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What Would Milton Friedman Say?

October 28th, 2011 . by economistmom

An economist friend drew my attention to this old Phil Donahue interview of economist Milton Friedman. I think it dates back to 1979 (the year I graduated from high school). It has gotten me to wonder what Friedman would say about this Occupy [fill in the blank] movement–and also how the point he is trying to make in this interview says about what the Occupy movement should really be about. Is it some inherent evil of capitalism that the 99 percent are outraged about? Is greed something you find only in capitalism and not in other economic structures? Is greed at all an essential quality of capitalism, or is it something a bit less evil–say, “self interest” in the utility maximizing or profit maximizing sense?

My daughter Emily (a freshman at Sarah Lawrence College) got me thinking about this last question. I have every incentive to pursue my “selfish” interests, optimizing with respect to market prices and my economic capacity. Does it mean I will not provide for my children or even other people’s children, or animals or the environment–or that I will argue that my taxes should be lower and my own part of government benefits larger? No, it depends on what is in my own individual utility function–what makes me “happy.” Part of what may make some of us happy is a more equitable income distribution. (Economists model “altruism” as having other people’s utility levels embedded within our own individual utility function.) Capitalism and the free market system are not necessarily incompatible with a more just society. It seems we might be blaming the economic system when the real problem is probably the political system. Neither an economic system nor a political system can change one’s basic human character. There will always be some not very nice and not very smart (i.e., not so “evolved” or “civilized”) people around, but society doesn’t have to fall because of them, depending on how much of a “say” we give them in our society. I don’t think it’s the “fault” of a capitalist economic system at all.

It strikes me that the problem with our political system is that it’s become out of sync with our individual values–those “selfish” interests (is that different from “self interests,” btw?) that aren’t necessarily inconsistent with maximizing social welfare. Like Friedman says, there will always be many “greedy” people in any kind of society–just as much as there will always be many generous people in any kind of society.  I’d like to believe that inherently, most of us are very “good” people.  I think we’re very confused people though.  We don’t know exactly what we want, and we don’t know how to communicate it within our political system.  We’re easily told by our politicians and the media what we should want and value, rather than the other way around.

And then of course, there’s always my pitch for a “benevolent dictatorship” that I could fall back on–emphasis on “benevolent.”  My daughter Emily points out that it is apparently the “feminist” in me that believes that that benevolent dictator would have to be a woman!  ;)

I find this question–exactly what are we outraged about and protesting about in the “Occupy” movement–so fascinating.  I find this Friedman video so thought provoking.  What do you think?  Is it greedy capitalism, our dysfunctional political system, or some inherent human weakness in all of us?  Please discuss!

43 Responses to “What Would Milton Friedman Say?”

  1. comment number 1 by: Becky Hargrove

    Only a couple of years ago I thought that the problem was in the use of money breaking down, as it became harder and harder for many businesses to make a profit. Only recently have I realized the degree to which political players in conjunction with large corporate players mess up the playing field for everyone. A great example is the recent law in Louisiana that prevents the use of money - that’s right money, for the purchase of second hand goods. Now everyone who wants a garage sale more than once a month must take checks or some other form of currency. It was a coalition of left and right that allowed such legislation to pass, and one only wonders who the influences were…did someone think this might thin out the homeless, in that they primarily use cash? It is the accumulation of so much legislation for individual purposes that eventually strangles the economic activity people naturally want to have with one another at local levels.

  2. comment number 2 by: AMTbuff

    No, it depends on what is in my own individual utility function–what makes me “happy.”

    An old Russian joke tells the story of a peasant with one cow who hates his neighbor because he has two. A sorcerer offers to grant the envious farmer a single wish. “Kill one of my neighbor’s cows!” he demands.

    Research by two British economists, Daniel Zizzo of Oxford University and Andrew Oswald of Warwick University, suggests there is a good bit of truth behind that joke. In a recent study, Zizzo and Oswald ask, “Are People Willing to Pay to Reduce Others’ Incomes?” “The short answer to this question is: yes,” they report.

    Read the rest at http://reason.com/archives/2002/06/19/burn-the-rich

    What one person might see as a desire for fairness another person might see as simple envy. The difference is subtle, and perhaps mostly a matter of self-deception vs. self-awareness.

    Discuss: Is a measure of social welfare that assigns positive weight to indulging envy a defective measure? Or is it accurate and legitimate? Why?

  3. comment number 3 by: Patrick R. Sullivan

    Friedman would say what he always said, elegantly and cleverly, that the OWS crowd is similar to the farmer in the Aesop fable who killed the goose who laid golden eggs. Not understanding the wealth creation process, he took action that destroyed it.

    The OWS crowd are the ones who are greedy; they covet their neighbor’s goods. Funny how some people with the education to know that don’t see it.

  4. comment number 4 by: Patrick R. Sullivan

    ‘A great example is the recent law in Louisiana that prevents the use of money…’

    Did anybody think to take out a dollar bill and read that it is legal tender for all debts, public and private?

  5. comment number 5 by: Patrick R. Sullivan

    Or, we could watch Friedman actually talking with one OWS’s most famous supporters:

    http://vodpod.com/watch/4122772-milton-friedman-puts-a-young-michael-moore-in-his-place

  6. comment number 6 by: STDog

    Patrick, One might think so, but not the District Court in Ney York.
    GENESEE SCRAP & TIN BALING v. City of Rochester, 558 F. Supp. 2d 432 - Dist. Court, WD New York 2008
    http://scholar.google.com/scholar_case?case=16588449391523644412

    City ordinance requiring junk/scrap dealers to pay for purchases by check, not cash.

    The Louisiana statute is similar, requiring second hand dealers to purchase goods by means other than cash and defining said dealers very broadly.
    http://www.legis.state.la.us/billdata/streamdocument.asp?did=760886

  7. comment number 7 by: Brooks

    First, it must be noted that, in watching Friedman and Donahue together, we observe a gross maldistribution of hair. Clearly Donahue is in the top 1% and Friedman…well, around the bottom 1%. The inequity is appalling and outrageous, and if it happened to day, I’d go join the Occupy protesters with a sign saying “Share the Hair” (not for my sake — I’m thinking of poor Friedman who was clearly a victim of “the system”).

    Although I thought of the above initially merely in jest, it does remind me of another observation with a serious point: I happen to be near Times Square when the Occupy protesters were there so stopped by to see them. As I walked by I saw one protester approach the other (who was smoking) and ask nicely for a cigarette, but the smoking dude held up his cigarette and said it was his last one. The requester responded “Really?”, in a tone that seemed to combine disappointment and resignation with a mild form of (dare I say it) protest, skeptical that his luck was truly that bad that he really caught the smoking dude on his last one (I guess only a 5% probability). I guess the idea of sharing is generally more appealing when it’s the other guy’s stuff, and less so when it’s your stuff, particularly when the other guy is a stranger.

    Diane writes “Does it mean I will not provide for my children or even other people’s children…?” That conjunction (”or”) skips over an important distinctions of proximity to the provider. I always tell people that there are indeed examples of communism working. In fact, billions of historical examples: Families. To each according to his need; from each according to his ability. That concept could even work on a small commune, although not necessarily. Communism works on the family level because (1) we “naturally” care more about the would-be net receivers, (2) we are much more capable of assessing the “from each according to his ability” part (as well as the “his need” part), and of influencing the “from each” part. All of that rapidly diminishes the farther we move from the family unit, or more generally from those with whom we feel an emotional bond and whose abilities and behavior we can observe and influence.

    Next is the distinction between helping strangers via government vs. private sector. We shouldn’t equate opposition to government helping people in some way (or in general) with a disinterest in helping people in that way (or in general). I’m sure many very-small-government conservatives and libertarians are charitable with their own money.

    The intermediary of large government bureaucracy exacerbates the aforementioned sense of distance and ability to observe and influence. Even a private charitable organization would do so, but the general sense of government bureaucracy is of less careful oversight and less competent influence.

    And of course government is funded via government confiscation of private property – i.e., taxation. I don’t mean that as a pejorative or disapproving description of taxation; I consider that description simply neutral and accurate. But the default starting point should be that people should get to keep their stuff, and the burden of argument is on those who think government should confiscate stuff from some people to give to other people. One such argument is that most people want a given program, but if funding were not forcibly universal, there would be too much of a “free rider” problem, which would be unfair and/or leave the program vastly underfunded vs. what most people want. Another argument could be that government can administer the program most efficiently due to scale, or can do it better in some way than could private entities. And there can even be what I’ll call a “moral superiority” argument – and believe it or not, I mean that label neutrally as well – that even if some minority doesn’t want to give up some of their money to help others in some particular ways to some particular degree, the majority feels confident in the moral case that fully funding the cause justifies compelling contributions from those who don’t feel morally compelled to contribute. Obviously the “moral superiority” rationale could get slippery*, and can overlap with another related argument: that private property isn’t really all that private anyway; that those with more have benefited – or even benefited disproportionately – from contributions made by others in society at least partly for the sake of society (e.g., the patriotic element in serving in the military and thus providing national security, securing open shipping lanes for commerce, etc.). And I suppose a tangent of this not-so-private property perspective can be that inherited property is undeserved and therefore is not accompanied by a full property “right”. All of that said, we still shouldn’t lose the distinction between wanting to help strangers vs. wanting the government to help strangers on our behalf. I’ve merely listed arguments I could think of at the moment for the latter; I’m not implying some sweeping validity of those arguments. Again, I’m saying the burden of argument (which I do believe can be met in many cases) is on those who want to forcibly take things from others, even if they want to do so via the institution of government (even a democratically-elected government).

    And of course, underlying much of all of this is the constant question of how best to “help” someone. Obviously some types and levels of financial and quasi-financial support can do more harm than good by dampening individual (or private group) initiative. I’m certainly NOT making a blanket statement regarding all transfer payments and other forms of support, just saying that there are some cases of such counterproductivity and there can be a matter of degree.

    * I’d like to add another thought re: the challengability of that “moral superiority” argument. There are many millions — perhaps billions — of people in the world who need financial help far more than many American net beneficiaries of wealth transfer via government. It is quite possible that some who resent being forced to contribute (via taxes) to helping other Americans in particular situations would otherwise use that money to help reduce starvation or malaria (etc.) among the world’s most desperate peoples. That’s something those implicitly making a “moral superiority” case should consider.

  8. comment number 8 by: SteveinCH

    Brooks,

    Thanks for an excellent post. There’s one thing I might add to your potential objections speaking as someone who is skeptical of forced giving through the means of government action.

    I’ll speak personally on this. My most substantial issue is not the efficiency of government but its focus. Let me take two examples. On the large senior transfer programs, the government has chosen not to constrain its forced help to those who actually demonstrably need help. Were it to do so, I would be much more comfortable with giving.

    The simple fact is that, at the Federal level at least, government help is not focused on the needy (at least in terms of dollars distributed), it is focused on powerful/influential groups. This, for me, is what most undermines my faith in the government route. Even if one convinced me of the need to have forced contributions through the government to support a morally important cause, one would still need to show that the “help” is focused on those with actual need. This in turn leads to your point about the US population in the context of the global population.

    But again, yours was a very thought provoking post and I appreciate it : )

  9. comment number 9 by: Brooks

    Steve,

    Thanks for the compliment. And it’s admirable that you’d give me a compliment given the friction we’ve had. I take my hat off to ya’.

    You make a good point re: the problem of political influence causing government to transfer wealth to those without justifiable need. That is indeed another major type of objection, and I concur re: the particular cases of means-testing entitlements.

  10. comment number 10 by: Patrick R. Sullivan

    Thanks for the link to the Genessee case, ST Dog. Though the reasoning in it strikes me as pure sophistry.

    If there is a problem with people buying stolen goods, that could be handled by requiring the purchaser to get proof of the identity of the seller. If the buyer didn’t, and was found in possession of stolen material, that could be a crime. Why do we need to bar cash transactions?

  11. comment number 11 by: Arne

    Add: Communism works on the family level because (3) there is seldom doubt about who the final arbiter is in deciding who does and who gets what, and (4) it is also usually clear who the new leader is when the old one can no longer lead.

  12. comment number 12 by: Emily Rogers

    re: female benevolent dictators–Empirically, women are more likely to spend their money on their children than men. It is also my sense that the ideal of altruism seems much more impossible to men that it does to women. Given that economics is the most male-dominated field, it is no wonder that, for example, most of the above commentators are men, Milton Friedman was a man, and much of the research done on this topic has been carried out by men. I can’t help but wonder if our perception would be different if there were more female voices in economics.

  13. comment number 13 by: Brooks

    Arne,

    Perhaps I’m missing your point, but seems to me that both your elements could exist for the most part on a national level in a “communist” nation, yet it still wouldn’t work due to the differences vs. family on the elements I noted. So I don’t see why your points explain why communism can work on a family level but doesn’t work on a national level, if you are drawing the same contrast I was (which perhaps you weren’t, but then I’m not sure what your point is, unless you are saying those elements you note are inherent, inescapable traits of “communism” at a national level).

  14. comment number 14 by: Jim Glass

    The OWS crowd are the ones who are greedy; they covet their neighbor’s goods.

    While also intending to keep all their own. Here in NYC the chefs of OWS are revolting against the “freeloading” poor, “professional homeless” and criminal elements who are being attracted to their gourmet meals. They are going on strike until the freeloaders are purged from “their community”.

    Ah, but if you feed them they will come. Everybody looks out for #1. (Or, more politely, “people respond to incentives”.)

  15. comment number 15 by: Brooks

    Jim,

    Yeah, I saw a headline about the chefs. I guess distinguishing between those two groups will be about as difficult as distinguishing between all the New Yorkers talking on the phone via Bluetooth headset vs. all the the schizophrenics talking to imaginary people. Maybe even more difficult, because in the case of Bluetooth vs. schizophrenia there’s usually a pronounced olfactory difference.

    It would be interesting to see how they decide whom to reject.

  16. comment number 16 by: Jim Glass

    An old Russian joke tells the story of a peasant with one cow who hates his neighbor because he has two. A sorcerer offers to grant the envious farmer a single wish. “Kill one of my neighbor’s cows!” he demands.

    I was a young student in Russia way back eons ago when the Cold War was still on. (It was an interesting experience walking across Red Square and realizing, “Hey, all those nuclear bombs targeted at me right now are American!”)

    My favorite Russian joke:

    God appears to Dmitry and says, “You have been a good and holy man, so I will reward you by granting you anything you wish. But your neigbor Ivan has been an even better and more holy man than you, so he will be rewarded with twice as much of what you ask for. If you ask for a dacha Ivan will recieve two, if you ask for gold Ivan will receive twice as much.”

    Dmitry thinks for a moment and says, “Lord, make me blind in one eye.”

  17. comment number 17 by: Brooks

    ok, I’ll join in on the jokes about communism:

    I entered business school in the fall of 1989. I attended a panel discussion by professors at the university about developments in Eastern Europe, where one professor boldly predicted that the Berlin wall could come down within 5 years!

    A professor told this joke:

    A man dies and finds himself in a big room. There are two doors, one that says “West German Hell” and the other that says “East German Hell”.

    There is a long line to get into the East German Hell, and no one waiting to get into the West German Hell.

    He asks someone in line for the East German Hell, “What’s so bad in the West German Hell that no one wants to go there?”

    The reply: “First they stick steel rods through you, then then dip you in hot oil and roast you over hot coals.”

    He then asks “Well, what do they do in the East German Hell?”

    The reply: “The same things, but there are always shortages of steel and oil and coal.”

  18. comment number 18 by: Jim Glass

    Capitalism and the free market system are not necessarily incompatible with a more just society.

    Capitalism and the free market system are essential for a more just society. What other social system has ever increased life expectancy from 25 to 75+, wealth and welfare for average people to beyond the dreams of pre-1800 kings, eliminated slavery, enfranchised women and minority groups one after the other, etc etc etc? Communism? Feudalism? The Khans? The empires of Rome and Persia? Really, which alternative has done *anything* in this direction in 10,000 years? None of them. This is a pretty big reality — yet in discussion it usually is pretty much quickly dismissed.

    The fact that it is so often so summarily dismissed — in favor of “look at the problems we still have, they show capitalism is incompatible with justice” — is a wonderful example of Stalin’s dictum that in politics huge facts are ignored while people obsess over the minor. Something he used in politics to his immense advantage.

    Like Friedman says, there will always be many “greedy” people in any kind of society–just as much as there will always be many generous people in any kind of society. I’d like to believe that inherently, most of us are very “good” people.

    This makes it sound as if they aren’t the same people. Is there a conflict between being “greedy” and “very good”?

    Phil Donohue made millions of dollars for yapping on TV. He didn’t spread those millions beneficently among his employees, but paid them mere market rates and is still living very nicely with Marla off the profits.

    If that isn’t a living example of “capitalist greed” what is? Yet there he was putting down greed. Surely he thought of himself as being an enlightened and “very good” and generous person and while doing so. Was he wrong? Do you think he is not a very good person because he is an embodiment of greed?

    Smith’s most fundamental, correct and important insight is that the baker provides good bread to the community out of self-interest, his quest for money directed by competition– that it is when the interests of individuals and society coincide (both in economics and politics) that society benefits. Good, beneficent intentions have functionally nothing to do with it. Nothing.

    Take our recent increase in life expectancy from 25 to 75+ and in the wealth and welfare of average people beyond the dreams of pre-1800 kings. What percentage of this immense gain in welfare has resulted from us capitalists being “better people” — more selfless, generous, and beneficently considerate of others — than all the other peoples of all previous societies?

    I would say: zero percent. If so, then good intentions and being “good” people have had nothing to do with it, rounding to the nearest percent.

    That’s all we need to know to keep building a better society. But we need to know it.

    As to our chronic fiscal problems, I’ll say it one more time: Our legislators’ strength of character, good intentions, desire to do the right thing, and/or our need for “better” legislators, have nothing to do with it. Legislators are like everyone else, they act by their self interest — which is overwhelmingly short term, next election.

    The problem is world-wide, not just US, all the developed countries are in the same boat, including China. Which shows it is not US Congressional failure or Democratic-Republican irresponsibility. It’s that our governmental structures (world-wide) evolved before politicians could drop debt on future generations for short-term benefit, so they have no way to constrain that behavior. They don’t align politicians’ self-interest with long-term fiscal welfare — just the opposite. That’s the entire story.

    Politicians are just like Smith’s bakers. Find a way to align their self-interest with fiscal responsibility and they will be responsible — be they personally greedy, generous, cowardly, brave, honest, cheaters, whatever. Keep their self-interest contrary to responsibility as now, and nothing will change from now, except via the hard way when a crisis hits. Unless and until, there is no hope. How “good” they are as people, what their character is, has nothing to do with it.

    People respond to incentives. Politicians are people.

  19. comment number 19 by: Jim Glass

    there’s always my pitch for a “benevolent dictatorship” that I could fall back on–emphasis on “benevolent.” My daughter Emily points out that it is apparently the “feminist” in me that believes that that benevolent dictator would have to be a woman!

    A cautionary example for “benevolent feminist dictators” who wish to tame the cut-throat nature of capitalism:

    A key constitutional development in social legislation in US history was the case of Muller v. Oregon, in which the Supreme Court first upheld state labor legislation over the individual’s constitutional right to contract, by upholding a state law that limited women to working 10 hours a day and gave them a minumum wage. Brandeis made his name with his first famous “Brandeis brief” documenting at great length the harm that long work hours caused to women’s health, while the law’s supporters mocked “women’s right to contract to work 12 hour days”.

    The Court ruled that all the proven facts of a woman’s vulnerability “justify legislation to protect her from greed”. That’s it! Legislation against greed endorsed by the Supreme Court itself. Officially!

    Alas, the result of the legislation was not to protect women against greed by reducing their hours to 10 per day and upping their pay, but to cause them all to be fired (this was in the laundry industry, where women could get work until then) and be replaced by men workers not subject to the hours/wage rules, who then got a wage increase due to the elimination of competition. Which was the exact intent of those behind the legislation — though they were smart enough not to market it that way. The women so “protected against greed” wound up unemployed and all the more impoverished for the protection.

    The benevolent dictator never understands the details of the self interest of those at any distance. So they are always able to game the dictator’s benevolence — and that of all the good-intentioned and well-meaning but uninformed — by disguising their selfish rent-seeking as concerned, beneficent, disinterested taming of the heartless greed of capitalism. Examples are everywhere, on every scale, name your own.

    Just block free markets a little more, legislate against greed some more, to make the world a better place. From the fluorescent light industry successfully backing the green movement to ban incandescent light bulbs so everyone will have better light bulbs (so much better they have to be forced by law to buy them!) … to regulatory agencies one after another being captured by the industries they regulate, large and small, assuring the industry profits and protection against new competition … to Lenin using his “useful fools” who so believed in making a better world via communism … always the world is being made a better place by benevolent taming of the heartless greed of free markets.

  20. comment number 20 by: Mark

    I found the clip very interesting. Today, to my mind, the observation that greed drives all action at some level, is a given - an “of course” sort of assumption. But when this interview occurred it was, again to my observation, a thought-provoking and something revelatory declaration. We were just out of growing up in a time when “economics” was a bad word synonomous with undue greed.

    However, Friedman’s claim of history proving that the only time there was economic benefit was with free markets is, at best, ripe for misunderstanding, and at worst quite wrong. If market anarchism - a completely free and unfettered market - were always the most successful, the Elinor Ostrum’s life work was a waste of time.

    Frankly, I think the answer is not in completely free markets, but wisely regulated markets. The conditions where a completely free market works best are very limited - for instance, they require complete communication and knowledge of market conditions. It takes no reflection at all to concur that this will rarely be the case.

    What Ostrum recorded was that community regulation could enable a more efficient and profitable market. Regulations themselves were not the key - it was the community providing the regulations - sort of a community expression of greed, if you will.

    I heartily disagree that the OSW people are expressing a desire to knock others down for the spite of it. What we have had is a consistent move towards deregulating markets that served the community greed better when they were regulated.

    I thoroughly agree that there will always be people who will abuse a system for the own gain. It is the community’s responsibility to regulate those natural human tendencies. Such regulation can take the form of religious or political governance - it does not matter in the long run. What matters is that there is governance, and that it reflects the community. What OSW is pointing out is that the current regulatory environment does not represent the community, and that leaders who claim it does are essentially snake-oil salesmen, telling us something is good for us, when the truth is that it is a hornswoggle.

  21. comment number 21 by: Patrick R. Sullivan

    Following on Jim’s remarks; one of the greatest American political philosophers of all time, Sonny Bono, just before being killed in a skiing accident, charmingly explained all of the above to Chris Matthews on his Hardball. And, of course, Matthews didn’t get it.

    What Bono said, after describing his hardscrabble apprenticeship driving a meat truck and telling a number of self-deprecating anecdotes–”The first time I entered my committee everyone looked at me like, ‘Oh no, please tell me this guy is here to deliver the pizza.’”–was that he thought it would be better if more people like him were in congress, because he understood that there were people who ‘would game any system’.

    Missed opportunity. For Cher as well as for us.

  22. comment number 22 by: Patrick R. Sullivan

    As luck would have it, here’s a nice example of what Congressman Bono was talking about:

    http://www.nytimes.com/2011/10/28/nyregion/charges-in-lirr-disability-scheme.html?_r=2&pagewanted=1&hp

    —————quote—————
    The United States attorney in Manhattan, Preet Bharara, said, “Employees, in many cases, after claiming to be too disabled to stand, sit, walk or climb steps, retired to lives of regular golf, tennis, biking and aerobics.”

    The charges involving the railroad come at a time when public workers’ unions across the country have faced heavy criticism for negotiating pension obligations that led many government agencies to slash services and lay off teachers, police officers and other workers.

    A sampling of hundreds of cases approved by two doctors showed that $121 million had been paid to workers whose disabilities were either fabricated or exaggerated, according to court papers, though the total was quite likely more. It was unclear if officials would try to stop the payouts, or could even legally do so, before the disbursements hit $1 billion.
    —————-endquote—————-

  23. comment number 23 by: Patrick R. Sullivan

    And, for people who prefer video, here’ a guy who also knows what a fraud the OWS crowd is:

    http://www.pbs.org/newshour/bb/business/july-dec11/makingsense_10-26.html

  24. comment number 24 by: SteveinCH

    Mark,

    On what basis are you arguing “a trend toward deregulation”? The US has been steadily more regulated as pretty much every moment in its history from about 1930 to today.

  25. comment number 25 by: Chris Wegener

    Interesting post. interesting comments, I particularly like the expansion in 7.

    The main point I would make is that we no longer live in a tribal society. Everyone’s wealth and success is built on the prior efforts of many other anonymous people and the luck of their birth.

    Assuming that we wish to live in a happy and successful society we need rethink our childlike belief in “freedom.”

    No one moves out into the woods and carves out a farm or mine or ranch and builds themselves a life. (And even then succeeded through the purchase of tools produced by others, following trails blazed by others.)

    We all work within the confines of a large closely integrated modern society where our efforts require far more the coordination of efforts of others and relying upon their work and their skills. In such an environment we all will be happier and more successful if everyone prospers.

    Giving up some of what we earn to make sure that everyone benefits from the success of the economy enriches our lives tremendously. We could have longer vacations. We could have complete cradle to grave health care. We would not starve. Rather their would be excellent restaurants (because everyone can afford them.) There would be significantly less crime. (Who would need to steal if all are provided a lower middle class living.) There would be no slums. (Go visit Europe if you doubt this. Try and find any section of any city that is as bad as sections of Baltimore, or South Los Angeles.) Less people would have to die in industrial accidents. The air and water would be clean. Education would be first class and free. We would not spend as much or more on prisons than we do on higher education.

    I could go on but you get my point. What we would get from higher taxes is far greater than what any one individual would receive by not paying them.

    I know this is true because we have the example of Europe right across the ocean, filled with happy societies and high taxes. (The Euro crisis notwithstanding. ;-))

    Regards,
    Chris

  26. comment number 26 by: Patrick R. Sullivan

    Funny, the Europeans themselves don’t see it quite the way Chris does:

    http://www.huffingtonpost.com/2011/10/15/occupy-wall-street-protests-europe-asia_n_1012336.html

    ‘Heavy smoke billowed in downtown Rome as a small group broke away and wreaked havoc in streets close to the Colosseum and elsewhere in the city.

    ‘Clad in black with their faces covered, protesters threw rocks, bottles and incendiary devices at banks and Rome police in riot gear. With clubs and hammers, they destroyed bank ATMs, set trash bins on fire and assaulted at least two news crews from Sky Italia.

    ‘Riot police charged the protesters repeatedly, firing water cannons and tear gas. Around 70 people were injured, according to news reports, including one man who tried to stop the protesters from throwing bottles.’

  27. comment number 27 by: Arne

    The fact that a group in Europe turns protests into riots is not evidence to contradict Chris’ assertion that Europe does not have slums as bad as the US.

    Friedman does not do a very good job with Moore either. The critical point about capitalistic principal was not the value placed on a life, it was whether Ford’s knowledge and the customer’s lack of knowledge created an issue. (Moore’s leadup was poor, but he did get that out at one point.) Friedman justifies having a choice about spending more to be more safe, but Ford did not provide that choice until after information that it already knew became generally known.

    I am not sure anyone in the OWS camp would say this, but information asymmetry is one of the things that does bother people. It is pretty clear that having a lot of money makes it easier to get a good return on your money.

  28. comment number 28 by: SteveinCH

    Arne,

    I’d suggest you take a tour of the northern part of Paris or certain parts of Naples just as examples and then come back and talk to us about slums.

    As to information asymmetry, it’s a whole lot lower than at any time in the history of the republic.

  29. comment number 29 by: Brooks

    FYI, apparently that kid in the video is NOT Michael Moore. I was skeptical and Googled a bit, but didn’t find much that was helpful. Then I checked for more info on the YouTube page and saw this update from the person who posted — and entitled — the video.

    *Update*
    Holy cow! I never thought this video would get so many views. I uploaded it as a joke - this is not the real Michael Moore (although if you add some neckfat it would be hard to tell the difference). I meant “A Young Michael Moore” in the sense that a child who is great at basketball is a “Young Michael Jordan”. Nevertheless, I’m glad it stirred some debate in the comment section, it’s a great back and forth between Friedman and the kid, IMO. I thought the metaphor would be obvious, seeing as how the kid is a skinny redhead, while Michael Moore… well, isn’t a skinny redhead. I apologize for the confusion.

    Let’s all remember not to automatically believe what “the Internet” says.

  30. comment number 30 by: Arne

    Steve,

    Send me a ticket and I will provide a report. What you are suggested could produce evidence - what Sullivan posted is not.

  31. comment number 31 by: Patrick R. Sullivan

    Arne, Friedman was correct, Ford did provide choices in the LTD, Continental, F series pick ups…. That’s what he meant by ‘a Mack truck’.

    But, actual events aren’t evidence?

  32. comment number 32 by: Patrick R. Sullivan

    Well, whoever the kid in the video was, he was factually wrong. He’s relying on a ‘Mother Jones’ magazine article that has since been discredited.

  33. comment number 33 by: Jim Glass

    Friedman justifies having a choice about spending more to be more safe, but Ford did not provide that choice until after information that it already knew became generally known.

    What information did Ford not provide to the public? That the Pinto actually was safer than competing small car models [.pdf] on the market then?

    Note that the famous alleged smoking gun “secret internal memo” wasn’t secret or internal at all, but had been sent to the NHTSA as commentary on proposed regulation. And also that the infamous “dollar price of a life” did *not* come from Ford, but had been set by the NHTSA and merely quoted by Ford.

    Government agencies set “the dollar price of a life” all the time. That’s how they decide which dangerous road curves to straighten out, and which not to because the lives lost aren’t worth the cost of saving them.

  34. comment number 34 by: Jim Glass

    As to “look at an anti-profit movement, see a profit motive behind it”, regarding Occupy Wall Street in NYC….

    Meanwhile, donations of goods and cash pile up, with a reported $500,000 on deposit.

    The cash marks an embarrassment for a movement supposedly railing against capitalism and wealth, especially now that a radical group called the Alliance for Global Justice is legally sponsoring the protest. By lending its tax-exempt status — for a 7 percent cut! — the global-justice group allows donors to deduct their contributions from federal taxes and gives its own board control over the money.

    The alliance, based in Washington, is a hotbed of far-left causes that range from backing hunger strikes in California prisons to denouncing the CIA and oil companies. Its Web site says the group sponsors operations in the Gaza Strip, with Hamas, and boasts of an alliance with Anarchists Against the Wall, which contests Israel’s security barrier in the West Bank. The group suggests it has a relationship with Iran, supported the Sandinista revolution in Nicaragua and expresses solidarity with Venezuela’s Hugo Chavez against the United States.

    For the 7 percent fee, it offers its tax-exempt status to “grassroots nonprofits” and provides payroll services, liability insurance and prepares federal tax forms. It also offers “activist training” … [Post].

    That doesn’t count the profit motive of the NYC unions and local politicians who “threatened” (Bloomberg’s word) the private owners of the park when they announced plans to clean the park grounds, which the OWS people thought might inconvenience them, intimidating the owners out of doing it.

  35. comment number 35 by: Vivian Darkbloom

    I wish someone would do a poll of the OWS protesters and ask this question: “For what reason do you think those in the top 1 percent of income earners earn more than you do”?

    Here’s what I’ve learned from reading a variety of reader comments the past few years: Those who occupy the left side of the political spectrum would almost always place emphasis on “luck” as the primary factor that determines success. Those on the right of the spectrum would place much greater emphasis on “hard work”, “motivation” or simply different life priorities such as the desire to become wealthy (aka “greed”). I’m almost certain that the OWS protestors would come down heavily on the side of “luck”. “Good luck” determines who is successful and “bad luck” is primarily responsible that the rest who are not. I noticed in this regard that in his post Chris Wegener cites the “luck of one’s birth”. I”ve also noticed the same tendency among those who believe in esoterics: One’s lot in life is not due to individual choices or effort; rather, it is due to the position of the sun, moon and stars, magnetic fields, emanations from crystals, etc. I’ve known a few of these people and they tend not to be successful financially. Once you’ve decided that the cause of financial success is “luck” or some other factor beyond one’s control, it then stands to reason (and only then) that incentives don’t matter, and that it is only natural and just that those lucky winnings be re-distributed among the unlucky.

    There is no question in my mind that “luck” often plays some role depending on the sources of one”s wealth and other types of “success”. But, I tend to think that, by and large, in the USA of 2011, those who are successful are successful because they are driven to be. Often, it is just a matter of having different priorities. If your priority is to make money, you are likely going to study dentistry, medicine, law, business, management, accounting or finance. If you have other priorities, you might study art history. Despite the inevitable role of “luck” in success of any kind, I’ve consciously chosen in my own life, for very pragmatic reasons, to concentrate on the things that I can control and not worry too much about the rest.

    I suspect that the majority of OWS protesters believe that the top earners are at the top because they were lucky. I also suspect the majority have consciously chosen paths in life that do not directly lead to money. If that is the case, I think they would be better off protesting against the philistinism of those top 1 percent and not their financial success, per se. And this certainly does not justify the notion that they are “entitled” to the “lucky” winnings of those fortunate few.

    I would have a lot more sympathy for the OWS movement if it were directed towards some clearly identified abuses of the “free market system” that lead to those top 1 percent unjustly earning their incomes. I can think of a few. The protests seem to be directed towards corporate CEO’s and managers, particularly in the banking industry. I, too, have a problem with some of the practices that lead to unjustified pay packages at some of our banks and largest public corporations. Most progressives and OWS protesters, including I think Economist Mom, concentrate most of their attention on the tax code as a means of levelling the economic field. This is a rather blunt and inefficient instrument for that purpose.

    If you are looking for something to protest against in respect of some of those in the top 1 percent, I suggest that you might work to reform the methods by which executive compensation is determined at our public corporations. Boards rely on compensation studies to benchmark pay and then based on that benchmark award their folks somewhat more than the average. It does not take a degree in math to figure out that this results in an ever-increasing benchmark averages. You could cite other abuses in pay practices such as repricing of options to ensure they make money, granting hefty bonuses in good times, but not taking them back in bad times, etc. If you want to protest banker’s pay, you might legitimately ask what entitles investment bankers to the same share in profits they had when they were still doing business as partnerships. Ideally, the “free market system” would take care of these practices, but in this respect the system is not entirely democratic or “free”. This type of pay abuse is also not due to “luck”. So, if you want to protest, perhaps you might consider buying some shares in Nabors Technology Ltd., and vote to kick out the board that just granted their CEO $100 million for changing positions within the firm and work to change corporate governance laws that give shareholders a greater right to challenge excessive pay awards. You could also protest CALPER’s and other major pension funds (including union funds) who have the most voting power to prevent these excesses.

    http://online.wsj.com/article/SB10001424052970204528204577007932167790556.html?mod=WSJEUROPE_hps_LEFTTopWhatNews

    If you do that, I won’t occupy Wall Street to support you (or any other group), but I might just lend my support by occupying my desk chair. I certainly won’t support you if you mindlessly protest against people who make more money than you do because they work harder, or longer, or have different priorities in life, or even if they are just plain “lucky”.

  36. comment number 36 by: Charlie

    Couple of points re OWS:

    1) I have visited several times. The reality is ugly. The reality is scruffy 20somethings, street people, news vans, food trucks, and cops, scored by a relentless drum circle of tone deaf cavemen. The reality is banal. Boring. But it is a symbol of what cannot be denied. THAT is powerful. Focusing on the facts on the ground is the wrong way to look at it. It is an idea virus that is spreading.

    2) There are too many issues. That is because there is so much injustice, and so many grievances.
    People don’t know where to start. And does it matter? They have no faith that the system can address our problems.

    3) OWS goes right to the legitimacy of the system. OWS goes to the meaning of money. Trillions disappear from the economy. Either it never existed, or someone has it. Either answer is an indictment of the fundamental unfairness of the system.

    4) No one has been held accountable.

    My .02

  37. comment number 37 by: Arne

    “safer than competing small car models” are Jim Glass’ words, not those of the author (Schwarz) of the article to which he links. In fact the author provides data showing that the Pinto was 4th out of 7 in all creashes (footnote 62) slightly better than average, but not to any statistical significance. In rear-end collisions it was notably less safe.

    The “secret memo” did not exist, but crash test results did show it would fail to meet the proposed new standards for rear-end collisions. Ford did know how much it would have cost to meet those requirements (which were put in place after people died) and it did not offer a choice of a safer Pinto (until after it was sued.)

    In his conclusion Schwarz stresses the same issue I did. He calls it informed-choice warnings.

  38. comment number 38 by: Patrick R. Sullivan

    ‘The “secret memo” did not exist, but crash test results did show it would fail to meet the proposed new standards…’

    Thank you for the gracious concession that I was correct to note that the young man was ‘factually incorrect’.

    Btw, how many lives do you suppose Ford saved by providing a cheap mode of transport safer than walking, bicycling, or horse back riding?

  39. comment number 39 by: Patrick R. Sullivan

    ‘…it did not offer a choice of a safer Pinto …’

    But, as you’ve already had pointed out to you, it did offer safer alternatives in the Falcon, LTD, Mercury and Lincoln. Ford would have been happy to sell those too.

  40. comment number 40 by: Vivian Darkbloom

    The evidence perhaps suggests that the Pinto was, overall, a safer vehicle than most other small cars in its class. This, however, strikes me as irrelevant to the issue, which is whether the Pinto’s rear end was defectively designed. The Ford engineers might well have designed a superior, super-safe front-end and side-end vehicle that more than compensated for a negligently designed rear-end. If, in fact, the rear-end was defectively designed (an issue I am not qualified to address), then I doubt very much that a judge or jury would be impressed by a defense concerning a rear-end collision that rested on the argument “but, we’ve got an exceptionally safe front end”.

    If my memory serves me correctly, Japanese cars, say the Honda Civic, started appearing on US roads en masse about the time the Pinto case became big news. I wonder to what extent this case encouraged US car makers to surrender that market to the foreign competition?

  41. comment number 41 by: dave

    quote: “OWS goes to the legitimacy of the system… No one has been held accountable”

    O.K., I agree. But that is, in fact, a condemnation of the POLITICAL system more so than the economic system.

    Yes, so J.P. Morgan Chase filed reams of questionable mortgage foreclosures,… all the while making contributions to Barney Frank’s (House Financial Services Committee chair) campaign. Frank pushed lending to increasingly credit-inferior borrowers under threat of federal intervention. His committee wanted a credit boom,…. just not the unavoidable bust.

    Now that so many mortgages have proven to be defective, the titans of banking have arranged a settlement with state attorneys general and the federally-owned Fannie Mae/Freddie Mac supermortgagee to pay over their shareholders’ money and completely avoid prosecution of executives, who continue to meet with the White House on banking policy! So, yes, the system is broken. The political system.

    How best to fix it? Easy. No more federal deposit insurance for large banks. Caveat emptor. Then money-center banking returns to being a private sector endeavor done with private money at risk of private loss. I also agree with Vivian that exec compensation excesses at publicly-held firms should be subject to high-percentage shareholder approvals and clawbacks for nonperformance.

    But I do not feeel that most of the OWS crowd understands the game and who plays it. Obama, for one, is heftily indebted to Bank of America for campaign money, and when he decries evil bankers, the OWS crowd lifts him onto their shoulders.

    They don’t really get it, somehow.

  42. comment number 42 by: Jim Glass

    Btw, how many lives do you suppose Ford saved by providing a cheap mode of transport safer than walking, bicycling, or horse back riding?

    Reminds me of how the safety lobby at one point was working to make airlines prohibit mothers from flying while carrying infants and young children, instead requiring them to buy an additional seat to hold a child’s safety seat.

    After all, if it is illegally dangerous for a child to ride without a safety seat in a car, how reckless is it to let one do so in a jet going 500 miles an hour? And the airlines didn’t stridently object, after all it was more seat sales for them — and they didn’t want to get slammed for offering a “dead child low fare discount”.

    The FAA was about to do it until they ran a study finding that many mothers facing a doubled air fare would shift to traveling by bus or car, causing a lot more deaths than child safety seats in the air would save.

  43. comment number 43 by: Mark

    @SteveinCH
    quote: On what basis are you arguing “a trend toward deregulation”? The US has been steadily more regulated as pretty much every moment in its history from about 1930 to today.

    You need to reexamine your history since Reagan. While a number of moves were made prior to Bush 2, the repeal of Glass-Steagall should provide a glaring example.