David R. Henderson  

Milton and Rose Friedman on Inequality

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An excellent book review... The Popularity of Silly Method...

Last week my group of students who work their way through readings had our last formal meeting. Good news: they decided over drinks afterwards that they want to continue the meetings informally next quarter and one of them suggested calling it "The Dead Economists Society."

For our last readings, we covered Chapters 5 and 6 in Milton and Rose Friedman's Free to Choose. They are "Created Equal" and "What's Wrong with Our Schools." As supplementary readings, we covered Murray Rothbard, "Egalitarianism as a Revolt Against Nature" (for Chapter 5) and Armen Alchian, "The Economic and Social Impact of Free Tuition" (for Chapter 6). We did them in reverse order and so didn't cover Chapter 5 on equality as thoroughly as any of us probably would have liked.

But here's what I found interesting. In the 15 minutes or less that we devoted to the chapter on equality, three out of six students zeroed in on this passage from Chapter 5:

A society that puts equality--in the sense of equality of outcome--ahead of freedom will end up with neither equality nor freedom. The use of force to achieve equality will destroy freedom, and the force, introduced for good purposes, will end up in the hands of people who use it to promote their own interests.
On the other hand, a society that puts freedom first will, as a happy by-product, end up with both greater freedom and greater equality.

In the view of all three, this was a nice summation of their message.

Why do I find this so striking? Two reasons. First, it is the quote I zeroed in on and was planning, even before our meeting, to blog about. Second, years ago, I had a conversation with Bob Chitester, the producer of the Free to Choose TV series. Out of all 10 1-hour shows in the series, the one item he highlighted as his favorite was a shortened version of the above. Notice, in fact, that this is what he highlighted on this blog.


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CATEGORIES: Income Distribution



COMMENTS (10 to date)
Ross Levatter writes:

Wouldn't "The Dead Economists Society" restrict the reading assignments?

David R. Henderson writes:

@Ross Levatter,
Either that, or we would have to hire a hit man before each meeting.

Mike Donahue writes:

Dead Economists are a good place to start.

Pajser writes:

I think that Leninist countries in Eastern Europe succeeded to build more egalitarian societies, i.e. GINI coefficient was significantly lower.

http://wsarch.ucr.edu/archive/books/tausch/spar5.html

Tracy W writes:

Pajser: and a number of people were willing to risk their lives to escape those more egalitarian societies.

Pajser writes:

Tracy W: European capitalist regimes had some important advantages over Leninist regimes, no doubt. But Friedman's prognosis wasn't right. His talk from Stanford 1978 can be found on Youtube under "Liberty and Equality?" Friedman believed that re-distributors will abuse their power to increase their own wealth. They certainly did, but not that much. Modern elite managers and capitalists in Eastern Europe are many times (100-1000?) wealthier than elite party cadres. It is surprising that Friedman said that in 1970's and that libertarians still believe he had the point.

Arthur_500 writes:
Friedman believed that re-distributors will abuse their power to increase their own wealth. They certainly did, but not that much. Modern elite managers and capitalists in Eastern Europe are many times (100-1000?) wealthier than elite party cadres.

I think we need to compare Apples to Apples. Take Bill Clinton as an example. His Presidency is in the past tense so we are discussing history rather than bashing current individuals.

Mr. Clinton never really had a job outside of politics. He really had little skill set that would be valuable in the private world. In other words, his income potential would be relatively low.

I believe I read that when he took the Presidency he had only worked for jobs paying less than the national average wage - even as governor. However, by the time he departed the Presidency he was purchasing million dollar properties and displaying the trappings of wealth.

This from an individual who was concerned about the poor and minimum wage, access to healthcare, etc.

I would suggest that he did use his power to increase his own wealth far beyond what he could have done in the Private sector. Certainly I would suggest comparing his skill set to possibly a school guidance counselor [meeting with individuals, listening, and working to get them where they want to be] and looking at his ultimate earnings would be more applicable to comparing him to a corporate leader.

Mark V Anderson writes:

Pajser -- You may be right that those societies that emphasize equality may have slightly more income equality. But those who go into politics are usually not looking for more income (although some are), but instead looking for the privileges of those with power.

The USSR did not have much inequality of income, but the inequality of power was enormous, higher than any free market country. Even in more democratic countries, those countries with big governments (seems like everywhere these days) yield great power to politicians. Those in the top 1% of political power have much more power than the accumulated total of the bottom 50%.

Tracy W writes:

Pajser: and yet, despite this reported greater equality, people were moving from Communism to capitalism, not from capitalism to Communism.

As for wealth distribution, the elite in Communist societies had less wealth around to redistribute to themselves.
Think, for example, of Bill Gates's wealth. Whatever you think of the merits of Windows or MS-DOS, Bill Gates got rich because he sold millions of copies to rich people in developed nations - poor people in poor countries just made illegal copies.

ThomasH writes:

The quote is probably true but also pretty irrelevant in the 2014 context. (Maybe it was useful when first announced.) It is far more important to focus on which policies one uses to promote equality -- progressive taxation, EICT, and drug law reforms are good; rent controls, "affordable" housing set-asides, and minimum wages are not -- than the relative priority one accords in the abstract to "freedom" and "equality."

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