David R. Henderson  

Friedman in 1946

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Mr. Schultz: Friedman, how do you summarize what we have said this afternoon?

Mr. Friedman: Two very different kinds of techniques are available for lessening the income inequalities of the world. On the one hand, we can use direct techniques--the rich can share their wealth with the poor by gifts and grants and by freer migration. On the other hand, there are the indirect techniques of promoting freer international trade, export of capital, technology, and know-how.
For the near future, we must use the direct techniques; but, for the long future, the indirect techniques are likely to be far more effective. They strike at the root causes of inequality and benefit the rich and poor alike.

This is from "Can World-Wide Income Inequalities be Lessened?" A Radio Discussion by Milton Friedman, Theodore Schultz, and Louis Wirth, NBC Radio, December 22, 1946. Friedman was an associate professor of economics at the University of Chicago. He had received his Ph.D. from Columbia University that same year. Schultz was professor of agricultural economics at the University of Chicago. Wirth was professor of sociology at the University of Chicago. Friedman won the Nobel Prize in economics in 1976; Schultz, who was 10 years older than Friedman, won it in 1979.

After my office burned down in 2007, Milton's secretary, Gloria Valentine, heard about it and invited me to "raid" his office at Hoover. Milton had died 3 months earlier. One of my "finds" was a bunch of transcripts of NBC radio shows on which Milton spoke. My guess is that that's one of the first situations in which he got to practice saying things clearly and succinctly.

I found three things particularly interesting about this conversation:
1. Everyone referred to everyone else by his last name.
2. Milton didn't totally dominate the discussion.
3. Milton wasn't as gung-ho on immigration as he later was. Recall that his big concern, in his last decade or two, about allowing immigration was that the extensive welfare state in the United States would attract people who came for welfare rather than to work. But in 1946, the welfare state was much less extensive. There were no food stamps and no Medicare or Medicaid. Also, notice that above, he counts freer migration in a list of direct techniques by which the rich can share their wealth with the poor. He doesn't point to the fact that the rich can benefit by freer immigration, although, interestingly, in the other part of the transcript, he does claim that the main benefit from immigration to the United States is to Americans, not to the country losing the immigrants. (Strangely, he leaves out the main beneficiaries: the immigrants themselves.) Also, notice in the above he thinks of freer immigration as a shorter term measure and does not see immigration restrictions as a root cause of inequality. I'm not beating on him. It's just that I find it interesting that immigration just didn't seem to be on his radar that much. I think he represented the profession. My guess, and it's only a guess, is that the median economist today is more pro-immigration than the median economist of 1946.


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COMMENTS (3 to date)
Steve F writes:

"Also, notice in the above he thinks of freer immigration as a shorter term measure and does not see immigration restrictions as a root cause of inequality."

Isn't this correct? Haven't lots of different countries achieved similar levels of equality with vastly different immigration history?

David R. Henderson writes:

@Steve F,
Isn't this correct?
No.
Haven't lots of different countries achieved similar levels of equality with vastly different immigration history?
Yes, but the discussion was about worldwide inequality, not within-inequality.

Tanstaafl writes:

I'm very sympathetic to immigration -- but that in spite of thinking that it IS a form of transfer. Wealth creates positive externalities, and poverty negative ones. The gains of exchange are, of course, mutual, but their absolute value is rather low by 'rich' measures.

Friedman, anchored in the real world as he was, must have seen immigration as it happens now here in Germany: it's a gift and grant paid in kind to desperate people, and Merkel let them in and risked her career because it was the only decent thing to do, short term, not because this is the most economical solution for everybody.

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