Word
Gems
What is a
man but the sum of his thoughts?
Economics:
Milton
Friedman's
Free
To Choose - 1990
#5: Created Equal
Hello there, as they used to say in television. I am Steve Allen. If you don't
know that, it is not going to be a big deal anyway. Millions of people are willing to
spend money to be entertained. You spend a few dollars on a record, a theater concert
ticket, and Michael Jackson becomes a millionaire. I think that is a nice arrangement for
you as well as for Michael Jackson, and for me too. Of course, you also have some special
talents, whatever the job. If you do it well, you make life better for yourself, your
family, and your neighbors.
With a free market, our income is dependent on how much training we might have
had, how well we do our job, and the scarcity of what we have to offer. Lucky for me there
weren't too many other Steve Allens around. But equal opportunity __ that is the American
dream. That is a market economy as Milton Friedman explained earlier in the series.
Over the years I have asked Milton for advice in understanding a number of aspects
involved in economics and politics. He is a great teacher and, of course, a defender of
freedom and individual rights. On the other hand, there are people who think Michael
Jackson and others who earn astronomical incomes, should be prevented from doing so. They
think it would be better off if income/wealth were shared, more or less, evenly. As a
bare, abstract idea, there is something appealing about that. Michael obviously doesn't
need to earn fifty or one hundred million a year, and there are certainly those who have
practically no money at all. So, as I say, there have been philosophers over the centuries
who have tried to diminish poverty by limiting the income at the top end of the scale. The
problem with that admittedly charming idea is that it has never worked.
The Pilgrims tried a form of socialism over 300 years ago. Unfortunately for their
fair minded plans, they prospered only after they were allowed to keep for themselves all
the food they grew, and to use it or sell it as they saw fit.
Now to turn back the clock to the early days of the communist revolution in
Russia, the basic aim again was the share the wealth. But again it didn't work. It had to
be enforced with harsh laws, machine guns and barbed wire. In terms of pure economics, it
was a failure. The end result was near poverty for all.
So what human kind has been so long struggling to achieve is a fair system that
will permit those with special gifts of abilities to accumulate a good deal of money
without, at the same time, turning a blind eye to the sufferings of the poor. No system
can work if there isn't an accumulation of wealth. It just happens that the free market
system is better in that regard that the alternatives. In the ongoing debate on this
issue, it is by no means necessary to argue that the free market system is perfect. It
isn't. It is simply better than the other alternatives because it is the system that
provides us many more choices, certainly much more freedom, and continued prosperity.
Friedman: From the Victorian novelists to modern reformers, a favorite device to
stir our emotions is to contrast extremes of wealth and of poverty. We are expected to
conclude that the rich are responsible for the deprivations of the poor __ that they are
rich at the expense of the poor.
Whether it is in the slums of New Delhi or in the affluence of Las Vegas, it
simply isn't fair that there should be any losers. Life is unfair __ there is nothing fair
about one man being born blind and another man being born with sight. There is nothing
fair about one man being born of a wealthy parent and one of an indigenous parent. There
is nothing fair about Mohammed Ali having been born with a skill that enables him to make
millions of dollars one night. There is nothing fair about Marleena Detrich having great
legs that we all want to watch. There is nothing fair about any of that. But on the other
hand, don't you think a lot of people who like to look at Marleena Detrich's legs
benefited from nature's unfairness in producing a Marleena Detrich. What kind of a world
would it be if everybody was an absolute identical duplicate of anybody else. You might as
well destroy the whole world and just keep one specimen left for a museum. In the same
way, it's unfair that Muhammed Ali should be a great fighter and should be able to earn
millions. But would it not be even more unfair to the people who like to watch him if you
said that in the pursuit of some abstract idea of equality we're not going to let Muhammed
Ali get more for one nights fight than the lowest man on the totem pole can get for a days
unskilled work on the docks. You can do that but the result of that would be to deny
people the opportunity to watch Muhammed Ali. I doubt very much he would be willing to
subject himself to the kind of fights he's gone through if he were to get the pay of an
unskilled worker.
This beautiful estate, its manicured lawns, its trees, its shrubs, was built by
men and women who were taken by force in Africa and sold as slaves in America. These
kitchen gardens were planted and tended by them to furnish food for themselves and their
master, Thomas Jefferson, the Squire of Monticello. It was Jefferson who wrote these
words: We hold these truths to be self-evident that all men are created equal. That they
are endowed by their creator with certain inalienable rights, that among these are life,
liberty and the pursuit of happiness. These words penned by Thomas Jefferson at the age of
33 when he wrote the Declaration of Independence, have served to define a basic ideal of
the United States throughout its history.
Much of our history has revolved about the definition and redefinition of the
concept of equality, about the intent to translate it into practice. What did Thomas
Jefferson mean by the words all men are created equal? He surely did not mean that they
were equal and/or identical in what they could do and what they believed. After all, he
was himself a most remarkable person. At the age of 26, he designed this beautiful house
in Monticello, supervised its construction and indeed is said to have worked on it with
his own hands. He was an inventor, a scholar, an author, a statesman, governor of
Virginia, President of the United States, minister to France, he helped shape and create
the United States. What he meant by the word "equal" can be seen in the phrase
"endowed by their creator". To Thomas Jefferson, all men are equal in the eyes
of God. They all must be treated as individuals who have each separately a right to life,
liberty and the pursuit of happiness.
Of course, practice did not conform to the ideals. In Jefferson's life or in ours
as a nation, he agonized repeatedly during his lifetime about the conflict between the
institution of slavery and the fine words of the declaration. Yet, during his whole life,
he was a slave owner.
This is the City Palace in Jaipur, the capitol of the Indian state of Rajasthan,
is just one of the elegant houses that were built here 150 years ago by the prince who
ruled this land. There are no more princes, no more Maharajas in India today. All titles
were swept away by the government of India in its quest for equality. But as you can see,
there are still some people here who live a very privileged life. The descendants of the
Maharajas financed this kind of life partly by using other palaces as hotels for tourists
__ tourists who come to India to see how the other half lives. This side of India, the
exotic glamorous side, is still very real. Everywhere in the world there are gross
inequalities of income and wealth. They offend most of us.
A myth has grown up that free market capitalism increases such inequalities, that
the rich benefit at the expense of the poor. Nothing could be further from the truth.
Wherever the free market has been permitted to operate, the ordinary man has been able to
attain levels of living never dreamed of before. Nowhere is the gap between rich and poor.
Nowhere are the rich richer and the poor poorer than in those societies that do not permit
the free market to operate, whether they be feudal societies where status determines
position, or modern, centrally-planned economies where access to government determines
position.
Central planning was introduced in India in considerable part in the name of
equality. The tragedy is that after 30 years, it is hard to see any significant
improvement in the lot of the ordinary person.
Ever since the end of World War II, British domestic policy has been dominated by
the search for greater equality. Measure after measure has been adopted, designed to take
from the rich and give to the poor. Unfortunately, the results have been very different
from those that were intended by the high-minded people who were quite properly offended
by the class structure that dominated Britain for centuries. There have been vast
redistributions of wealth but it is very hard to say that the end result has been a more
equitable distribution. Instead, new classes of privilege have been created to replace or
supplement the old. The bureaucracy, secure in their jobs protected against inflation both
when they work and after they retire. The trade unions, who profess to represent the most
downtrodden workers but who in fact consist of the highest paid laborers in the land. The
aristocrats of the labor movement and the new millionaires the people who have been
cleverest most ingenious at finding ways around the rules, the regulations, the laws that
have emanated from over there, who have found ways to avoid paying tax on the income they
have acquired. To get there wealth and there money overseas beyond the hands of the tax
collector. A vast reshuffling, yes. A greater equity, hardly.
The Hoonde Menuin school in the south of England is also a place of privilege.
Musically talented children from all over the world compete for a chance to come here to
study.
Much of the moral fervor behind the drive for equality comes from the widespread
belief that it is not fair that some children should have a great advantage over others
simply because they happen to have wealthy parents. Of course it is not fair, but is there
any distinction between the inheritance of property and the inheritance of what, at first
sight, looks very different. These youngsters have inherited wealth, not in the form of
bonds or stocks, but in the form of talent. That 15_year_old is an accomplished cellist.
His father is a distinguished violinist. It is no accident that most of the children at
this school come from musical families. The inheritance of talent is no different from an
ethical point of view from the inheritance of other forms of property, of bonds, of
stocks, of houses, or of factories. Yet, many people resent the one but not the other.
Or look at the same issues from the point of view of the parent __ if you want to
give your child a special chance, there are different ways you can do it. You can buy them
an education __ an education that will give him skills enabling him to earn a higher
income. Or, you can buy him a business or you can leave him property, the income from
which will enable him to live better. Is there any ethical difference between these three
ways of using your property, or again, if the state leaves you any money to spend over and
above taxes, should you be permitted to spend it on riotous living but not permitted to
leave it to your children? The ethical issues involved are subtle and complex. They are
not to be resolved by resort to such simplistic formulas as fair shares for all. Indeed,
if you took that seriously, it is the youngsters with less musical skills, not those with
more, who should be sent to this school in order to compensate for their inherited
disadvantage.
When the evening started, all of these players had about the same number of chips
in front of them. But as the play progressed they surely didn't __ some won and some lost.
By the end of the evening, some of them will have a big pile of chips, others will have
small ones. There will be big winners; there will be big losers. In the name of equality,
should the winnings be redistributed to the losers so that everybody ends up where he
started? That would take all the fun out of the game, even the losers wouldn't like that.
They might like it tonight, but would they come back again to play if they knew that
whatever happened, they would end up exactly where they had started?
What does Las Vegas have to do with the real world? A great deal more than you
might think. It is one very important part of our life in highly concentrated form. Every
day, all of us are making decisions that involve gambles. Sometimes, they are big gambles,
as when we decide what occupation to pursue or whom to marry. More often, they are small
gambles as when we decide whether to cross the street against the traffic. But each time,
the question is who shall make the decision __ we or somebody else. We can make the
decision only if we bear the consequences. That is the economic system that has
transformed our society in the past century and more. That is what gave the Henry Fords,
the Thomas Alva Edisons, the Christian Barnards, the incentives to produce the miracles
that have benefited us all. It's what gave other people the incentive to provide them with
the finance for their ventures. Of course, there were lots of losers along the way. We
don't remember their names, but remember, they went in with their eyes open; they knew
what they were doing; and win or lose, we society benefited from their willingness to take
a chance.
Lance von Allmen has an idea, he is taking a chance. Who knows, I suppose it is
possible that we might all benefit from it one day, but that isn't why he is taking a
chance. He is doing it just because he wants to get rich. This is his business
headquarters in Las Vegas, empty except for the idea that he shares with his partner who
will handle the production end of the venture when things really get going.
Lance von Allmen: Well, the idea is that if you have an oil spill in the ocean or
in the river, you want to get it under control. What I am going to simulate here __ I am
going to put some of this oil down __ there is your oil spill of major proportions. This
product, what I can do is unfortunately what I can't show you here is if you put this
product down with an application system, you ring the oil spill in such a manner. The
application system will make it much finer and it will control this. I don't know if you
can see what is happening to the oil yet, but it is just literally being drawn into this
stuff as I spray it across the top. It is starting to draw it in. I have way more than I
need. This controls ten times its weight in oil and it will not sink. It has been
chemically treated __ it is cellulose __ it has been chemically treated so that it will in
fact not do anything with the water __it hates water but it loves oil. I don't know if you
can see we have containment devices and that is what we are going to use this with. You
can see that it has just taken a very little amount of this oil absorbing product which we
call Oileater, to pick this up. The nice thing about it is that after that oil spill, we
have the system to do what I am doing with my hand and that is pick all this up. There is
the oil out of the product.
Now, if you want the oil back, that is not a big problem, if I can keep it all
under control. The oil will come out and there we go, allowing it, I don't know if you can
see. What I have done is I have quit my regular job, I have mortgaged everything I've got,
and it is quite a risk to do this, but the product works. You can see it works.
And when it goes I am going to make millions. It's compatible with a lot of other
products and a lot of other systems that are on the market. So, the money factor is the
main thing. Its the kind of thing that when you see it you want to take the risk, it's
just that kind of thing. You know you're going to make a lot of money. People talk to me
and they will say, yeah, but you are crazy, you don't have a job; you don't know where the
next pay check is going to come from; as a matter of fact, I think I have $10.00 in my
pocket right now, but I don't worry about it. I get up in the morning and it is my world.
I own it. I can sit back and say I am losing, or I can sit back and say I am winning. I
can go out and change the odds in my favor.
Friedman: People who are free, make their own choices. These two men do a
dangerous, noisy, filthy job. They don't do it because they like it. They do it because it
is well paid. That is their choice.
This young man has given up any thought of a steady, well-paid career in order to
take a job on a golf course. He wants to become a professional golfer. It is a big gamble
but it is one that he has decided to take.
When people are free, they are able to use their own resources most effectively
and you will have a great deal of productivity, a great deal of opportunity. The major
beneficiaries are always the small man. The man who has power who is at the top of
society, he is going to do well whatever kind of society you have. It is the society which
gives the small man the opportunity to go his way which is going to benefit him the most.
That is why if you ask where in the world do ordinary people have the greatest opportunity
for themselves and their children, it is not in Russian, it is not on the other hand in
India __ it is in places like the United States, like Hong Kong, like Britain as it was,
not so clearly Britain as it is.
For much of this century, the British have tried to use the law to impose
equality, with very indifferent results. The failure of the drive for equality is not
because the wrong measures were adopted; not because they were badly administered; not
because the wrong people administered it. The failure is much more fundamental. It is
because that drive goes against the most basic instinct of all human beings.
In the words of Adam Smith, the uniform, constant, and uninterrupted effort of
every man to better his condition, to improve his own lot and to make a better world for
his children and his children's children. When the law interferes with that pursuit,
everyone will try to find a way around. He will try to evade the law. He will break the
law or he will emigrate from the country. All of those things have happen in Great
Britain. There is no moral code that justifies laws fixing prices or fixing wages, or
preventing a man from earning a living unless he joins a union and submits himself to the
disciplines of the union, or forcing you to buy more expensive goods at home when cheaper
goods are available from abroad. When the law prohibits things that most people regard as
moral and proper, they are going to break the law. Only fear of punishment, not a sense of
justice will cause them to obey the law and when people start breaking one set of laws,
there's a strong tendency for the lack of respect for the law to extend to all. Even to
those which everyone regards as moral and proper. Laws against violence, theft, and
vandalism. Hard as it may be to believe. The growth of crude criminality in Britain owes
much to the drive for equality. In addition, that has driven some of the ablest, best
trained, most vigorous people out of Britain much to the benefit of the United States and
other countries that have given them a greater opportunity to use their talents for their
own benefit. And finally, who can doubt the effect which the drive for equality has had on
efficiency and productivity. Surely that is one of the main reasons why Britain has fallen
so far behind its continental neighbors, the United States, Japan and other countries in
the improvement of the economic lot of the ordinary man over the past 30 years.
Everywhere and at all times, economic progress has meant far more to the poor than
to the rich. Wherever progress has been achieved, it has relieved the poor from
backbreaking toil. It has also enabled them to enjoy the comforts and conveniences that
have always been available to the rich.
During the 19th century, and especially after the Civil War and on into the 20th
century, the idea of equality came to have a much more definite and specific meaning than
the abstract concept of equality before God. It came more and more to mean that everyone
should have the same opportunity to make what he could of his capacities; that all careers
should be open to people on the basis of their talents, independently of the race, or
religion, or belief, or social class that characterize them. This concept of equality of
opportunity offers no conflict at all with the concept of freedom. On the contrary, they
reinforce one another. It is no doubt that the concept, even today, is the most widely
held.
But in the 20th century, beginning especially abroad and at a later date in this
country, a very different concept, a very different ideal has begun to emerge. That is the
ideal that everyone should be equal in income and level of living in what he has. The idea
that the economic race should be so arranged that everybody ends at the finish line at the
same time rather than that everyone starts at the beginning line at the same time.
This concept raises a very serious problem for freedom. It is clearly in conflict
with it, since it requires the freedom of some be restricted in order to provide greater
benefits to others.
The society that puts equality before freedom will end up with neither. The
society that puts freedom before equality will end up with a great measure of both.
DISCUSSION
I am Linda Chavez. I hope you have enjoyed "Created Equal", the last in
the "Free to Choose" series. Joining Dr. Friedman to discuss the concept of
equality are Thomas Sowell of the Hoover Institution and Michael Kinsley of the New
Republic.
Tell me Mr. Kinsley, is individual freedom all that matters or should we be
concerned about the unequal distribution of wealth?
Kinsley: I think, of course, we should be concerned. Let me make two concessions,
however, at the very beginning. Number one, capitalism is an economic system that benefits
everybody, including those at the bottom, as Milton Friedman has so eloquently pointed
out. Capitalism requires incentives; incentives necessarily imply some degree of
inequality. Second of all, as was pointed out towards the end of the show, even apart from
economics, radically leveling experiments have been disastrous for human freedom, . . . .
. . and so on.
Having made those two concessions, I do not think you have therefore said that the
government has no role in promoting equality. Much of the inequality we see around us
cannot be explained as capitalism working its will in text book circumstances. Some of it
is just luck, the most boring example being inherited wealth. Some of it is the result of
economic activity that is capitalist, but is not really productive. I think even Milton
Friedman would concede that there is that category, some aspects of investment banking,
leap up as the obvious example from the 80's. Some is the result of government policy. For
example, auctioning off valuable television licenses. Secondly, meritocracy . . .
Friedman: You may not auction off television . .
Kinsley: Not auctioning, of course . . . giving away television licenses.
Friedman: Right. Right.
Kinsley: Even when capitalism is working in the text book way, increasing
everybody's wealth, much of the qualities that are being rewarded there are essentially
innate. The term meritocracy really disguises that and implies that intelligence, talent
are exactly the same as hard work and initiative. It seems to me that those are very
different categories of reward. So, because of that, I think a certain amount of
government induced redistribution is not a bad idea.
Chavez: But is it really redistribution or Dr. Sowell, is it putting people at the
starting line, as Dr. Friedman said?
Sowell: I am still trying to see the connection between what he said before and
what he said at the end. No. What the government is trying to do is to set up programs to
justify on the assumption that they are equalized. I think the crucial thing is that we
try to create this equality. You don't create the equality, you create something else. I
have been doing studies now for 20 years of programs designed to increase equality. They
increase inequality because even when the programs are designed for disadvantaged groups,
they help the affluent members of disadvantaged groups, while the lower members of those
groups fall further behind than ever before, and not just in the United States __ in
India, to some extent in Malaysia the very same thing is happening.
Kinsley: But would you say that that is a theoretical necessity or is that because
of these specific programs being badly designed?
Friedman: Name a well-designed one.
Kinsley: You designed one __ the negative income tax.
Friedman: I did not design that in the sense in which you mean it. I favor the
negative income tax as a way of getting from where we are now to where I would ultimately
like to be. It is a less bad alternative than our present mess. It is not in and of itself
a good alternative, no.
Kinsley: You wouldn't favor it, but it would not, it seems to me, suffer from the
defect that Professor Sowell sees in the welfare programs we have today of large
bureaucracies of inadvertent beneficiaries and so on and so forth. It would, seem to me,
be possible to redistribute wealth.
Chavez: But is it a good idea to redistribute wealth?
Friedman: It is possible to redistribute wealth. The question is whether in the
process of redistributing wealth, you don't inevitably accompany it by side effects which
have the characteristic that they make things worse rather than better. What happens is
that every time you go to redistribute wealth, you establish a pie there for somebody to
grab. There are lots of people around trying to grab it. They are going to go down to
Washington or the state house or wherever it is and work and try to convert that program
into one which, although it started out fine, almost all of these welfare programs that
you and I now regard as having bad effects, started out fine. The new broom sweeps clean.
Kinsley: I wouldn't necessarily conceded that every welfare program we have now
has entirely bad effects.
Friedman: It doesn't have entirely bad effects . . .
Kinsley: Or even primarily bad effects. My understanding that the Head Start
program is a great success. Now does that come under __ maybe that comes under your
category of equality of opportunity rather than equality of results. Nevertheless, it is a
major government program that is taking tax money and spending it on poor people.
Sowell: I think that if you are going to say that the government should do things
of that sort to help people to help themselves or rise up and meet some standards, what
are the theoretical objections might be to it __ I think the political objections are
relatively minor __ that very few people would argue against. The polls that I see suggest
that almost every segment of the society was supported.
Kinsley: Why is it that even today, 20 or 25 years after it started, Head Start is
only available to a small fraction of the people who quality for it.
Friedman: Thank you. That is our whole point. Because that isn't the kind of
program that can get political support. That isn't the kind of program that brings the
fancy paid lobbyists down to Washington. If you look at what the government spends __look
at what government spends and ask yourself, how much of it can be characterized as being
spent for purposes that you would regard as desirable.
Kinsley: I think you are absolutely right that the government redistribution
programs very often redistribute from the worse off to the better off, or from the middle
to the middle; social security, Medicare, the Farm Price Support program is obviously in
an egregious example of that. But surely, it is conservatives and republicans, the people
who consider themselves in line with Professor Sowell and Professor Friedman who prevented
the expansion of the Head Start program.
Friedman: I doubt it very much. What I think prevented the expansion of the Head
Start program was the ability of the people for these other programs getting in first. Let
me illustrate very directly about the kind of people you represent. The worst program,
from the point of view of taking money from the poor and giving it to the rich, is none of
those you mentioned. It is higher education in the United States. There is no program in
the United States that is so clearly, taxes the poor to benefit the people of the present
rich and of the people who are going to be rich.
Kinsley: You mean the student loan program.
Friedman: It is not only the student __ it is state universities in every state.
It is total government spending on higher education, whether in the form of so-called loan
programs, most of which are grant programs, or in the form of . . . . . . Let me ask you,
which lobby has been more influential, the lobby in favor of expanding that program of the
lobby in expanding the Head Start program.
Kinsley: I am going to dig myself into a hole here, but how far do you push this
logic __ do you put why higher education and not secondary and primary education.
Friedman: I agree on secondary __ I am favor of I think the same thing is true in
secondary and primary except the secondary and primary, from a redistributive point of
view, is not as bad.
Kinsley: Because everyone goes, just about everyone goes.
Friedman: It is compulsory. Personally I am in favor of privatizing secondary and
primary and ultimately getting rid of government subsidy except, and here I would agree
and here I am going to your side that I would agree that there remains a residual
necessity of providing for the children whose parents are, for whatever reason, not in the
position to finance their schooling.
Sowell: I don't think it is accidental that the emphasis has been at the higher
education level when it comes to money. Again, if you look at other countries you will see
the same thing. When they say they are going to help the poor and the down tribe in India,
they do it by allowing preferential admission to medical schools. Well, these people out
there in the villages who don't have enough to eat are not going to go to any medical
schools that they always start at the top. They want to give out the goodies that have the
prestige and the visibility. They are not interested in raising the test scores in some
Harlem school.
Kinsley: Surely, would you say that you would prefer it if society did not offer
an opportunity for a higher education to everyone, whether they could afford it or not, or
would you prefer some other system of accomplishing that goal.
Friedman: You have evaded the question. What's a society? What you really mean is
what I prefer that the government not offer, and the answer is yes.
Kinsley: If government doesn't offer it, how can you be assured that it is going
to happen.
Friedman: Because society does. Look, long before the federal government was
providing subsidies, the state governments were. But even long before that, the earliest
colleges and universities in the United States were established not by state governments.
Harvard, which you went to, was established by private people.
Kinsley: That was not, an opportunity to go to Harvard is not universally
available. Am I naive? My impression was that the GI Bill after World War II, correct me
if I am wrong, gave millions of people who otherwise would not have had the opportunity to
go to higher education, to go. What I would say is, let's have a system where I think
there are abuses of the student loan programs was clearly redistribution, but the basic
principal is that it is the role of government to make sure that everyone has the
opportunity who can quality for and make use of it for an excellent, higher education, is
a good one and you mitigate the redistributive effects of that through the income tax
system.
Friedman: The problem is to get stuck on objectives and not on outcomes. Of course
that would be a desirable outcome. It is desirable that everybody have the opportunity. I
am not questioning that, provided he is willing to pay for it, either before or after. I
do not think there is any justification whatsoever for people who do not go to college
subsidizing people who do.
Kinsley: Surely, I think if you want to set up a system where you loan the money,
you pay it back over the long run, I think that is fine. Surely, a progressive income tax
system roughly approximates precisely that system. The people who go to college have
higher opportunity, they end up making more money, and under a progressive tax system,
they will therefore pay more money over the course of their lives to the government which
will be used to fund this system, among other things. You have sort of reinvented the
wheel here.
Friedman: You mean a graduated income tax system because what is called a
progressive income tax system is not progressive at all. If you look at the actual payment
of taxes by the populace, it is not true fortunately, I would say. The higher income
classes pay a higher percentage of their income.
Kinsley: I am with you on that. You are arguing my side of the fence once again.
Sowell: In other words, you keep telling me how these are wonderful ideas, it is
just that they never work out in practice. It is like the Marxists who are telling us that
Eastern Europe wasn't really socialism. Nothing that ever existed on this earth was ever
really socialism. It is only in their imaginations. At some point, you have to ask
yourself, could it be that this principle cannot work out in practice with human beings as
they exist on this planet?
Kinsley: Let me say two things to that. Number one, I am certainly not saying that
it never works out in practice. I think that, for example, the University of California
higher education system is actually one of the jewels of western civilization.
Sowell: I have taught in that system and it is not.
Kinsley: Do you really wish it didn't exist?
Sowell: Yes.
Friedman: You mean that the jewel of the western civilization that California,
which has the most extensive state system of schooling in the country, should have a
smaller fraction of the youngsters of the appropriate age graduated from college than the
average for the country. That is a fact. Why is it a fact?
Kinsley: Because they are spending too much on Berkeley?
Friedman: No. Because the kids who go to California universities and colleges drop
out. Fifty percent of the people who enter as Freshman in UCLA drop out before they
graduate. Why? Because this is a state system in which you have an entry is essentially
widespread and free, and the result of it is that the quality of the schooling that is
given is very low, it is a place where people go to have a good time, not to have an
education, it is a nice interlude between high school and the real world, and it is
because __ let me ask you something, do you really think that people appreciate something
they don't pay for?
Kinsley: I didn't pay for my higher education and I certainly appreciated it.
Sowell: You are one of the rare people then.
Kinsley: That is not my impression.
Friedman: You will agree in general?
Kinsley: As a general principle of life, certainly.
Friedman: If they don't pay for it, if they get it for nothing, they value it at
nothing. What happens is that insofar as there are any large number of people like that,
any large number of kids who go to college just because it is an easy, cheap, free,
pleasant thing to do, it destroys it for the ones who would like to get something from it.
Kinsley: Whenever the government is giving away things instead of simply
redistributing money, obviously there are inefficiencies. Anything that is free, like
people use too much water if their water isn't metered, higher education no doubt suffers
from the same fact. I want to get to something else that Tom Sowell said __ this analogy
to socialism which is one of the things that sticks in my craw. As I said at the
beginning, obviously there are levels of redistribution that are nightmares and I do not
think you can analogize from socialism to the progressive income tax.
Sowell: No. You missed the point entirely. I was saying that you are making the
argument that they are making which is this is a wonderful idea, it is just that when we
come to specific examples of it, it always ends up a disaster and yet somehow it still
remains a wonderful idea. You mentioned California, I taught there. There is another
reason for the problems of the California system and that is that the people who are in a
position to appropriate the rents, as we say, do so, namely the faculty. These are
research factories. These are not teaching places. I can remember in faculty meetings
whenever I would mention the students or the taxpayers, there would be a knowing smile
that says oh so . . . . and they would tolerate it and go on because it is run for the
professors. I was on the . . . .
Kinsley: Is it your impression that private universities such as Harvard, Yale and
Princeton, are not run for the professors to the same degree?
Friedman: Not to the same degree. They are run for the professors, again, because
all of them are also getting government money. But . .
Kinsley: Surely it is not just that. It is because . . . large bureaucratic
institutions.
Sowell: But before the government money got there, you had much higher teaching
loads. For example, at Columbia, when Bazin wrote this book about the teacher in the
1940's, he mentioned the teaching load at Columbia was 15 semester hours. A rural college
out in the boondocks with no reputation at all would not have people teaching like that.
As you pour more government money in, you've got more and more people doing less and less
teaching.
Chavez: If we can get off the issue of universities and get back to the issue, for
a moment, of income redistribution.
Friedman: A fact of life. A fact of history __ the greatest period of . . . . .
activity in the United States history was in the 19th century when government was very
small. That is when the great bulk of the private colleges and universities were founded,
Harvard was even earlier of course, and that is when you had the Red Cross, the Boy
Scouts, you can name one after another.
Kinsley: Yes, but Milton, there were the level of services to the poor, the level
of redistribution, if you want to call it that, that went on in the 19th century was
obviously far lower than it is today. There was not health care for the poor universally
or even approaching what we have today. There was not education for the poor that there is
today. Now, if you want to say that the government should not be involved in these forms
of redistribution, I think you should have the courage of your convictions and recognize
that redistribution will not take place and not sort of hide behind the hope that private
. . . . . efforts will take care of it.
Friedman: I don't agree with your interpretation of the facts. The great private
nonprofit hospitals were all founded in the 19th century. In many ways, the poor had
better access, the very poor. The saying used to be when I was growing up, this was a long
time ago, before we had this great development, back in the 1920's. The standard saying
was the very poor can get good medicine, the very rich can get good medicine, the people
in between are the ones who are squeezed.
Kinsley: Look, our health care system is a mess for many reasons because it is not
free market, and I have to defer to your expertise, but I find it very hard to believe
that the poor had better access to health care in the 19th century than they have today.
Friedman: Let me give you another example. The immigrants who came from Europe, my
parents and other people, there were very active and effective . . . . . . institutions to
help them out to enable them to get started.
Chavez: Is fairness not an issue at all, should we just give up on this notion,
Dr. Sowell?
Sowell: Well, it depends on what you mean by fairness. If you are talking about
fairness as opportunity, certainly, but that is wholly different from the notion of
redistributing. I am appalled at the notion that there are some people out there who are
permanently called the poor if they are born with a scarlet "p" on their
forehead. The great thing that has happened for the poor in this country is they stopped
being poor. They stopped being poor because you did not have the government control of the
markets that were slowly building up. Now as you begin to add that, now we are talking
about permanent under-classes and again the people who are saying these wonderful things
don't ask, how did it work out? What happened?
Kinsley: My point is a much more elementary one than that. Where you end up in
life's rat race is to a large degree, a function of luck.
Friedman: Absolutely.
Kinsley: It is not a function of talent, talent is luck, as you point out __
inherited wealth/inherited talent, same thing. It is fate and it seems to me that given
that, if there is a way to mitigate fate somewhat with minimum damage to the economy to
the total production of the economy, that is a very good thing to do.
Friedman: Agreed.
Kinsley: You don't have any problem with it in principle. It is only in practice.
Friedman: It is all together different. The difference between us, is that I think
you are far more likely to achieve that with a minimal state and a minimal government,
than you are with a big government. The market should not be interpreted so narrowly. It
includes charitable activity. It was a expression of market activity when Carnegie
established private libraries all over the country. It was a market of private activity.
In a market activity when these nonprofit hospitals were established. My argument is that
a more effective means of achieving our common objectives, our objectives are the same. I
agree with you. Where people end up is tremendously an amount of luck.
Chavez: I hope you have enjoyed Free to Choose and that you will continue to think
about the ideas we have discussed and the way they affect your lives.
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