Milton Friedman On Government

In 1975 Milton Friedman appeared on The Open Mind, a television show that is no longer showing, and in the interview he gave the fundamental problem with using the government to solve social problems:

And that is the fallacy — this is at the bottom of it — the fallacy that it is feasible and possible to do good with other people’s money. Now, you see that fallacy — that view — has two flaws. If I want to do good with other people’s money I’d first have to take it away from them. That means that the welfare state philosophy of doing good with other people’s money, at its very bottom, is a philosophy of violence and coercion. It’s against freedom, because I have to use force to get the money. In the second place, very few people spend other people’s money as carefully as they spend their own. Let me take this down to the situation of New York City right now. About six or seven or eight years ago — I’ve forgotten when it was — John Kenneth Galbraith, in an article he wrote in The New York Times Magazine Section, said, there are no problems in New York City that would not be solved if the New York City budget were twice what it is now. Now, the New York City budget has since then something like tripled. And all the problems are worse. Why? Because the fact is, it’s a confusion to identify the City with the people. The New York City’s budget is higher, but that means that the people of New York have less to spend. It’s only been transferred from people individually to the City. Now, who spends the money more carefully — the City civil servants or people who are spending their own money? Now, of course, you may say to me, but when the City spends the money, it’ll go for the good things, and so even half of it is wasted, it’s better off. But that’s nonsense. City civil servants and others are just like the rest of us. We’re all of us interested in pursuing our own objectives. The label again on the bottle may be welfare or health or education. But you have to look at all of the places where it drops off en route to going there. There are lots of other things that can be accomplished under those titles, and the fact is that no more — no larger a fraction of the money the City spends goes to good things. Let me illustrate in a very concrete way. A major problem in New York City is housing. Why? Because of bad governmental policy. Rent control, which was continued in New York after World War II, and the only city in the country where it was continued, everywhere else it was dropped. It has caused enormous abandonment of houses, eroding the tax base, public housing, governmental subsidy to housing, so that people who occupy it have no incentive to maintain it. If you had eliminated the government from the housing market and left that money in the hands of the people themselves, the housing situation in New York today would be far better than it is.

The full transcript can be found here. For a video of the interview, along with many other must watch videos on this topic, go here.

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