Thursday, November 16, 2006

RIP, Milton Friedman

Nobel Prize-winning economist Milton Friedman has died at the age of 94. Friedman was the best advocate of free-market economies of the latter half of the 20th century, a true intellectual giant. Reading Capitalism and Freedom was instrumental in convincing me that given a choice between leaving an economic issue to the market to sort itself out vs. having the government control the outcome, the burden of proof should lie with the side advocating government intervention. A top-down command economy simply can't see the differences between individual needs, respond as efficiently to change, or inspire innovation the way a free economy can.

That's speaking generally. Getting specific, I disagree with a lot of Friedman's conclusions, such as his dislike of anti-discrimination laws, or his being against occupational licensure. I think that he has a bit too much confidence in the efficiency of the market and isn't willing to recognize, for example, that it may not always be so easy to simply patronize a competitor to a discriminating institution, nor the precarious position that unlicensed incompetent, untrained, or unscrupulous professionals put their clients in. In other words, I think that in many cases he sets the bar too high when determining where the government should impose regulations on the market. But I accept his premises and feel that he lays out the case against socialism very well.

1 Comments:

At Sunday, November 19, 2006 at 1:25:00 PM PST, Blogger Arb said...

We should also remember that part of the formula is whether or not socially desirable services such as occupational licensure would adequately be provided by the free market.

As a current case-in-point, consider the recent proposal for the federal government to maintain and publish a database of statistics on colleges and universities. Now, this is an area where the private market has clearly provided -- perhaps *over*provided, but provided. Prospective college students and their families have abundant information about the relative qualities and merits of schools and programs. So while in principle students could suffer from adverse consequences due to asymmetric information or moral hazard, in practice the market does solve the problem.

It is an interesting thought experiment to wonder, for example, if we did not license medical doctors, whether the Johns Hopkins, Harvard Medical School, etc. of the country wouldn't effectively create their own privately-managed certification schemes. (I don't advocate we try this beyond a thought experiment, however. :)

There's also the problem that while a well-designed government intervention might be a good idea, a poorly-designed one might be worse than doing nothing. Take, for example, the teacher certification process for elementary and secondary school teachers which, in most if not all states, measures something which is more or less orthogonal to teacher ability and skill.

 

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