Both David Boaz and Bryan Caplan recently sent a link to a YouTube audio recording of a talk that Milton Friedman gave in the early 1990s. After his talk came a back and forth between Milton, moderator David Boaz, Hannes Gissurarson, Sally Pipes, and me.
Milton was his usual cogent and clear self, surveying the landscape and focusing on ways that government messed things up in area after area.
I won’t bother giving play by play but I will highlight a few things with a rough estimate of where they appear in the 1 hour and 19 minute audio.
There is an interesting discussion starting at 38:00 about the low quality of programming on TV, with me advising Hannes to get cable and Milton pointing out that the FCC had banned pay TV for years. It reminded me of my first major trip in United States when my friend Clancy Smith and I hitchhiked and took buses from Rockford, IL to Philadelphia and then went on to New York. In the midwest, we saw ads on movie theatre marquee saying “Stop Pay TV.” In New York, as Clancy noted, it was slightly more subtle: “Save Free TV.”
Good discussion of medical care at around 47:00.
At the 58:00 point, Milton says, “No one believes in majority rule as a general principle.” He makes his case well with his 60/40 example.
At the 59:38 point, in a discussion of how you get change that undercuts special interest legislation, David Boaz says, “Mancur Olson’s book The Rise and Decline of Nations made it look like you have to lose a war.”
Interesting discussion around the 1:03:00 point about whether Milton is right that changing the personnel in government doesn’t work. David Boaz gives the Alfred Kahn counterexample.
One argument Milton uses a couple of times in his talk and in the discussion has less force than it used to: he objects to taxing poor and low-income people to help middle- and higher-income people. Given the way the federal tax system has evolved, poor people pay no income tax and even lower-income people pay little or no income tax. It’s a little different at the state level.
Note: The picture in the featured image is from that day. Milton is at the head of the table, Hannes and David Boaz are on the left, with Hannes closest to Milton, and I’m on the right. I assume it was Sally who took the picture. In those days, I don’t think we had timers on cameras and, even if we did, no one had bought a tripod.
READER COMMENTS
Ahmed Fares
Jan 30 2024 at 3:00pm
Monetary policy is a stealth tax on the poor. It does exactly what Friedman objects to, i.e., transferring wealth from the poor who are debtors to the rich who are creditors, thereby widening inequality. To wit:
Posthaste: Interest rates would be 200 bps lower if governments spent less, says Scotiabank
Richard W Fulmer
Jan 30 2024 at 3:55pm
Excellent point. In addition, while the poor pay little or no income tax, they do pay sales, property, and payroll taxes.
David Henderson
Jan 30 2024 at 5:45pm
Actually, unanticipated inflation transfers wealth from net monetary creditors to net monetary debtors, the opposite of what you said.
Richard W Fulmer
Jan 30 2024 at 7:25pm
You’re right, of course. Mr. Fares is correct that inflation is a stealth tax, but it doesn’t just affect the poor. I think that he’s also right that inflation widens the wealth gap, but it does it by inflating nominal asset prices.
Ahmed Fares
Jan 30 2024 at 10:15pm
Richard,
To be clear, I said that monetary policy is a stealth tax.
A progressive tax system is the cruelest tax system because it strikes hardest at poor people. The purpose of taxation is to constrain consumption in order to release resources, to allow the government to provision itself. Taxing the rich doesn’t release resources, which means monetary policy then releases resources from the poor instead. The higher interest rates return to the rich the money that was taken away from them in taxes. The burden of taxes lands on the poor.
To release resources, you need to tax the middle class. You should still tax the rich to reduce their political power, but not for economic reasons.
Thomas L Hutcheson
Jan 31 2024 at 6:27pm
Yes, we do need to tax the consumption of the middle classes more, but we ALSO need to (progressively) tax the consumption of the rich.
As Yglesias sort of alludes to, we should use a VAT to transfer consumption from people is “normal” circumstances to those with time and circumstance circumscribed needs (especially high marginal value of consumption) such as age, sickness, unemployment, child rearing years. A progressive consumption tax would serve to reduce inequalities in consumption arising from genes and luck and (unfortunately, too) hard work and entrepreneurship.
Together, the two should eliminate the deficit.
Ahmed Fares
Jan 30 2024 at 8:49pm
We had unanticipated inflation in Canada due to government spending and Federal pandemic relief to households, as my comment showed. The Bank of Canada hiked interest rates sharply in response. Here was the effect:
High interest rates widen Canada’s wealth gap: StatCan
David Henderson
Feb 1 2024 at 2:42pm
Thomas Hutcheson, wrote:
I don’t know that that’s true but let’s stipulate that it is.
I’m surprised to see you writing this. Frequently on this blog, you advocate cost/benefit analysis to decide whether a government program is worthwhile. By not advocating cutting any federal expenditure, you’re implicitly saying, given your criterion, that every single federal program has benefits greater than costs. Do you really believe that?
Thomas L Hutcheson
Jan 31 2024 at 11:08am
I think ScotiaBank means is that interest rates would be lower if government ran smaller deficits to shift more resources to investment. They could do that by taxing consumption, too.
Richard W Fulmer
Jan 30 2024 at 3:58pm
No doubt there are many examples of exceptional people making significant impacts in the quality of government services. However, for most people and in the long run, incentives win. Bad incentives tend to produce bad results.
Thomas L Hutcheson
Jan 30 2024 at 7:37pm
I just wish people would remember Friedman’s point that inflation (and deflation, and employment, and unemployment) is a monetary phenomenon. It not fiscal policy; it is not COVID, it is not supply chain disruptions it is not greedflation, it is not Putin’s invasion of Ukraine, etc. It how the Fed moves the settings of its monetary policy instruments, taking account of all those things and more.
Ahmed Fares
Jan 30 2024 at 10:33pm
Inflation causes money printing and not the other way around.
Richard W Fulmer
Feb 2 2024 at 9:36am
While it’s true that severe supply constraints can push up prices, they’re not the only thing that does so. What is the cause of a general price rise that occurs without a severe supply constraint? What, for example, drives the Fed’s 2% target inflation?
Also, why does a severe supply constraint create a need to print more money? First, supply constraints usually don’t affect all products (COVID being a notable exception). When the prices of some goods rise, consumers tend to shift their buying patterns, causing other prices to fall.
Second, in response to supply constraints – even general constraints – we want the prices of the most critical goods to rise relative to those of less critical ones, creating incentives to reduce consumption, switch to substitutes, and increase production. Increasing the money supply artificially alters the network of interrelated prices, leading people to misallocate resources. Printing money to “fix” a shortage would almost certainly be counterproductive.
steve
Jan 31 2024 at 3:15pm
Listened to the part on health care. While I was aware of Friedman back then I had just started reading heavily on health care policy and economics and dont remember him being especially influential in that area. As I have said before, when people who dont understand medicine and its history talk about it I think they maker mistakes or end up sounding uninformed. For example he mentioned the cost of a day in the hospital and couldn’t imagine why it costs so much more. Note that the average length oof stay in the hospital was 20.5 days in 1960 and now it is 5.4. We do everything now in 5 days that used to take 20, plus we do tons more stuff. MRI and CT didnt exist. Most hospitals didnt have an ICU. NICUs largely didnt exist.
Just to drive it home let’s look at cataract surgery, maybe our most common surgery. It’s now almost all outpatient surgery. When we took wife’s friend she was there for about 90 minutes, surgery took about 10 minutes. Most fo the time was spent waiting for her drops to work. In the 50s and 60s much larger incisions were used requiring pts to stay in bed for weeks with sandbags to keep one form moving their head. The first week or two of that was often (usually depending upon your circumstances) spent in the hospital. As recently as 1993 at the Naval hospital where i worked an older eye doc admitted his cataract pts for a day or two.
https://www.google.com/search?client=safari&rls=en&q=length+of+hospital+stay+1960+vs+2022&ie=UTF-8&oe=UTF-8
Steve
Mike Wagner
Feb 7 2024 at 9:38pm
I think it was Friedman that said the problem with fiscal and monetary policy is that it works. The problems come in in when determining when and how much to expand or contract. Policy makers often over or undershoot their targets creating more havoc, not the prescribed outcome.
Comments are closed.