Yes, sir?
Dr. Friedman, is there an economic system now or historically that has allowed free
enterprise alone to determine which direction the economy goes? And secondly- I have a three-part
question. Okay, fine.
Secondly, in economics you have resources and how to best use these resources is a value
judgment, but it seems to me you can have either free enterprise decide or government
decide or some combination. Then don't you think a combination would be the best alternative?
And thirdly, if I can remember it, isn't there some benefit to having the government steal
our money? Which is what they do effectively; they'll hold a gun to our head and say pay
us 40 percent of your income or go to jail. They take this money and they give it mostly
to government employees. Well, the government employees spend it. The marginal propensity
to consume is pretty high. So the people who were robbed have to do something creative
to get the money back, and isn't this creative activity the real wealth of . . . ?
Well, I take it that they would have to be still more creative if 98 percent were being
spent by the government. (laughter)
No, the third part of your thing is just pure fallacy from beginning to end,
(laughter) ... because if those people who are now government
employees were employed in creative activity and productive activity they would also be
spending their money, and we'd have a greater total around. All you're doing...let's suppose
for a moment- take the extreme case, that that 40 percent is being used just to have
people sit around. The fact that they spend their money doesn't alter the situation. The
only product there is is what the 60 percent produce, and that 60 percent is divided among
100 percent. If those 40 percent were also producing goods, then there would be more
goods to go around among everybody. You are just involved in a fallacy of looking at dollars,
which is important sometimes, instead of looking at the real product, the goods and services
that people produce and people consume. Spending isn't good; what's good is producing. What
we want to have is more goods and services. And as I say, the obvious indication that's
clear is that if your logic were right, it would apply for 50 percent, 60 percent, 70,
90, 98, 100 percent, and obviously you would see that that would be a bunch of nonsense
at that stage. It is desirable to have some money spent by
government for those things, those services that we believe we can get more usefully and
more effectively through government. If people are getting their money's worth, fine. That's
why it's very desirable to have governmental expenditures take place at as local a level
as possible, because you as a citizen of a small community can judge whether you are
getting your money's worth. You can decide that you want to spend it. But when it comes
to the federal government you tend to think that you are spending somebody else's money,
and you are in a way, but he's spending yours. Now let me go back to the first two items.
Is there any example of a society in which the fundamental determination of the direction
of activity was determined by free enterprise, by free competition? Of course, most of history,
most of societies today. Government does have 40 percent of our income that it spends, but
it wastes half of it, so that as an effective matter 80 percent of our resources are being
determined by free enterprise now. And if I go back to the whole period of the nineteenth
century, to the whole period of the great growth of the U.S.; to Britain in the nineteenth
century, the period when Britain emerged as a leader of the nations, at the height of
Britain's power as the leading nation in the world, at the time of Queen Victoria's jubilee--in
1899 I think it was or something- celebrating the fiftieth anniversary, the golden jubilee
of her reign--when Britain ruled the waves and had an empire on which the sun never set,
total government spending in Britain was 10 percent of the national income. So of course
there have been many examples over time in which free enterprise has dominated and predominantly
been the major source of determination. Today it's true in Hong Kong, in Taiwan, in many
countries around the world. Alright now, your second question is: does
not the allocation of resources involve value judgments and isn't it better to have that
value judgment shared by government and the people? Who is government? What's government?
Is that something other than you and me? Is that something other than us operating through
a different mechanism? Who can make value judgments? Only people. Resources don't make
value judgments; governments don't make value judgments; people make value judgments. And
the question is: what is the most effective way in which we as people can jointly, cooperatively
express our values? Now, we express some of them individually in the family at home, separately,
people, you and I alone. We express some of them by doing things for ourselves. We express
some of them through voluntary groups--Boy Scouts, churches, charitable organizations.
We express some of them through cooperation on a broader scale- on a free market through
business enterprises that serve as intermediaries between people selling their productive services,
producing products and selling the products. We express some of our values through doing
things through government, and there is nothing wrong with doing that, provided we keep in
control and don't let the government become the master instead of the servant.
And the real problem is, in my opinion, that as we move from the local community to the
state, from the state to the federal government, it becomes increasingly difficult for us to
control the mechanism we have established and that mechanism tends to control us. That
was the great wisdom of the Founding Fathers of this country, of the people who wrote the
Constitution. That constitution was designed to limit government's powers in order to preserve
the freedom of the individual, and what has happened in the past fifty years is that the
fundamental character of the Constitution has really been changed. We have broadened
enormously the conception of what is a governmental power and what is not, and have departed from
that limited government until we have created a Frankenstein, an unlimited government that
threatens to destroy us.
I love Milton Friedman
I'm a little bit less of a localist but it's basically me_irl