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

by Milton Friedman

Next to the military, education is the largest socialist industry in the United States.

The amount spent per pupil in the past thirty years has tripled in real terms after allowing for inflation. Although input has tripled, output has been going down.

If there is any function of government that all but the most extreme anarchist libertarians will agree is appropriate, it is to protect individuals in society from being coerced by other individuals, to keep you from being hit over the head by a random or nonrandom stranger.

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.

I believe a major source of our current lawlessness, in particular the destruction of the inner cities, is the attempt to prohibit so-called drugs. I say so-called because the most harmful drugs in the United States are legal: cigarettes and alcohol.

For decades, total spending on medical care was about 3 to 5 percent of national income. It is now 12 or 13 percent and rising.

None of this means that government does not have a very real function. Indeed, the tragedy is that because government is doing so many things it ought not to be doing, it performs the functions it ought to be performing badly. 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.

The difference is not that our government has been more efficient in avoiding pollution; it is that private enterprise finds that it is not profitable to pollute; it is more profitable to avoid pollution.

the incentive of profit is stronger than the incentive of public service.

Suppose the same group of people start the same enterprise in the government sector and the initial results are the same. It is a failure; it does not work. They have a very different bottom line. Nobody likes to admit that he has made a mistake, and they do not have to. They can argue that the enterprise initially failed only because it was not pursued on a large enough scale. More important, they have a much different and deeper pocket to draw on.

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.

The problem is not that government is spending too little but that it is spending too much. The problem in schooling is that government is spending too much on the wrong things.

The key problem is that we are unable to practice what we preach because of what has happened to the governmental structure. We preach free enterprise to the newly freed communist countries. We tell them to privatize, privatize, privatize, while we socialize, socialize, socialize.

It is an extraordinary tribute to the virtues of the free market that, with less than 50 percent of the country's total resources, the private sector can produce a level of living that is the envy of most of the world.

The United States has a great heritage and a great history. Since the beginning of our republic, every generation has been better schooled than its predecessor and has had a higher standard of living. The coming generation threatens to be the first for which that is not true, and that would be a major tragedy.

QUESTION:

Reagan was a real aberration in the sense that he was the first president in my lifetime who was elected not because he was saying what the people wanted to hear but because the people had come around to wanting to hear what he was saying.

QUESTION:

The Federal Reserve System explained in its 1933 annual report how much worse things would have been if the Federal Reserve had not behaved so well, yet the Federal Reserve was the chief culprit in making the depression as deep as it was.

I once attended a breakfast with Senator Long when he was chairman of the Senate Finance Committee; I remember very well his saying, "You know we never could have adopted by legislation the rates of tax we now impose on low and middle incomes. When those rates were adopted, they were on high-income people, but inflation made them applicable to low-income people."

QUESTION:

QUESTION:

QUESTION:

I do not believe in the concept of a competitive advantage in the global economy. We are not harmed by other people improving their standard of living relative to ours; we are helped. The notion of competitiveness, of which so much is spoken, makes sense for an individual enterprise but it does not make any sense for a country.

Almost all talk about national competitiveness rests on the fallacy of not considering what determines the exchange rate.

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.