life that i would like to be allegedly legacy which really surprised me it's hard to recognize but it's really independent of public policy but the other aspect of my life is that i would like to believe that i will be judged to have contributed to human freedom that freedom is a great objective now if you ask me why do you believe that in freedom so much i don't really know but somehow what i want is human freedom for people to be free to talk to one another to deal with one another to love one another or hate one another and that's what people don't really recognize that that's the great virtue of the of the free market of the private market it enables people who hate one another who don't speak the same language who would fight one another if they had the chance to cooperate together economically we were able to deal with china when china was a communist state even though we thought that that was a terrible arrangement we could still uh cooperate and that's when markets enable people to do they bring freedom with them thank you for doing this well i can say one other thing you might say you you had the good sense to choose a wonderful partner some 63 years ago oh 67 years 57 years ago your wonderful wife i agree with you thank you very much thank you milton friedman we are in san francisco uh interesting that milton friedman lives in this city uh i'm pleased to have him on this program and thank you for joining us for the hour milton friedman by far is my patron saint of economics i have a few takeaways from this uh one was just observing his confidence that the fed would target inflation um that all ended after he passed away janet yellen came in under the obama administration and did not target inflation and jerome powell has not done a very good job either another thing i noticed between milton friedman and thomas soule i think if you keep your mind active thinking about economics you will have longevity i know correlation isn't causation but i tend to like to think that another one that was uh interesting to me china really isn't playing out according to milton's expectations he thought with more capitalism more free trade more business-minded thinking that they would have greater levels of freedom in their economy however i think it's still quite early and things have a long time to play out things move slowly on the political front in china i'm still hopeful things will change and things will be less restrictive for the people the other thing is he was talking about the world's reserve currency being the united states dollar of course we know about the petro dollar all oil is traded in u.s dollars the chinese definitely want the wand to be the world's reserve currency and i'm not so sure if the us dollar can maintain its world reserve currency status at its record spending and record u.s dollar printing that's going on right now inflation is not good and then that leaves bitcoin and when you see major institutional investors like jp morgan and fidelity and bank of america gobbling up all the bitcoin they can and you see major corporations like microstrategy buying up tons of bitcoin and then you see etfs like arc buying up bitcoin it shows you the direction things seem to be going so it's a very interesting hedge and with the finite amount of bitcoins uh realistically there's only about 14 million bitcoins out there it is definitely the least inflationary asset you can find thank you so much if you made it to the end type in mf number one in the comments for milton friedman hey we're at 47 000 subscribers we're almost at 50k keep sharing out these videos and please hit the subscribe and notification bell so you know when the next one comes out i have some really interesting stuff along the way there's one coming out with thomas seoul a very early interview where he's just swearing mad it's it's a treat i don't think it's anywhere else on youtube and you guys are going to love it i truly appreciate all your support thank you so much a number of you have been asking for merchandise so if you haven't seen it yet go ahead and click on that store tab and we have several t-shirts sweatshirts with thomas soul milton friedman and the basic economics logo we'll have some more stuff coming out soon but check it out it's another great way to support the channel and get some cool gear as always i have some great referral links in the description i just wanted to go a little bit more detail on the american express offers if you sign up for the american express cash magnet card with no annual fee once you spend a thousand dollars you'll get a 200 statement credit back and after that you don't ever have to use the card again if you don't want it's an easy way to get 20 back the other one is the amazon mx cards and you can apply for both by the way uh if you're a prime member upon approval they will give you a hundred and twenty five dollar credit to your amazon account you don't even have to spend one dollar on the card if you're not a prime member uh you'll get a hundred dollar credit on your amazon account these are business cards but basically anybody can say they're a business if you sold something on ebay you're a business so go ahead and apply it doesn't even take 10 minutes and get your amazon credits and again you don't even have to ever use the card again it's upon approval no annual fees thanks again for all your support i couldn't be more appreciative we're almost to 50k let's get there if you haven't already please check out and install the brave browser it is the best for speed compatibility and privacy if you're using it already go ahead and hit that triangle up in the corner and it's a great way to show your support for this channel you can also earn basic attention tokens when you use brave which you can convert to bitcoin us dollars whatever you want it's a great 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Channel: BasicEconomics

Views: 27,264

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Id: lzoBPst7DOE

Length: 57min 45sec (3465 seconds)

Published: Sat Jul 24 2021