Milton Friedman - What is America? (QnA)

how would you reconcile you reconcile your advocacy of open immigration with your support of negative income tax a program which would have an effect have a minimum income for every American they are it's a very good question because of course in that form they are incompatible I agree and that leads back to the question of the negative income tax if you are starting from scratch if you did not have any welfare programs at all if you were back in the situation when you did have open immigration I am very dubious that I would be in favor of a negative income tax I am not in favor of a negative income tax is a good thing in and of itself I am in favor of it as superior to the present welfare mess and as a way in which we can possibly move from where we are now to a situation under what you could have open immigration I agree today you could not have open immigration you could not have open immigration because you do have essentially a guaranteed minimum income whatever you call it you have a guaranteed minimum income in the form of a large number of very varied and different kinds of programs whether you include food stamps aid to dependent children social secur SSI and so on they are a mess they mean that people who are in the same position may get very different benefits depending on how many programs they can qualify for it means that many people have a strong incentive not to work and that by working they only make themselves worse off and so on down the line at the same time you cannot abolish all those programs overnight you have some millions of people whom you have led to become dependent on those programs if you hadn't had the programs they wouldn't have been dependent but there they are now you cannot simply turn your back and say we're going to pull out the rug from under you you have to have some kind of a transitional device and I have always viewed the negative income tax as a way in which you could have a program that would be far superior to the present structure in that it would help people who are poor because they're poor it would help them in a way which would retain an incentive for them to work and at the same time over time you could gradually get out gradually get out of the business by holding the amounts relatively steady while the economy grew and grew away from and then if you started in that direction maybe you could eventually come to a position where it would be possible to have free immigration thank you mr. Friedman how much government intervention do you think is necessary to prevent the rise of Monopoly and oligopoly under the free enterprise system or would it take care of itself if well I believe if you examine that if you examine the sources of Monopoly and oligopoly you will find that almost all those sources are government intervention I think the situation is almost precisely the reverse let me put it in a very simple way suppose I were to ask this audience my favorite question along these lines you have one law you can pass its only purpose is to reduce the extent of monopolies that's its only purpose you have one law what law would be most effective in achieving that end what law would you pass I don't mean any gimmicks you know it's not going to be something in which you can have a law with 4,000 different parts I'm not asking you very complicated question what would you do limit the size of the market that they could well that's one proposal the limit is proposal but you will agree with me I'm sure immediately that mine is a much better one and that's free trade eliminate all tariffs and all restrictions on foreign trade and you enable the world to come in as competition to prevent domestic monopolies wouldn't that do a great deal more good in preventing monopolies than would a limit on the size of enterprises with much less restriction in human freedom now if you ask yourself ask yourself where do monopolies come from in the United States the most important and the strongest monopolies are unquestionably those that derived from governmental privilege the monopolies of a TV license granted by the government at a zero price that's a source of monopoly privilege it also has been a source of wealth for some notable Americans the grant of a the grant of a tariff protection with the steel industry in the United States have any kind of monopoly or oligopoly position if we weren't able to get government to impose impose restrictions on imports of foreign items and so on the trade union monopolies they get their strength in their support from davis-bacon act walls Healey act other governmental measures that interfere with competition by others it's very hard in fact I have tried to I have tried to consider and George Stigler is a greater authority on this than I so we maybe we ought to get him in to add to this what private monopolies there are that have been able to maintain themselves over any long period of time without government assistance and I have myself only been able to construct two one is an international one the De Beers diamond monopoly it really is an extended maybe George can tell us the answer but it has been successful over a very long period and the second was a new york stock exchange not more recently because since 1934 it's had the help of the sec but before 1934 from about the Civil War to 1934 so far as I know it had no government support and yet it did maintain an effective monopoly but almost every other case you have temporary monopolies developed and if the government doesn't come in to shore them up they fall to pieces the railroads became a monopoly only because they were able to get the Interstate Commerce Commission established trucking is a monopoly because the ICC keeps out competitors and you can go down the line and find then one hypothetical monopoly case after another derives from governmental assistance and support so I think the answer to your question and you and I have the same objective here his life government intervention not more thank you I very much enjoyed your example about the pencil but I raised a very serious question in my mind is that there's only so many trees to get that pencil from and there's only so much steel to be mined now how in a free enterprise system go about creating more trees they only grow so fast or still can only be discovered that's a very very good question I remember once about 15 or 18 years ago I was on a private farm in which they were planting a crop which was going to have a yield a hundred years from date that crop Worth's trees it was a farm in Sweden which was a tree farm and they were planting trees and they were doing it for private enterprise purposes and now you will say to me how in the world can the market do that there's nobody who's going to live 100 years ah but if I plant a tree and it's one year old well its value will be a little higher than if it isn't there at all if it's two years old will be worth still more if it's three years old it'll be still worth still more so I as an individual planting those trees don't have to look to my length of life I am creating value every year as those trees mature and the closer they come to the time when they can be used for the purpose of making prep pencils the greater they value the value they have so I have a strong incentive to invest in those trees now when it gets comes at the time when I want to use that money that I've been saving and accumulating they I say money I mean those resources those physical assets I will sell it to somebody else maybe he'll hold it another five years in the same way if you go back to the tree example if if you own a tree farm how fast does it pay you to cut it does it really pay you to cut it down to the ground right now not at all that depends on what's going to happen to the price of wood in the future see the price system is a very subtle and sophisticated thing because it also gives you information about whether you should save things for the future if it looks as if something is going to be very scarce then it will be to your incentive to hold on to it and not to let it go and that will drive up its price immediately and that will give people an incentive today to consume less of it take trees no matter the fact is that the total amount of trees is not finite the total amount of trees is infinite because you can plant it you can grow it you can harvest it and unless I am mistaken there are more trees being harvested today than there was at 50 or 75 or 100 years ago the volume or wood production has gone up not down it's really a mistake to suppose that you've got a finite you see again if you'll pardon me you're involved in the same mistake I mentioned before they fixed pie idea the zero-sum game idea there isn't a finite amount of trees out there how much trees it will pay people to grow depend on what they expect to shoot your demand for trees to be if somebody discovers some way of having a substitute for trees that are half as expensive then the forest will disappear for that purpose if on the other hand trees become more valuable well then there will be planted and grow same thing with steel with iron ore and with other things people are really you know this kind of nonsense that you hear from the Club of Rome and similar engineers about finite physical resources setting a limit to economic possibilities is really a bunch of nonsense most of the value of our product most of our output doesn't consist of raw materials at all the total cost of the raw materials in our national income is under ten percent of the total national income most of that value comes from here not from there okay thank you thank you in your opening comments or you made some some reference to ethnic separation and the melting pot well it seemed that you've spoken to spare edgington's as to the as to ethnic solidarity you please comment on that sure I'll be glad to I believe it's highly desirable for people to be able to pursue their own values to have whatever ethnic values they want provided they do it voluntarily and do not interfere with the freedom of others to do it also we want a society of variety and diversity we want a society in which people can can can celebrate their own special ethnic backgrounds but that's a very different thing from a society in which there are somehow which somehow takes ethnic characteristics as a criterion for preference or lack of preference for a society which moves away from the doctrine of colorblindness to the doctrine of so-called affirmative action that's the problem the problem is you see this is one component of a very much broader problem you cannot achieve in general good ends by bad means and the end the desire to correct past discrimination the desire to improve the conditions of people is an action and to enable people of all colors Creed's backgrounds to have a more even story it's an admirable blend but that end is corrupted when you use the wrong methods to achieve it and the methods of force and coercion or in my opinion the wrong method that do corrupted and often don't use reacts against you don't you think it's through ethnic solidarity that many minority groups were able to make advances in the American society not in the slightest if you look at the way in which ethnic minorities made advances it was not through ethnic solidarity it was through the free market you can take any group you want to whether you take for example the group obviously I've been closest to her the Jews how did the Jews make their one only in the competitive areas of the American economy how did the blacks make their way only primarily in the competitive areas though laws what have been the greatest hindrance hampered in those areas where government has supposedly been doing something for there is no area in American life in which the blacks are more disadvantaged in the kind of schooling they can get why because it's provided by the government the minimum wage laws are supposed to be to help the poor to help the disadvantaged they are the they are the most anti-negro laws on the books why do we have unemployment rates of forty to fifty to sixty percent for black teenagers because the law says it is illegal for an employer to hire them at a wage which corresponds to their productivity and to their worth and he can only hire him if he's willing to pay him charity it's a law that he must discriminate against people with low skills first we give him lousy government school so they have no skills and then we make it impossible for him to get job training training on the job by saying to employers it's illegal for you to hire them and that's why if you look at the record you know this is a recent phenomenon if you go back to the immediate post-war period before the minimum wage was biting the unemployment rate for black teenagers and white teenagers is roughly the same today it's two or three times as high for black teenagers if you go back to that period the fraction of black teenagers in the labor force was higher than of white teenagers today it's lower why that's almost entirely a result of the minimum wage law plus are very inferior plus a very inferior form of governmental education again where what has been the source in the focus of racial discrimination the craft trade unions why because they have gotten governmental monopoly powers essentially that has enabled them to keep people out what is the what is the activity the commercial activity which has had the greatest degree of exclusiveness of blacks and in this case also of Jews no doubt for decades it was banking why because banks had a franchise from the government you will search long and hard before you find any minority that as effectively had its rights protected or its opportunities expanded by government intervention and its behalf try to find an example okay but isn't it often through solidarity of a group that they are able to fight government intervention such as in or any groups intervention in their rights such as overthrowing quota systems like well let me see let me separate issues I'm not have no quarrel two ethnic solidarity of course in the sense of helping one another in no doubt by a feeling of identification and of assisting one another they have helped one another of course but the particular aspect you're taking us is to say that one evil raises another evil I agree with you that once you start on the route where you turn to government to control the conditions of entry then people who want to fight against bad government discriminations have no other choice but to go through the same political mechanism so I agree with you that they have but that's it as the lesser evil not as a positive good ok dr. Friedman uh in relation to your statements as far as Mexican immigration go I'd like to make the following comment and that is that it seems to me that Mexican immigrants have a choice between on one hand staying in Mexico and getting what life they can which to me seems like trying to evade starvation as long as possible or crossing the river and then taking the job that they have available and what I'm wondering is is this choice a choice at all and is it not equivalent to the gun against the head that you were talking about as absent from the tree holding the gun the capitalists in Southern California who owned on the contrary it's a matter in your image it would be the Mexicans who are holding the gun well because he's denies him the opportunity in Mexico there aren't enough capitalists in Mexico I suppose none of jobs available obviously they have two bad choices that doesn't mean that one isn't better than the other well you must distinguish sharply between the somebody giving you a choice which is not a very satisfactory in somebody imposing something on you nobody is holding a gun to the head of these people and saying they should come to California they are coming there because they believe they can have a better life for themselves and their children they can't have a better one yes but is it a life or as you said yourself no American would would like to do these jobs not the no American would like too many Americans would be perfectly willing to if that were their only alternatives but the Americans have better opportunities fine you how did the Americans get to have those opportunities by being American citizens that way no no by initially going through stages similar to that which the Mexicans are going through so they didn't they you know people don't come full-blown into the world the nations don't come full-blown into the world with skills and capital and so on that all has to be derived through a long historical process thank you then what's the alternative if you say well we're willing to have the Mexicans in only if they can be supported at the level at which the Americans are supported then you're condemning them to stay in Mexico mm-hmm but it still drunk to don't hurt them in order to help them isn't it true that the the wine growers in Southern California would prefer to have these Mexicans working at this at the rate they are working at then they would to have Americans coming in demand higher wages because their cuz of the other words they refer to pay lower wages rather than higher wages you'd like to pay lower prices for the things you buy rather than higher prices of course that's the whole system that's exactly the system and you say if you say to the if you say to the Mexicans you may not offer to work for lower wages then you're denying them the only weapon they have but our Jasin that's why equal pay for equal work laws are a source of apartheid you know the basic source of apartheid in South Africa was the insistence by two equal pay for equal work the equal of the women who go around today urging equal pay for equal work are being anti-feminist they don't intend of it but that is the effect of their policy because if there is any activity in for which for any reason a male is preferable to a female or vice versa the only weapon the less productive sex has is to offer to work for less and if you deny them that opportunity you're assuring yourself that you're going to have all male jobs are all female jobs or white jobs are all black job but aren't you also condemning them to stay that way not at all not at all the typical course if you go back to American history by taking these low paid jobs a great many people not all but a great many people were able to develop skills and activities accumulate a little skill a little capital a little knowledge improve their lot become advanced in the stage and get to a higher level of productivity and get a higher income that's been the typical way up the ladder for most of the people who came in here was a way up the ladder from my parents for your parents or grandparents or great-grandparents I don't know when and that's the way in which unfortunately there's no way in which you can son immediately propel people to the top of the ladder okay thank you very much thank you you spoke a few times you mentioned a distribution of wealth sure but most of why I've heard you talking about has been about distribution of income rather than about the distribution of wealth yeah now you wouldn't argue at least like kopi wouldn't that the person in let's say sure but say is genetically inferior say to the person in America it's rather through the purely arbitrary circumstance of birth that he's in the country with a less developed economy and or in a family that doesn't have as large a share of the capital and that's that not something that he's to blame for well I'm not saving anyone even if the free market system equitably works and everyone progresses an equal amount that person who started out with less a lesser share of the capital is still going to end up with a lesser share of the capital and there's nothing in the free market system that's going to enable him to make up for what was a purely arbitrary deficit in the first place and given that the kind of people who become successful capitalists do not become that way by giving away their wealth voluntarily isn't it necessary to forcibly redistribute wealth before you can begin to operate under a capitalist system no it is not now the let's examine this argument because of course it's true there's no justice in the distribution of income or wealth I never would argue there is those who are wealthy don't deserve to be wealthy any more than those who are poor deserve to be poor it's pure accident and we might but if you start to look at things that way you're going to go down the wrong line because you're going to get back into this kind of a situation of destroying the good things destroying what is possible in the search of an impossible ideal the only way in which you can redistribute effectively the wealth is by destroying the incentives to have wealth and the question is what is the way what is the system which will offer those people who are so unlucky is to be born without good positions what is the system which will offer them the greatest opportunity one possible way of redistributing the wealth without affecting the incentives to earn as much income as possible is simply to have a 100 percent inheritance tax but since that won't effect the incentives it's only after the person I date anyway I beg your pardon your - I'm afraid I don't know the family you come from I don't know but as you grow up you will discover that this is really a family society and not an individual society we tend to talk about an individualist society but it really isn't it's a family society and the greatest incentives of all the incentives that have really driven people on have largely been the incentives of family creation a family of pursuing of establishing their families on a decent system what is the effect of 100% inheritance tax the percent of and 100% inheritance tax is to encourage people to dissipate their wealth and high living what care are they that the harm in that is that where do you get the factories where do you get the machines where do you get the capital investment where do you get the incentive to improve technology if what you're doing is to establish a society in which the incentive is for people who if they have our accident accumulates and wealth to waste it in frivolous entertainment you know the thing is that the thing that is amazing if people don't really recognize is the extent to which the market system has in fact encouraged people in the naval people to work hard and sacrifice in what I must confess I often regard as an irrational way for the benefit of their children one of the most curious things to me and observation is that almost all people value the utility which their children will get from consumption higher than they value their own here are parents who have every reason to expect that their children will have a higher income than they ever had and they scrimp and save in order to be able to leave something for their children I think you are sort of like a bull in a china shop if you talk about the eliminate 100% inheritance tax having no incentive effects it would destroy a continuing society with destroying society well you're saying which there are links from one generation to the name you're okay I'm mr. Friedman referring to the statements that you made about women who abdicate equal pay for equal work gee I thought I'd get a rise out of that soon delighted to have it and yes okay I just would like to know if you're insinuating or perhaps you know point-blank ly saying that women and other minorities skills are inferior to those of those now holding those jobs and that they need to go through a period where their skills need to be improved and therefore deserve to be paid less no I don't think desert has anything to do with it I'm not affirmed first of all I think desert is an impossible thing to decide who deserves one nobody deserves anything thank God we don't get what we deserve but but I'm not saying that at all I'm saying a very different thing I'm saying that the actual effect of requiring equal pay for equal work will be to harm women if women's skills are higher than men's in a particulars are recognized to be higher the law does no good because then they will be able to compete away and can get the same income if their skills are less for whatever reason maybe it isn't because they're saying it's their sex maybe it's because they were out of the labor force maybe it's for other reasons and you say the only way you can you are able to hire them is by paying the same weight then you're denying them the only weapon they have to fight with if the unwillingness of the men to hire them is because the men are sexist are what's the phrase racist sexist pigs or whatever if that's the only reason they want to hire nonetheless if you want to make it costly to them to exercise their prejudice if you say to them hmm you have to pay the same wage no matter whether you pay will hire women or men then here's mr. sexist pig it doesn't cost him anything to hire men instead of women however if the women are free to compete and to say well now look I'll offer my work for Less then he can only hire men if he bears a cost if the women are really good as a man as good as a man then he's paying a price for discriminating and what you are doing not intentionally but by misunderstanding when you try to get equal pay for equal work laws is what you are doing is reducing to zero the cost imposed on people who are who are discriminating for irrelevant reasons and I would like to see a cost imposed on I'm on your side but you're not Oh

Channel: BasicEconomics

Views: 270,245

Rating: 4.9252801 out of 5

Keywords: liberty, Milton Friedman, Economy, Economic, Freedom, Economics (Field Of Study)

Id: QN1sdZX9bbY

Length: 28min 37sec (1717 seconds)

Published: Sat Apr 14 2012

Reddit Comments

[u/78fivealive]

Thought this was very provocative in that "Equal Pay For Equal Work" was front and center at the DNC. In particular:

Sexist pigs... if that's the only reason they won't hire women, you want to make it costly to them to not hire them. If you say you have to pay the same wage whether you hire men or women, it doesn't cost him anything to only hire men instead of women. However if the women are free to compete, and to say I'll work for less, then he's paying a price for discriminating.

[u/[deleted]]

I bet this guy is a hit around here.

[u/[deleted]]

Completely proven wrong by empirics, women had the same if not higher productivity levels in many industries and were paid 68 cents to the dollar, and also- why is Friedman such a jerk- he doesn't even try to maintain a level of politeness just all condescending and smug- yuck.