Why Government Is the Problem (Essays in Public Policy Book 39)

by Milton Friedman

The major social problems of the United States—deteriorating education, lawlessness and crime, homelessness, the collapse of family values, the crisis in medical care—have been produced by well-intended actions of government.

You can rigidly enforce only those laws that most people believe to be good laws, that is, laws that proscribe actions that they would avoid even in the absence of laws. When laws render illegal actions that many or most people regard as moral and proper, they can be enforced only by brute force.

The basic functions of government are to defend the nation against foreign enemies, to prevent coercion of some individuals by others within the country, to provide a means of deciding on our rules, and to adjudicate disputes.3

Government actions often provide substantial benefits to a few while imposing small costs on many.

The phenomenon of concentrated benefits and dispersed costs is a valid explanation for many governmental programs.

In all cases the incentive is the same: to promote their own interest.

If a private enterprise is a failure, it closes down—unless it can get a government subsidy to keep it going; if a government enterprise fails, it is expanded. I challenge you to find exceptions.

government undertakes an activity that seems desirable at the time. Once the activity begins, whether it proves desirable or not, people in both the government and the private sector acquire a vested interest in it. If the initial reason for undertaking the activity disappears, they have a strong incentive to find another justification for its continued existence.

International Monetary Fund (IMF), which was established to administer a system of fixed exchange rates.

In 1971, after President Nixon closed the gold window, the fixed exchange rate system collapsed and was replaced by a system of floating exchange rates. The IMF's function disappeared, yet, instead of being disbanded, it changed its function and expanded. It became a relief agency for backward countries and proceeded to dig deeper into the pockets of its sponsors to finance its new activities.

At the end of World War II, we had wage and price controls. Under wartime inflationary conditions, many employers found it difficult to recruit employees. To get around the limitations of wage control, many began to offer health care as a fringe benefit to attract workers.

workers had come to regard nontaxable medical care provided by the employer as a right—or should I say entitlement?

That excuse disappeared once wage and price controls were eliminated, but the tax exemption of health benefits continued.

agricultural subsidies. Do the people of this country really want to pay farmers to grow goods and throw them away or give them away at low prices abroad?

restrictions on the import of Japanese cars, restrictions that raised by perhaps $2,000 or so the cost of a car to a member of the public and, incidentally, did not prevent the decline of the U.S. auto industry.

We preach free enterprise to the newly freed communist countries. We tell them to privatize, privatize, privatize, while we socialize, socialize, socialize.

The great virtue of a free market system is that it does not care what color people are; it does not care what their religion is; it only cares whether they can produce something you want to buy. It is the most effective system we have discovered to enable people who hate one another to deal with one another and help one another.