Thursday 2013-11-07

Capitalism and Freedom by Milton Friedman

Friedman summarizes the classical liberal's talking-points for the US as he saw them back in the 1960's. The crux of his arguments lies in the tension between the social values of local knowledge and remote expertise. Friedman believed that by the 60's the US had put too high a premium on remote expertise in governance, that much more value would be gained than lost by pushing decision making capabilities closer to local matters at hand.

A prime example is the Federal Minimum Sentencing laws. For certain classes of crimes, federal courts are legislatively pre-empted from exercising judicial lenience when circumstances warrant. If Congress trusts the judge to be socially fair throughout the proceeding, why would they not trust the judge with the sentencing? In that instant, Congress believes it can create a better outcome than the judge with the relevant facts and law in front of them.

Note that Friedman is not an anarchist; there is a place for government, especially in situations like natural monopolies. He just wants us to think about the continuum of localization and centralization, and whether it's possible to improve outcomes by moving to another point on that continuum.

On funding education via selling shares in one's future income:

There seems no legal obstacle to private contracts of this kind, even though they are economically equivalent to the purchase of a share in an individual's earning capacity and thus to partial slavery.

His view on the US tax system. As an aside, in Singapore they just send you a bill in April; only the US citizens in SG get to enjoy the additional pleasure of working through the IRS' 10-page remedial math equivalency test every year.

The yield is so low partly because some of the most competent men in the country devote their energies to devising ways to keep it so low; and because many other men shape their activities with one eye on tax effects. All this is sheer waste.

Wards of the State should not be allowed to vote (quoting A V Dicey):

Surely a sensible and a benevolent man may well ask himself whether England as a whole will gain by enacting that the receipt of poor relief, in the shape of a pension, shall be consistent with the pensioner's retaining the right to join in the election of a Member of Parliament

And on the Federal Reserve:

The monetary authorities they established bear primary responsibility for converting a serious economic contraction into the catastrophe of the Great Depression from 1929-33. A system established largely to prevent bank panics produced the most severe banking panic in American history
The tacit reason for creating the Fed was that someone envied the power of JP Morgan. The problem is that once someone has that power, they have to wield it as well as Morgan did.