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Friday, January 06, 2006

Kuttner's Claimed Killing Of Milton Friedman

The American Prospect's Robert Kuttner interviewed Milton Friedman recently. The discussion ranged from the Fed's monetary policy to unemployment and public schooling. Kuttner consistently pursued Friedman's views on the propriety of government intervention in these matters seeking to find concessions that such intervention was warranted and successful.

Friedman always couched his approval of such interventions as permissive acts based on humanitarian choice over sound economic principles. Friedman also suggested libertarian half-measures in order to avoid displacing jolts to society. Kuttner consistently found these comments indicative of support for government intervention. Kuttner keeps on missing Friedman's point.

For instance, regarding health care and school vouchers, the discussion went:

RK: Would you regulate insurance companies to make it illegal for them to refuse to insure people who were deemed to be at risk of getting sick?

MF: No, I wouldn’t.

RK: So in other words someone who is elderly, just wouldn’t be able to get insurance, because the insurance companies couldn’t make a profit insuring that person.

MF: Well that’s why I am saying there could be a government role

RK: In what, subsidizing the ability to purchase insurance or….?

MF: In providing catastrophic insurance for people who cannot afford it.

RK: Now is that a humanitarian argument or is that an efficiency argument?.

MF: Humanitarian.

RK: And what about school vouchers, where you are on record in favor of them, but the public realm would pay the freight?

MF: My ideal school system would be one in which parents would be responsible for supporting their children, as they are responsible for feeding and clothing them, in which if the government has any role at all it is solely on a humanitarian basis, for those cases of indigent families who simply cannot afford to school their child.

RK: So you see only a humanitarian argument. You don’t see an efficiency argument?

MF: We have a system now in which the government finances schooling. We cannot get from here to there [a complete free market] in any single step, and I see vouchers as a measure that goes in the right direction and would improve enormously the quality of schooling for the great majority of children.

RK: Do you place any stock in the notion of positive externalities, or is this purely a humanitarian argument.

MF: Number one, it’s mostly a humanitarian argument, not because I do not recognize positive externalities. There are some. What you have to do is differentiate between average externalities and marginal externalities. Suppose in the absence of government involvement, half the children were not in school. Then the positive externalities would provide a very strong case for government involvement. I do think it would make this country impossible to live in, and it could not be a free society, if you had half the population never schooled On the other hand, what if in a free market 98 percent or even 90 percent of kids go to school and are getting adequate schooling. Then on the margin, is there any great externality involved? Very little I think. Now, what are the facts? In Britain, before you had compulsory schooling, in 1870 or 1880 or whenever it was, something like 90 percent of the kids were going to school. In fact, educational performance did not go up after government got involved.

RK: So, in the context of America in the 21st century, the bottom quartile of the income distribution probably couldn’t pay the going rate to have their kids schooled, so how would their kids get schooled?

MF: Well in the first place that’s not clear to me. In every society, however poor, the bottom quartile does school their children. The reason why the bottom quartile has low disposable income is partly because of our lousy educational system plus the taxes they now pay for that school system. One of my major reasons for being in favor of vouchers is because I believe that defects in our educational system play a major role in the growing inequality of income.

RK: So, your middle ground is that for people who’d have to spend something like 50 percent of their disposable income on tuition, those people would get government vouchers?

MF: No. Hold on. We shift back and forth between utopia and reality. In the utopia, yes. In reality, I want universal vouchers. Everybody pays taxes. Everybody is entitled to vouchers. I believe that if you have vouchers only for low-income people, it would be a very bad program for several reasons. A program for the poor would be a poor program. They say that about Social Security.

RK: Yes, I believe that too.

Apparently, Kuttner then wrote his analysis of the "debate" and found that he had defeated the noted Nobel prize winning economist. Here is Arnold Kling's review of Kuttner's claimed victory.

Kuttner considers Friedman's claimed lack of knowledge of facts as reported by Kuttner disingenuous. He writes: "A signature Friedman debating technique is to disclaim knowledge when conversation moves into an area where the facts are at odds with his theories."

Kling sees it as showing humility. Writes Kling:

Genuine humility is a feature of libertarian conservatism, which may be the fundamental reason that it differs from neoconservatism. If you think you have all of the answers, then it is difficult to resist passing No Child Left Behind Laws and other expressions of government hubris. Libertarian conservatives believe that we do not know enough to justify imposing our will on others through government. Supporters of activist government believe they know more than we do. I fear that they know less.


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