Becker on Milton FriedmanMike 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 onhow to improve public policy in different fields. These proposals onbased on just two fundamental principles. The first is that in the vastmajority of situations, individuals know their own interests and whatis good for them much better than government officials andintellectuals do. The second is that competition among providers ofgoods and services, including among producers of ideas and seekers ofpolitical office, is the most effective way to serve the interests ofindividuals and families, especially of the poorer members of society.

The famous education voucher system found in this book, and based onan article published in the 1950’s, embodies both principles: thatparents generally know the interests of their children better thanteachers unions and school boards do, and that competition amongschools is the best way to serve the educational interests of children.He added the further insight that one can and should separategovernment financing of education from government running of schools.The voucher system retains government financing, but forces publicschools to compete for funds against private for-profit and non-profitschools. The voucher proposal has I believe won the intellectual battleover the value of competition among schools at the k-12 school level aswell as at the college level, but so far vouchers have won only limitedpolitical victories in terms of actual implementation. This is mainlydue to the dedicated opposition of public school teachers unions whofear 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.