It follows that it is just as essential for the health of a dynamic economy that dying industries should be allowed to die as that growing industries should be allowed to grow. For the dying industries absorb labor and capital that should be released for the growing industries. It is only the much vilified price system that solves the enormously complicated problem of deciding precisely how much of tens of thousands of different commodities and services should be produced in relation to each other. These otherwise bewildering equations are solved quasi-automatically by the system of prices, profits, and cost. They are solved by this system incomparably better than any group of bureaucrats could solve them. For they are solved by a system under which each consumer makes his own demand and casts a fresh vote, or a dozen fresh votes, every day; whereas bureaucrats would try to solve it by having made for the consumer, not what the consumer themselves wanted, but what the bureaucrats decided was good for them.
Henry Hazlitt – Economics In One Lesson p.109
The greater part of the new ventures undertaken by government in the past few decades have failed to achieve their objectives. The United States has continued to progress; its citizens have become better fed, better clothed, better housed, and better transported; class and social distinction have narrowed; minority groups have become less disadvantaged; popular culture has advanced by leaps and bounds. All this has been the product of the initiative and drive of individuals co-operating through the free market. Government measures have hampered not helped this development. We have been able to afford and surmount these measures only because of the extraordinary fecundity of the market. The invisible hand has been more potent for progress than the visible hand for retrogression.
Is it an accident that so many of the governmental reforms of recent decades have gone awry, that the bright hopes have turned to ashes? Is it simply because the programs are faulty in detail?
I believe the answer is clearly in the negative. The central defect of these measures is that they seek through government to force people to act against their own immediate interests in order to promote a supposedly general interest. They seek to resolve what is supposedly a conflict of interest, or a difference in view about interests, not by establishing a framework that will eliminate the conflict, or by persuading people to have different interests, but by forcing people to act against their own interest. They substitute the values of outsiders for the values of participants; either some telling others what is good for them, or the government taking from some to benefit others. These measures are therefore countered by one of the strongest and most creative forces known to man – the attempt by millions of individuals to promote their own interest, to live their lives by their own values. This is the major reason why the measures have so often had the opposite of the effects intended. It is also one of the major strengths of a free society and explains why governmental regulation does not strangle it.
Milton Friedman – Capitalism & Freedom p.199
One of the major costs of the extension of governmental welfare activities has been the corresponding decline in private charitable activities…
If the objective is to alleviate poverty, we should have a program directed at helping the poor. There is every reason to help the poor man who happens to be a farmer, not because he is a farmer but because he is poor. The program, that is, should be designed to help people as people not as members of particular occupational groups or age groups or wage-rate groups or labor organizations or industries. This is a defect of farm programs, general old-age benefits, minimum-wage laws, pro-union legislation, tariffs, licensing provision of crafts or professions, and so on in seemingly endless profusion. Second, so far as possible the program should, while operating through the market, not distort the market or impede its functioning. This is a defect of price supports, minimum-wage laws, tariffs and the like.
Milton Friedman – Capitalism & Freedom p.190
Those of us who believe in freedom must believe also in the freedom of individuals to make their own mistakes. If a man knowingly prefers to live for today, to use his resources for current enjoyment, deliberately choosing a penurious old age, by what right do we prevent him from doing so? We may argue with him, seek to persuade him that he is wrong, but are we entitled to use coercion to prevent him from doing what he chooses to do? Is there not always the possibility that he is right and that we are wrong? Humility is the distinguishing virtue of the believer in freedom; arrogance, of the paternalist.
Milton Friedman – Capitalism & Freedom p.188
The tax rates are on paper both high and highly graduated. But their effect has been dissipated in two different ways. First, part of their effect has been simply to make the pre-tax distribution more unequal. This is the usual incidence effect of taxation. By discouraging entry into activities highly taxed – in this case activities with large risk and non-pecuniary disadvantages – they raise returns in those activities. Second, they have stimulated both legislative and other provisions to evade the tax – so-called “loopholes” in the law such as percentage depletion, exemption of interest on state and municipal bonds, specially favorable treatment of capital gains, expense accounts, other indirect ways of payment, conversion of ordinary income to capital gains, and so on in bewildering number and kind. The effect has been to make the actual rates imposed far lower than the nominal rates and, perhaps more important, to make the incidence of the taxes capricious and unequal. People at the same economic level pay very different taxes depending on the accident of the source of their income and the opportunities they have to evade the tax, if present rates were made fully effective, the effect on incentives and the like might well be so serious as to cause a radical loss in the productivity of the society. Tax avoidance may therefore have been essential for economic well-being. If so, the gain has been bought at the cost of a great waste of resources, and of the introduction of widespread inequity. A much lower set of nominal rates, plus a more comprehensive base through more equal taxation of all sources of income could be both more progressive in average incidence, more equitable in detail, and less wasteful of resources.
Milton Friedman – Capitalism & Freedom p.172
It is widely argued that it is essential to distinguish between inequality in personal endowments and in property, and between inequalities arising from inherited wealth and from acquired wealth. Inequality resulting from differences in personal capacitates, or from differences in wealth accumulated by the individual in question, are considered appropriate, or at least not so clearly inappropriate as differences resulting from inherited wealth.
This distinction is untenable. Is there any greater ethical justification for the high returns to the individual who inherits from his parents a peculiar voice for which there is a great demand than for the high returns to the individual who property? The sons of Russian commissars surely have a higher expectation of income – perhaps also of liquidation – than the sons of peasants. Is this any more or less justifiable than the higher income expectation of the son of an American millionaire? We can look at this same question in another way. A parent who has wealth that he wishes to pass on to his child can do so in different ways. He can use a given sum of money to finance his child’s training as, say, a certified public accountant, or to set him up in business, or to set up a trust fund yielding him a property income. In any of these cases, the child will have a higher income than he otherwise would. But in the first case, his income will be regarded as coming from human capacities; in the second, from profits; in the third, from inherited wealth. Is there any basis for distinguishing among these categories of receipts on ethical grounds? Finally, it seems illogical to say that a man is entitled to what he has produced by personal capacities or to the produce of the wealth he has accumulated, but that he is not entitled to pass any wealth on to his children; to say that a man may use his income for riotous living but may not give it to his heirs. Surely, the latter is one way to use what he has produced.
Milton Friedman – Capitalism & Freedom p.164
What is the relation between this principle and another that seems ethically appealing, namely, equality of treatment? In part, the two principles are not contradictory. Payment in accordance with product may be necessary to achieve true equality of treatment. Given individuals whom we are prepared to regard as alike in ability and initial resources, if some have a greater taste for leisure and other for marketable goods, inequality of return through the market is necessary to achieve equality of total return or equality of treatment. One man may prefer a routine job with much time off for basking in the sun to a more exacting one paying a higher salary; another man may prefer the opposite. If both were paid equally in money, their incomes in a more fundamental sense would be unequal. Similarly, equal treatment requires that an individual be paid more for a dirty, unattractive job than for a pleasant rewarding one. Much observed inequality is of this kind. Differences of money income offset differences in other characteristics of the occupation or trade. In the jargon of economists, they are “equalizing differences” required to make the whole of the “net advantages,” pecuniary and non-pecuniary, the same.
Milton Friedman – Capitalism & Freedom p.162