Monday, November 20, 2006

Becker on Milton Friedman
Mike Rappaport

Gary Becker writes:

I will discuss instead several ideas in his remarkable book, Capitalism and Freedom, published in 1962, that contains almost all his well-known proposals on how to improve public policy in different fields. These proposals on based on just two fundamental principles. The first is that in the vast majority of situations, individuals know their own interests and what is good for them much better than government officials and intellectuals do. The second is that competition among providers of goods and services, including among producers of ideas and seekers of political office, is the most effective way to serve the interests of individuals and families, especially of the poorer members of society.

The famous education voucher system found in this book, and based on an article published in the 1950's, embodies both principles: that parents generally know the interests of their children better than teachers unions and school boards do, and that competition among schools is the best way to serve the educational interests of children. He added the further insight that one can and should separate government financing of education from government running of schools. The voucher system retains government financing, but forces public schools to compete for funds against private for-profit and non-profit schools. The voucher proposal has I believe won the intellectual battle over the value of competition among schools at the k-12 school level as well as at the college level, but so far vouchers have won only limited political victories in terms of actual implementation. This is mainly due to the dedicated opposition of public school teachers unions who fear competition from private schools.

Becker's analysis that Friedman's proposals rest on two fundamental principles is correct, and helps to explain why someone like me would endorse a whole range of proposals on empirical grounds.  The benefits of self determination and competition in economic areas are so clear that one does not need to carefully study and test each proposal before concluding that they make sense.  (Of course, such tests are useful, but I don't feel the need to wait for vouchers to be tested before endorsing them.)

Becker's entire post is well worth reading, as is Posner's criticism of Friedman.

Update: In referring to Posner's criticism of Friedman, I do not mean to endorse it.  It seems to me either a misinterpretation or a very uncharitable interpretation, as many of the comments to his post point out.  To be fair to Posner, Friedman and Hayek were to a certain extent "dogmatic" but everyone must be in a world of imperfect information and in particular the absence of natural experiments.  Posner, alas, is just hostile to their claims, even though they are largely (although not always) correct, when properly interpreted.

https://rightcoast.typepad.com/rightcoast/2006/11/becker_on_milto.html

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