Milton Friedman's century

July 31, 2012 is the 100th anniversary of Milton Friedman's birth.  On this occasion we should celebrate the legacy that he has bestowed upon us.  Milton was a champion of limited government and free markets.  His ability to clearly explain the economic principles advocating personal freedom was unrivaled.

His audience was expanded dramatically when he was asked to host a television series “Free to Choose”.  This 10 part series reached millions of viewers and exposed them to the fundamental concepts of a free society.  Rose Friedman (Milton’s wife) described the decision to air the TV series in their memoirs (Two Lucky People, U. of Chicago Press, 1998), "Milton and I have spent much of our life trying to persuade our fellow men and women of the dangers of an intrusive government and the key role that a free competitive economy plays in making a free society possible. Bringing these ideas to the large audience that a TV documentary could attract excited us."

Thankfully Milton’s ideas were not isolated to the USA.  Czech President Vaclav Klaus has this to say: “For us, who lived in the communist world, Milton Friedman was the greatest champion of freedom, of limited and unobtrusive government and of free markets. Because of him I became a true believer in the unrestricted market economy.”  Milton’s books and essays along with the “Free to Choose” documentary were smuggled into totalitarian countries around the world and became a source of inspiration for a generation of freedom fighters.

I consider myself very fortunate to have met Milton and Rose in 2005.  It gave me a great feeling of satisfaction to personally thank both of them for all that they have done to advance our personal freedom.  I hope that you will take some time to visit the websites linked in this post.  Read his words, watch his videos, and most importantly spread his message that we must all be free to choose.

Milton Friedman collection

Ten Fallacious Conclusions

A recent blog post by The Independent Institute succinctly describes our current political predicament.  The blog post can be read at this link:

The Independent Institute blog

Here is the majority of the text:

For the past century in the United States of America, the dominant ideology has been progressivism ....Nevertheless, through all its emotional and intellectual ups and downs, progressivism has retained one central element: its abiding faith that the state can and should act vigorously on as many fronts as possible to improve society both here and abroad.

An economist notes in particular that progressive ideology now embraces the following default conclusions:

1. If a social or economic problem seems to exist, the state should impose regulation to remedy it.
2. If regulation has already been imposed, it should be made more expansive and severe.
3. If an economic recession occurs, the state should adopt “stimulus” programs by actively employing the state’s fiscal and monetary powers.
4. If the recession persists despite the state’s adoption of “stimulus” programs, the state should increase the size of these programs.
5. If long-term economic growth seems to be too slow to satisfy powerful people’s standard of performance, the state should intervene to accelerate the rate of growth by making “investments” in infrastructure, health, education, and technological advance.
6. If the state was already making such “investments,” it should make even more of them.
7. Taxes on “the rich” should be increased during a recession, to reduce the government’s budget deficit.
8. Taxes on “the rich” should also be increased during a business expansion, to ensure that they pay their “fair share” (that is, the great bulk) of total taxes and to reduce the government’s budget deficit.
9. If progressives perceive a “market failure” of any kind, the state should intervene in whatever way promises to create Nirvana.
10. If Nirvana has not resulted from past and current interventions, the state should increase its intervention until Nirvana is reached

The foregoing progressive predispositions, and others too numerous to state here, provide the foundation on which the state justifies its current actions and its proposals for acting even more expansively. Progressives see no situation in which the best course of action requires that the government retrench or admit that it can do nothing constructive to help matters. They see the state as well-intentioned, sufficiently capable, and properly motivated to fix any social and economic problem whatsoever if only the public allows it to do so and bears the costs.

It follows that progressives desire a change in the state’s size, scope, and power in only one direction, regardless of past and present conditions and regardless of whether previous attempts to implement progressive panaceas have succeeded or failed—indeed, if honestly assessed, virtually all of them have failed, on balance. Progressive faith in the state, however, springs eternal.

It is a great misfortune for modern Western countries, and many others as well, that serious challenges to this currently dominant ideology do not exist. The political parties compete for office, each seeking to direct more of the state’s plunder to its supporters, but the ideological differences between the competing parties is almost entirely superficial. All politically potent parties believe in a powerful, pervasively engaged state. They differ only in regard to which specific individuals should steer the Leviathan.

I, Pencil

"I, Pencil" is an incredible essay written by Leonard E. Read that was first published in 1958.

Milton Friedman said this about "I, Pencil": "I know of no other piece of literature that so succinctly, persuasively, and effectively illustrates the meaning of both Adam Smith's invisible hand—the possibility of cooperation without coercion—and Friedrich Hayek's emphasis on the importance of dispersed knowledge and the role of the price system in communicating information that "will make the individuals do the desirable things without anyone having to tell them what to do."

Donald J. Boudreaux puts this essay into perspective: "For its sheer power to display in just a few pages the astounding fact that free markets successfully coordinate the actions of literally millions of people from around the world into a productive whole, nothing else written in economics compares to Leonard Read's celebrated essay, "I, Pencil."

I have decided not to provide highlights of this essay.  Please read this essay in its entirety, you will be enlightened and uplifted:

http://www.econlib.org/library/Essays/rdPncl1.html

Yes, you did build that

On 7/13/12 in Roanoke,  Virgina our President made the following statement during a speech:

There are a lot of wealthy, successful Americans who agree with me, because they want to give something back.  They know they didn’t ---look, if you’ve been successful, you didn’t get there on your own.  You didn’t get there on your own.  I’m always struck by people who think, well, it must be because I was just so smart.  There are a lot of smart people out there.  It must be because I worked harder than everybody else.  Let me tell you something – there are a whole bunch of hardworking people out there.
If you were successful, somebody along the line gave you some help.  There was a great teacher somewhere in your life.  Somebody helped to create this unbelievable American system that we have that allowed you to thrive.  Somebody invested in roads and bridges.  If you’ve got a business. you didn’t build that.  Somebody else made that happen.

Of course President Obama has it exactly backwards. Business people created the wealth that the government confiscated to build infrastructure. The state cannot produce anything. Its very existence comes from the fruits of others.

Everyone wants to live at the expense of the state. They forget that the state lives at the expense of everyone.  - Frederic Bastiat

The Road to Totalitarianism

The Ludwig von Mises Institute recently published an article written by Henry Hazlitt.  This is a brilliant article and the most amazing aspect is that it was written in 1956.  The complete article is at this link:

The Road to Totalitarianism

The following are some of the highlights:

...the greatest threat to American liberty today comes from within. It is the threat of a growing and spreading totalitarian ideology.  Totalitarianism in its final form is the doctrine that the government, the state, must exercise total control over the individual.  The essence of totalitarianism is that the group in power must exercise total control. Its original purpose (as in communism) may be merely to exercise total control over "the economy." But "the state" (the imposing name for the clique in power) can exercise total control over the economy only if it exercises complete control over imports and exports, over prices and interest rates and wages, over production and consumption, over buying and selling, over the earning and spending of income, over jobs, over occupations, over workers — over what they do and what they get and where they go — and finally, over what they say and even what they think.

If total control over the economy must in the end mean total control over what people do, say, and think, then it is only spelling out details or pointing out corollaries to say that totalitarianism suppresses freedom of the press, freedom of religion, freedom of assembly, freedom of immigration and emigration, freedom to form or to keep any political party in opposition, and freedom to vote against the government. These suppressions are merely the end-products of totalitarianism.  All that the totalitarians want is total control. This does not necessarily mean that they want total suppression. They suppress merely the ideas which they don't agree with, or of which they are suspicious, or of which they have never heard before; and they suppress only the actions that they don't like, or of which they cannot see the necessity. They leave the individual perfectly free to agree with them, and perfectly free to act in any way that serves their purposes — or to which they may happen at the moment to be indifferent.

And it isn't too difficult to recognize the totalitarian mind when we meet one. Its outstanding mark is a contempt for liberty. That is, its outstanding mark is a contempt for the liberty of others.  The denial of freedom rests, in other words, on the assumption that the individual is incapable of managing his own affairs.

Three main tendencies or tenets mark the drift toward totalitarianism. The first and most important, because the other two derive from it, is the pressure for a constant increase in governmental powers, for a constant widening of the governmental sphere of intervention. It is the tendency toward more and more regulation of every sphere of economic life, toward more and more restriction of the liberties of the individual. The tendency toward more and more governmental spending is a part of this trend. It means in effect that the individual is able to spend less and less of the income he earns on the things he himself wants, while the government takes more and more of his income from him to spend it in the ways that it thinks wise. One of the basic assumptions of totalitarianism, in brief (and of such steps toward it as socialism, state paternalism, and Keynesianism), is that the citizen cannot be trusted to spend his own money. As government control becomes wider and wider, individual discretion, the individual's control of his own affairs in all directions, necessarily becomes narrower and narrower. In sum, liberty is constantly diminished.

The second main tendency that marks the drift toward totalitarianism is that toward greater and greater concentration of power in the central government. This tendency is most easily recognizable here in the United States, because we have ostensibly a federal form of government and can readily see the growth of power in Washington at the expense of the states....And so deep is the belief in the benevolence and necessity of uniform regulation and central planning that the federal government assumes more and more of the powers previously exercised by the states, or powers never exercised by any state; and the Supreme Court keeps steadily stretching the interstate commerce clause of the Constitution to authorize powers and federal interventions never dreamed of by the Founding Fathers. At the same time recent Supreme Court decisions treat the Tenth Amendment to the Constitution practically as if it did not exist.

The third tendency that marks the drift toward totalitarianism is the increasing centralization and concentration of power in the hands of the president at the expense of the two coordinate branches of the government, Congress and the courts. In the United States this tendency is very marked today. To listen to our pro-totalitarians, the main duty of Congress is to follow the president's "leadership" in all things; to be a set of yes-men; to act as a mere rubber-stamp.  One invariable accompaniment of the growth of Caesarism is the growing contempt expressed for legislative bodies, and impatience with their "dilatoriness" in enacting the "Leader's" program, or their actual "obstructionist tactics" or "crippling amendments." Yet in recent years derision of Congress has become in America almost a national pastime. And a substantial part of the press never tires of reviling Congress for "doing nothing" — that is, for not piling more mountains of legislation on the existing mountains of legislation — or for failing to enact in full "the President's program."

We have now outlined what I have called the three main tendencies that mark a drift toward totalitarianism. They are (1) the tendency of the government to attempt more and more to intervene, and to control economic life; (2) the tendency toward greater and greater concentration of power in the central government at the expense of local governments; and (3) the tendency toward more and more concentration of power in the hands of the executive at the expense of the legislative and judiciary.
To these I am tempted to add a fourth tendency — the pressure for a world state.
The addition of this will doubtless come as a shock to many self-styled liberals and well-intentioned idealists who would regard the establishment of a world state as the crowning achievement of liberalism and internationalism. A little examination, however, will show us that the present pressure for a world state represents a false internationalism and a retreat from freedom. It is, on the contrary, merely the equivalent on a world scale of the pressure for centralized government on a national scale.  This whole tendency makes a travesty of international freedom for the individual, which is the essence of true internationalism. For true internationalism does not consist in compelling the taxpayers or citizens of one nation or the inhabitants of one part of the globe to subsidize, or give alms to, or even to do "business" with, the citizens of any other nation or the inhabitants of any other part of the globe. True internationalism, on the contrary, consists in permitting the individual citizen or firm in any nation to buy from, or sell to, or trade with, the individual citizen or firm of any other nation.

This was Henry Hazlitt view of the road to totalitarianism in 1956.  What would his opinion be of our journey down this road today?

DC Public School Spending

Andrew J. Coulson is the director of the Cato Institute's Center for Educational Freedom.  His studies of the spending by the Washington DC public schools system are enlightening.  He has recently updated the data for public school spending in DC which you can read at the following link:

Census Bureau Confirms: DC Spends $29,409 / pupil

A brief summary of this study:

Back in March of this year I asked my then research intern to contact the Census Bureau and ask where they got their total spending data. It turns out, they got them from a DCPS official. We presented evidence to the Bureau that that DC Public Schools official had missed a few line items when completing the Census Bureau’s forms—to the tune of about $400 million. The Census Bureau agreed and is in the process of obtaining corrected data for the 2008-09 year. In the meantime, they made sure to ask DC officials to include all relevant items when filling out their forms for the 2009-10 school year. The result: Census Bureau data now show DC spent a total of $29,409 per pupil (obtained by dividing total expenditures in Table 1 by enrollment in Table 15). This is just a bit higher than my calculation for the preceding year.

Kudos to the Census Bureau for taking the initiative and getting DC to accurately report its public school expenditures. Now that education reporters can simply open a Census Bureau .pdf file and divide one number by another, I wonder if any will report what DC really spends per pupil? I suspect that they still will not, continuing to mislead the general public, but I would be delighted to be proven wrong.

Oh, and, BTW, this spending figure is about triple what the DC voucher program spends per pupil—and the voucher students have a much higher graduation rate and perform as well or better academically.