Friday Interview: Friedman's 1962 Ideas Still Resonate | Eastern North Carolina Now

The Nobel Prize-winning economist Milton Friedman died back in 2006, but his ideas live on through the annual Friedman Legacy of Freedom Day. The John Locke Foundation helped mark that day this year with help from Dr. Edward Lopez, professor of economics and BB&T distinguished professor of...

Publisher's note: This article was originally created by the CJ Staff of the Carolina Journal, John Hood Publisher.

Western Carolina's Lopez explores Capitalism and Freedom

Edward Lopez
 RALEIGH — The Nobel Prize-winning economist Milton Friedman died back in 2006, but his ideas live on through the annual Friedman Legacy of Freedom Day. The John Locke Foundation helped mark that day this year with help from Dr. Edward Lopez, professor of economics and BB&T distinguished professor of capitalism at Western Carolina University. He spoke to a JLF audience on the theme "Prospects for Pro-Market Reform: A View from 1962." Lopez shared key themes from that lecture with Mitch Kokai for Carolina Journal Radio. (Click here to find a station near you or to learn about the weekly CJ Radio podcast.)

Kokai: So 1962 was a significant year in the life of Milton Friedman, and why is that so?

Lopez: Oh, you're right. It was a very significant time because that's when he published his famous book called Capitalism and Freedom, which, to date, has sold over a half-million copies. If you're an economics professor working out there in the world, you would do anything to sell a half-million copies. But the real point of the 1962 reference in the title of my presentation was to use Friedman's Capitalism and Freedom as a way to think about where pro-market reforms might be on the horizon.

Kokai: Let's first of all remind folks that Capitalism and Freedom — for economics wonks, it's a famous text — but for those in our audience who really aren't familiar with it, what was it all about?

Lopez: Sure, sure. Well, this is no ordinary economics book. It's written for general audiences, and the tale of that is told in the number of copies that it's sold. The book sort of lays out a program, if you will, for expanding economic freedom through public policies. That's a really important theme in the book — expanding economic freedom — because Milton Friedman, in the book, successfully and, I think, compellingly argues that economic freedoms are necessary for political and civil freedoms to be held ... by citizens in the public. So the road map for freedom that he lays out is multiple policies that range from international trade to taxes and budgets, to education policy, and so forth and so on.

Kokai: And this ended up being very influential. Didn't a lot of things that have happened in the ensuing decades really result from some of the things Milton Friedman was talking about in the early 1960s?

Lopez: Absolutely. I think that you can look at the history of public policy-making since 1962, and you can sort of begin to check off certain boxes where the ideas that Friedman articulated in this book were successful. In other words, the reforms that he recommended, they came to fruition.

 Probably the biggest and most significant one on that list is the end of military conscription. Milton Friedman argued for that in 1962. And to some extent, he was a lone voice in making that argument, but we have, less than a decade later, the end of conscription. There are some other examples, and [I'm] happy to be talking about those as well.

Kokai: I would like to get into at least one of the other things that Milton Friedman was talking about at that time that is really a hot topic in North Carolina today, and that was this whole idea of vouchers for education.

Lopez: That's right.

Kokai: That was something that he was very much into, and I believe talked about in Capitalism and Freedom.

Lopez: That's right, he did. And I think that, you know, the starting point for an economist to talk about education is to recognize that there are benefits to the broader society of a person getting educated. And those benefits imply some degree of shared responsibility for education.

 Now, what Friedman rejected was a state or local or national government actually producing the education for its citizens — building the schools, hiring the teachers, running the administration, requiring attendance, and so forth.

 The reason Friedman had a problem with that is because it didn't give families and students a choice of where to go to school. They either had to go to the government school, or they had to pay their own tuition to go to a private school. They could opt out that way.

 Friedman introduced the idea of, instead of producing education for families, give families the financial resources to choose an education on their own, and that has become what we now know in the modern world as education vouchers. This is an idea that he articulated in Capitalism and Freedom. It's an idea that has come to fruition, not just here in North Carolina, but across the country.

Kokai: Now as an economist working in 2015, what are some of the things that you're focusing on that would be linked in some way to what Milton Friedman was talking about all those years ago?

Lopez: Good question. Well, I think that you could also run down the list of proposals that were in the book and say some of them haven't come to fruition. I think the biggest one that we might be able to focus on these days is what's happening with governments' debt and running deficits each year.

 In the book, Friedman describes certain priorities that governments implement into their budgets, as No. 1, not being consistent with economic freedom, and No. 2, leading to sort of systematic deficits — that is, every single year running a deficit, whether there's a national emergency or not.

 And the proposal that comes out of Capitalism and Freedom is to say, the federal budget — the government's budget — ought to be used only for those things that citizens choose to do collectively though the government.

 It shouldn't be used for things like creating jobs. It shouldn't be used for things like stimulating the economy if there's a recession. It shouldn't be used for things like stabilizing the macro economy, in general. It should be disciplined. There should be a fiscal discipline in play. Well, that's a good argument, but it hasn't come to fruition, and so there's a lot of work to be done on that issue.

Kokai: All right, there are some other things that you're focusing on that you say, "Hey, Milton Friedman was talking about this, and we still need to do some heavy lifting to get this done."

Lopez: Well, interestingly, you know, he also spends a lot of time in the book talking about how to help the underadvantaged economically. And a proposal that again comes out of the book is called the negative income tax. And this is an idea that suggests, well, if you are, for reasons of your background or your education or your abilities, unable to produce a sizable income for yourself — a standard of living for yourself — then society will help you out.

 And the idea is to provide a cash benefit that's inversely related to the amount of income that the person is able to earn. Now ... there's an interesting and very important twist here: He proposes it as a replacement of the entire welfare state.

 Now what has happened is we have the earned income tax credit on the books, which is a form of the negative income tax that Friedman proposed, but it was added on to the existing welfare state. And so that's also another challenge in front of us: to bring Friedman's ideas to fruition in public policies.

Kokai: Certainly there are a number of ideas, some of which, as you've mentioned, have come to fruition; others haven't. There's probably still some heavy lifting to be done before we'll see them in action, but as we wrap things up, just how important was Milton Friedman in terms of setting out some ideas and getting people to think about things that they perhaps hadn't thought about before?

Lopez: Well, certainly, he was an extraordinarily gifted economist, and that's recognized in a number of ways — probably the biggest way was his being awarded the Nobel Prize in economics. But he was also an extraordinarily gifted communicator.
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