Emily Rooney: The late economist Milton Friedman was one of the boldest and most provocative figures of our time. He was born in 1912, making this the 100th anniversary of his birth. Milton Friedman received the Nobel Prize in Economics in 1976 and, as a professor at the University of Chicago he transformed a generation of economists. Its safe to say his work influenced the entire field. He was an author and an advisor to several presidents. His ideas won him millions of advocates and opponents all over the world. While some place a greater emphasis on financial equality, Friedman advocated economic liberty. In 1980, he shared his ideas with millions of T.V. viewers in the landmark PBS series, Free To Choose. Hi, I’m Emily Rooney and here surrounded by images of the University of Chicago, Milton’s intellectual home, we’ll engage four distinguished guests in a discussion of the relevance of Friedman’s ideas today. Americans are universally committed to the idea of equality. But, in practice, that means different things. Some think equality means little without equal outcomes. Others, like Milton Friedman, believe equality means equal treatment before the law and spoke out against government attempts to guarantee equal outcomes. He argued that only equality of opportunity would lead to freedom and prosperity. So, what is equality? In his 1980 landmark series, Free To Choose, Friedman wrestled with that question in a program called, “Created Equal”. In the next hour, we will too, with our panelists; Walter Williams, a professor of economics at George Mason University. Matthew Yglesias, a fellow at the Center for American Progress, and Shikha Dalmia, a senior analyst at the Reason Foundation, and John Bouman, president of the Sargent Shriver National Center on Poverty Law. So, welcome to all of you. All right, well first, Milton Friedman went to Thomas Jefferson’s home, Monticello, which vividly illustrates Jefferson’s contradictions over the meaning of equality. Milton Friedman: It was Jefferson who wrote these words, “We hold these truths to be self evident, that all men are created equal. That they are endowed by their Creator with certain unalienable rights. That among these are life, liberty, and the pursuit of happiness.” What he meant by the words equal, can be seen in the phrase, “Endowed by their Creator.” To Thomas Jefferson, all men are equal in the eyes of God. They all must be treated as individuals who have each separately, a right to life, liberty, and the pursuit of happiness. Of course, practice did not conform to the ideals, in Jeffersonís life or in ours as a nation. He agonized repeatedly during his lifetime about the conflict between the institution of slavery and the fine words of the Declaration. Yet, during his whole life, he was a slave owner. During the 19th century, and especially after the Civil War and on into the 20th century, the idea of equality came more and more to mean that everyone should have the same opportunity to make what he could of his capacities. That all careers should be open to people on the basis of their talents, independently of the race, or religion, or belief, or social class that characterized them. This concept of equality of opportunity offers no conflict at all with the concept of freedom; on the contrary, they reinforce one another. And, it is no doubt the concept that even today is most widely held. But, in the 20th century, beginning especially abroad and at a later date in this country, a very different concept a very different ideal has begun to emerge; that is the ideal that everyone should be equal in income, in level of living, in what he has. The idea that the economic race should be so arranged that everybody ends at the finish line at the same time, rather than that everyone starts at the beginning line at the same time. This concept raises a very serious problem for freedom. It is clearly in conflict with it, since it requires that the freedom of some be restricted in order to provide greater benefits to others. The society that puts equality before freedom will end up with neither. The society that puts freedom before equality will end up with a great measure of both. Rooney: John, do you think that’s true? Milton Friedman was saying that in the 1980s that our ideal was that everybody should have equal income, equal living circumstances. Do you think that’s true? John Bouman: No, I don’t think so. I don’t think there was, and I don’t think the sort of ideal, as he calls it, of equality of outcome ever had any serious force in this country. I think mostly, what people were arguing for, that he might call equality of outcome, is just the government involvement in the guaranteeing of equal opportunity and the removal of barriers to equal opportunity. And, it’s where you get in that grey area between the sort of ideal extremes, and where you actually advocate for one thing or another, and develop the role of government in the guarantee of equal opportunity, that’s when you start get into, you know, getting into the arguments about who’s right or wrong about the role of government. Rooney: And, whether the outcomes should be equal as well? Walter Williams: Well, I think that the only kind, only kind of equality that is consistent with personal liberty is equality before the law. And, but however looking at equality of opportunity as a concept, it really just doesn’t tell you very much. That is, I don’t have an equal opportunity to be a great boxer. I don’t have the equal opportunity to be a great basketball player. And, I don’t have the equal opportunity to do many, many things, so I think that the only kind of equality we should be striving for is equality before the law. Shikha Dalmia: Well, just to respond to John’s point, I think when Milton Friedman Friedman ah…ah…made this clip- affirmative action was at its heyday. And, affirmative action, which started off as equality of opportunity had actually morphed into and still has morphed into something like equality of outcome. Because if you look at the admission practices of a lot of, you know, universities what they are trying to do is get proportional representation by ethnic group, by, you know, various different criteria. And, that’s because they feel unless they arrange for equal outcomes, you know, there’s no way to measure equality of opportunity. The only way to measure equality of opportunity is through equality of outcomes. And so, they have prearranged the outcomes and I think that’s the kind of mindset that Milton Friedman was talking about at the time. I thought it was interesting that Thomas Jefferson was invoked in this context because Jefferson at least, as I recall it, had a fairly robust sort of conception of equal citizenship. Where it was important not just for people to have a sort of formal, hollow equality; but, he wanted to see a society of sort of farmer, owner, practitioners. It’s difficult to know, you know, what that would mean in the modern context, but the idea’s that, you know, everyone needs to have access to certain kinds of economic resources to have real opportunity be a meaningful participant in society and not, I think, just a sort of empty, legal equality. Rooney: Going back to your point though, I mean, Thomas Jefferson had slaves and the free market essentially, created slavery; but, the free market wasn’t going to take that away, it wasn’t gonna take discrimination away, it wasn’t gonna take Jim Crow Laws away. So, without some kind of government intervention, why wouldn’t that have continued? Williams: Well, I don’t think slavery is consistent with the free market. That is the free market has something to do with private property rights and self ownership. And, slavery is a violation of the essential principles of free markets. So, slavery is more, it’s something like the forcible use of one person to serve the purposes of another. And, that has to be offensive to anybody who believes in personal liberty. Bouman: But it took government to fix it, the market itself wasn’t going to fix it. Williams: Right. Rooney: It wasn’t going to self-correct. Bouman: And if you equate, if you equate freedom, it’s difficult really to understand what Friedman meant by freedom here, that’s a very mushy concept. Everybody gives up some freedom, right? We pay taxes, if you’re a policeman, you submit to discipline, so you do the job well. And so, the issue isn’t, is there some pure freedom, unfettered ah… life ah… that is even possible for anybody; but, where are we gonna draw the line? In a very pragmatic sense, there’s a tension between personal freedom and the common good. And, I think they’re both ah… important, laudable goals. And, the idea is to seek the balance there. And, in the question of slavery, you had to have a government role in order to bring it to an end because the market wasn’t gonna do it. Rooney: Do you agree with that? Dalmia: Well no, I actually think the reason we needed government to get rid of discrimination and slavery was because government had created the problem in the first place. It was the government that was enforcing, even during Jefferson’s time, you know that the idea of enslavement; that one person could own another person, that was a government enforced, enforced institutionalization. Which is why we then had to, a whole culture developed around certain government practices which then you needed a violent government action, like the Civil War to get rid of; and then, later on of course, it, you know, we still didn’t have equality. We still had Jim Crow Laws in this country which required further government step, which was the Civil Rights Act to get rid of that. But, this was a problem, slavery was a government created and supported institution and it had nothing really to do with the free market. Yglesias: Well, but I, but I think however you construe the origin of the problem, it’s still the case that the Civil Rights Act involved some significant curtailments of private property rights. But, I would say, and I think the vast majority of people would say, it was good for freedom in any kind of meaningful sense. Williams:No, I don’t, I don’t think it was good at all, that is, I think that when the Civil Rights Act was written, I think that instead the government should’ve said that the Constitution applies to all Americans and that was it. And, but however, see, see I think one of the points that people fail to take into consideration that as, as was said earlier, that most of the problems that black Americans faced in our country, then and now, is a result of government. Its root lies with government. Bouman: I don’t, I don’t Williams: And you, and you disagree, you disagree. I mean, for example, if I were the Grand Dragon of the Ku Klux Klan, and I wanted to sabotage black academic excellence, I couldn’t find a better way to do that than the government schools, can you? Bouman: No, but I, but I don’t think the conclusion is to shut down government schools or get the government out of schools. The conclusion is to do a better job with schools. Williams: How long have we been doing that though? Rooney: What about the issue of affirmative action? Does it disenfranchise anyone? Milton Friedman says that you shouldn’t be restricting the personal freedoms of a few to benefit others. Isn’t that what affirmative action does? Dalmia: Essentially, I think that’s exactly what it does. Now, I think, you know, we have affirmative action in this country, not just for people at the lower end of the street. We have affirmative action for people at the upper end of the street. A whole host of universities use legacy preferences, which is affirmative action for the rich. And they all, and what again, it goes back to Milton Friedman’s point, that we are trying to arrange equality of outcomes. Because we want X number of people, you know, who are in, you know, upper echelons of New England to go to Harvard and certain number of Jews to go to Harvard, there were quotas against Jewish people in this country, you know, at Harvard for a very long time. And, it’s a very, affirmative action is very much an equality of outcome Rooney: I know, but the essential point of it was to create equality for, originally, for African Americans because of the legacy of slavery. That was the idea that it would equate, give equal opportunity where there didn’t, it didn’t exist before. Was it necessary? Dalmia: In my view, it was not necessary. In fact, if, you know, Abigail Thernstrom and Stephan Thernstrom have done some wonderful work in which they have actually documented how ah… black progress in universities, both in terms of attendance and graduation rates, had been going up, you know, quite rapidly till the 1970s when affirmative action became really big. And, at that stage, actually blacks started doing worse because they weren’t getting into Rooney: Anybody wanna rebut that? Dalmia: Universities without being properly prepared. And, ah… and so, they were going to universities Williams: Yeah, but affirmative action Dalmia: Affirmative action actually Yglesias: I think it’s interesting though. Dalmia: Affirmative action actually is a cause of, you know, keeping blacks back to some extent farther than their progress. Yglesias: You know, when we get into talking about education though, you two have both very quickly sort of abandoned this first principles, you know, that government has to to stay out of everything. And, you’re instead trying to mount some empirical arguments, you’re saying, Well, maybe the government schools aren’t very good. Maybe affirmative action didn’t do what it was supposed to do. But, that means that we’re having a conversation, which is about how do we actually equip children with what they need to have a fair chance in succeeding? Williams: Well, look at this Yglesias: And that that does require we seem to be agreeing, that some kind of meaningful shot at getting quality education really matters. I think there’s a lot of things about, you know, prenatal, neonatal healthcare Rooney: Would you just accept the achievement gap going forward? There is a profound achievement gap. It grows bigger and bigger every year between white and Asian American students. Williams: No, I don’t accept it Rooney: and black and Hispanic, its profound. Williams: I don’t accept it, but that doesn’t mean that affirmative action is necessary. Look, for example, at one time, blacks were not allowed in basketball. Today, 80 percent of professional basketball players are black. And, it didn’t happen because of affirmative action, it happened because these guys could do a 360 slam dunk, in your face, and you couldn’t do anything about it, the same thing in baseball, the same thing in football. Sixty-six percent are these? Rooney: All right. Williams: The results of affirmative action? Rooney: Moving on, okay, all right, In a world where children are born into radically different circumstances, Milton Friedman wrestled with what it means to provide equal opportunity and how to best provide that. Milton? Friedman: The Yehudi Menuhin School in the south of England is also a place of privilege. Musically talented children from all over the world compete for a chance to come here to study. Much of the moral fervor behind the drive for equality comes from the widespread belief that it is not fair that some children should have a great advantage over others, simply because they happen to have wealthy parents? Of course, its not fair. But, is there any distinction between the inheritance of property and the inheritance of what at first sight, looks very different? These youngsters have inherited wealth, not in the form of bonds or stocks, but in the form of talent. Or, look at the same issues from the point of view of the parent. If you wanna give your child a special chance, there are different ways you can do it. You can buy them an education, an education that will give him skills enabling him to earn a higher income. Or, you can buy him a business, or you can leave him property, the income from which will enable him to live better. Is there any ethical difference between these three ways of using your property? Or again, if the state leaves you any money to spend over and above taxes, should you be permitted to spend it on riotous living, but not permitted to leave it to your children? The ethical issues involved are subtle and complex, they are not to be resolved by resort to such simplistic formulas as fair shares for all. Indeed, if you took that seriously, its the youngsters with less musical skill, not those with more, who should be sent to this school in order to compensate for their inherited disadvantage. Rooney: Well, he’s got a lot of thoughts in that one piece; but Shikha, is he saying that education is the basis of all equal opportunity? Dalmia: Ah…I’m not sure he’s saying exactly that. I think what he’s saying here is that you know, we all have different endowments and, you know, whether they are inherited endowments or whether they are, you know, in terms of what our abilities are, or whether they are, we’ve inherited wealth. And, what matters is not what the initial distribution is, what matters is that we allow to be, you know, we should be allowed to make what we can of whatever that initial distribution is. So, here he is, you know, very much talking about again, the equality of, you know, opportunity to allow whatever hand life has dealt us as best as we can, as opposed to Rooney: But, I hear him saying that, is it our obligation, the government’s obligation, the citizenries obligation to provide education first? Dalmia: No, he, well, what he’s saying, what the government’s obligation is to try and make sure that we are able to use our endowments as best as we can without being prevented from other, by other people from doing so. So, you know, in feudal societies the, you know, the debate in history has been how do we redistribute income according to some formula? So, in feudal societies, the aristocrats had the right to ah…ah… extract labor; and therefore, wealth from the serf class. And, in super progressive societies you have, you know, the poor or the relatively less well-off trying to extract wealth from the rich. And, what he’s saying is that kind of society will inevitably lead to, you know, a whole host of curtailments of freedom, as opposed to, you know, an equality of opportunity, which is what he is interested in. Bouman: I think he was …he’s setting up kind of an extreme straw man in order to make an argument against the estate tax basically. Dalmia: Yeah. Rooney: Which we’re still having that debate right now. Bouman: Right, and of course, the equal shares, I don’t think was ever a serious proposal, but it’s sort of an extreme way to portray an argument about the estate tax. um…But, um… I think it’s perfectly consistent with notions of freedom and passing along, um… you know, a good inheritance to your children, to have an estate tax. Um… That it doesn’t matter, I heard Bill Gates Sr. say once, It doesn’t matter if Junior’s gonna get $8 million out of a $10 million estate or $6 million out of a $10 estate. He’s getting a nice inheritance that he didn’t earn himself. And, he can go off and do what he wants with it. Um… So, it’s hard for me to see exactly what point Friedman was making here other than the one that we all have different gifts and fine and we should have the ability to do what we can with them, equal opportunity again. And, I don’t think any of us are disagreeing with that. Williams: Well, what’s the difference between bequeathing your children a million or $2 million in cash and bequeathing them a superior IQ, or high height that translates into ah…ah…ah… differential advantages in the market? That is, Wilt Chamberlain surely had greater chances in the market than I did and it Rooney: Because he was 7 foot Williams: was bequeathed from his parents. Rooney: or whatever, yeah. Yglesias: Well but, you know, the different, I mean, the reason we have taxes is to raise revenue because we can do things with the revenue, right? So, the idea of taxing certain kinds of very large bequests is not just that we are, you know, mad at the kids who are getting the money. It’s that we’re thinking that the money can be put to use. We can for example, help make sure that people have schools and have education. You know, and that’s very fundamental. I mean, I think he seemed to indicate that it would be somehow absurd to be giving extra violin lessons to the less talented children, which is an interesting example. But, I think it’s quite natural to say that, well, if some children are born blind that we give them some extra assistance because there’s an unusual difficulty there. That we need to give healthcare to the people who are in need of the healthcare, rather than just hand it out equally, or hand it out to the people of the Rooney: But, he was also suggesting Dalmia: But, there’s a very, very, very important distinction between what you just said and the conception of equality, which is what you’re talking about and what Milton Friedman actually conceded that when you have people who are in distress, then you do have a responsibility to do something about them. That’s all right. What is not all right is income redistribution for its own sake because we just don’t like inequality. Williams: But, where’s that money gonna come from? Where is it gonna come from? Is it a Tooth Fairy or Santa Claus? Dalmia: Well, one of we don’t, we don’t Williams: No, that is Yglesias: That’s why there’s Christmas Williams: The only way, see… see… see… what I find pretty offensive about many of these programs is the forcible use of one person to serve the purposes of another. I think that is immoral. [crosstalk] I mean, unless you think its moral? Dalmia: And, and I know and to get Bouman: I think it’s a concept of community and the common good. Williams: No, that’s what slavery was. Bouman: It happens all the time. Williams: The forcible use of one person to serve the purpose of another. [crosstalk] Williams: And, I find that offensive in any degree. Yglesias: I think this is, the real concept of equality that I think is left out of this opportunity and outcome dichotomy is the idea that policy should take the interests of all the citizens equally seriously when you’re making these things. And, that means you can’t put undue burdens on any particular individual, you have to let people lead their lives. But, it also does mean that if arrangements can make a large numbers of people better off by calling for some sacrifice, then that’s a good idea that we can build a better world that way. Williams: So, you believe that the force, that people should be forcibly used to serve the purposes of others? Yglesias: I believe that institutions should be set up Williams: Come on. to serve the good. Dalmia: Institutions according to whom? Now, you know, we talk here about distributive justice, redistributing income based on, you know, poverty and wealth. In Plato’s Republic, he taught, you know, proper idea of distributive justice would be that goods go to people who deserve them. So, if you’re a great piano player, then you should get, you should be entitled to pianos, not if whether you are rich or poor. And, that part experiment led straight to, you know, extremely oppressive communist society. Yglesias: You’re saying Plato led straight to extremely Dalmia: In his, no his, that’s Yglesias: That took 10,000 years. his target experiment in the Republic. No, that’s his target experiment in the Republic. which goes to Milton Friedman’s point that if, you know, if you are going to be interested in questions of distributive justice, you are going to have to curtail people’s freedom to such an extent that you will get a great deal of oppression. Which, and at the final outcome will be, you will distort people’s incentives to produce and you [crosstalk] Yglesias: Why is it that we have to leap from extreme to extreme? I mean, we’re living in a society today, which is not a communist dictatorship, it’s not an unfree dystopia; but, it also is a society that has taxes, it has programs, it has some social insurance, it has some retirement benefits. Dalmia: Insofar as, look, insofar as it doesn’t make equality an end in itself. And simply, a means to removing certain extreme forms of distress, that would be all right. But, that’s not actually what happens these days. You know, when you listen to President Obama when you when you listen to no when you listen to President Obama, you know he talks about spreading the wealth for its own sake. Now, that’s a very problematic idea. [crosstalk] Williams: Well, we are, we are talking about repression because if I say to the federal government, I will pay my share of the Constitutional mandated functions of the federal government. I will pay happily, but I will not have my earnings go to farmers, go to bail out big banks. You’ll see all the intimidation threats and oppression that I would wanna say Yglesias: Absolutely, but I mean, I think America, America meets any normal person’s basic definition of, We are living in a free society here. This is not Plato’s Republic. This is not the Soviet Union. Williams: We’re not living in a free society. Bouman: Well, if you’ll, if you Yglesias: I mean, I think that’s an extreme view Bouman: If you equate paying taxes for things that the political establishment has set up that you don’t like, if you equate that to involuntary servitude, then, I guess you have a Williams: Well, what does the Constitution mean? Bouman: Living in an ordered society. Rooney: Okay, all right, well, Milton Friedman understood and accepted, as we were just saying, that life is unfair. That some people will be born into wealth others into poverty; but, he said, would be unjust to those who trying to redistribute that wealth would be unjust to those who work hard to earn their money. Friedman: From Victorian novelists to modern reformers, a favorite device to stir our emotions is to contrast extremes of wealth and of poverty. We are expected to conclude that the rich are responsible for the deprivations of the poor; that they are rich at the expense of the poor. Whether it is in the slums of New Delhi, or in the affluence of Las Vegas, it simply isn’t fair that there should be any losers. Life is unfair, there’s nothing fair about one man being born blind and another man being born with sight. There’s nothing fair about one man being born of a wealthy parent and one of an impecunious parent. What kind of a world would it be if everybody was an absolute identical duplicate of anybody else? You might as well destroy the whole world and just keep one specimen left for a museum. In the same way, it’s unfair that Mohammed Ali should be a great fighter and should be able to earn millions. But, wouldn’t it be, would it not be even more unfair to the people who like to watch him? If you said that in the pursuit of some abstract ideal of equality, we’re not gonna let Mohammed Ali get more for one night’s fight than the lowest man on the totem pole can get for a day’s unskilled work on the docks. You could do that, but the result of that would be to deny people the opportunity to watch Mohammed Ali. I doubt very much that he would be willing to subject himself to the kind of fights he’s gone through, if he were to get the pay of an unskilled docker. Rooney: Matthew, Milton Friedman is saying that inequality is a fact of life, deal with it. Do you agree? Yglesias: Sure, I think there’s always gonna be some inequality in life. But you know, there’s an option between do nothing with regarding Mohammed Ali and preventing him from fighting. And, it’s the system that we have now which is where you have an income tax and people pay it and even after taxes, many people are much richer than other people. But, it allows us to get some revenue, to fund some programs, to take care of some problems, to create the infrastructure of society that we have, and to express some concern with the level of inequality, and to try to make a society where, you know, we have prosperity for everyone and where we have broadly shared economic growth. I think that’s common sense. And, its gone sort of a little bit missing in that dialogue. Williams: I think that what we need to do, we need to pay more attention to the rules of the game. That is, what creates some of the inequality that we see? That is, for example, in New York City, the price to own, get a license to own and operate one taxi, is $603,000. In Chicago, I believe, it’s something like close to $200,000. And, many, many restrictions for people at the bottom of the economic ladder to get their feet on the bottom rungs of the economic ladder, those are the kind of things that we should look at. What are the rules of the game and how can we change the rules of the game to boost? Rooney: Doesn’t the free market control that, too? Williams: No, no it doesn’t. Its government, its government, that is people who are on the inside, let’s say the income, you use example the taxis in New York, the people who own these licenses, they’re able to rig the economic game against the outsiders. That is, the insiders wanna keep the outsiders out so the insiders can charge higher prices and earn more income. And, those are some of the systemic issues that we need to look at. Dalmia: Too, just to pick up on Walter’s point over here, Milton Friedman was making an extremely important point. The point that he was making was: how do you create the incentives in society to get the maximum possible wealth generated so that everybody can be better off? Now, if you, you know, its all very good to say, Well, you know, we can just sort of redistribute an X amount of wealth and, you know, still everybody will be prosperous. But, people don’t become prosperous through redistribution. People become prosperous through creation of wealth. The minute you start, take away Mohammed Ali’s incentive to, you know, go and fight and make $7 or $8 million or however much he makes, you take away the incentive of the producers to keep generating that wealth. That’s what Milton Friedman is talking about over here. And so, Walter Williams is making an extremely important point. What we need to do is look at the regulations and the disincentives for wealth creation, that keep people on the lower rungs of society at those rungs and deal with those, rather than redistributing wealth. Bouman: Well, I, you know, these are good points, but let’s remember that the people who are benefiting from the high prices for taxi cab licenses isn’t the government, its the entrepreneurs and the capitalists who run the taxi cab companies. Williams: But, they’re able to [crosstalk] Bouman: Now, the point is that the government, the government has to figure out how to arrange this so that there’s as much opportunity for as many people as possible. There’s a role for the government in regulating things and setting fair rules within a fairly open capitalist system. And, and… maybe they haven’t drawn the line in the right places here, but I don’t think that’s an argument against the role of government. Rooney: You know, Milton Friedman also supported a negative income tax. He was thinking that would be in exchange for programs like welfare, or food stamps, and that kind of thing. But, its essentially the same thing. Do you think that’s a contradiction to be in favor of a negative I’m gonna ask you that John, a negative income tax, which basically says at a certain point you stop paying in and you get more back? Bouman:Um…Well, I just, I, I, think it needs to be all more on a practical level, right? If that produced enough revenue to run the important functions of government, then, you know, I suppose its as good as anything else, depending on, you know, the give and take [crosstalk] Bouman: But, the point is you need revenue to do the important functions of government. The argument today, my life is spent in the actual give and take of trying to argue these things in public policy debates and not in the relatively clean academic arena where you can argue ideals and extremes. Rooney: I guess, what my question is, was this a contradiction in ideology because basically, its…its… a social welfare program by any other name? Wait, we have it now with earned income tax Dalmia: Well, to just to bring a little context over here. The reason Milton Friedman, you know, advocated the earned income tax credit scheme, which is I think what you’re talking about Dalmia: was he felt if there was going to be a welfare state, that was the most efficient way to arrange it where the, you know, money that needed to go to the recipients of welfare, would go directly to them. Williams: That’s given that you’re gonna have a welfare state. Dalmia: That’s given that but he didn’t advocate a welfare state, so that’s a very important difference to keep in mind. Going back to John’s point over here, you know, I just hear you guys slipping between two things. Its one thing to tax people in order to function vital functions of the state, which are equally used by all. It is quite another thing to tax rich people to give that money to a certain subset of people, whether they are the poor, or the talented, or the untalented. Those are two very different things. And, that’s Yglesias: I feel like its you who’s switching. Dalmia: it’s the latter, its the latter that Milton Friedman was opposed to. Yglesias: You know, we hear here, Mohammed Ali, he’s so great. Wouldn’t it be terrible if someone stopped him from boxing? And, I agree, that would be terrible. Mohammed Ali was great, great fighter, great career. But, of course, he was paying income taxes, very high income tax rates as I recall back when he was boxing. I mean, you were talking as if that would just destroy it and there would be no athletes, there would be no business men. Dalmia: You and I can, you and I can sit and debate: what is the optimal level of taxation after which the tax becomes a disincentive to the producer? But there is such a point. Yglesias: Absolutely. Dalmia: There is such a point. Yglesias: There absolutely is [crosstalk] Williams: That’s right. Dalmia: We have to and so the point is that, you know if you are a central planner, and in your infinite wisdom you know exactly where that optimal point is, its a different thing. I don’t believe…I don’t believe that kind of knowledge is possible. Yglesias: But, this is what, this is what I’m saying about the switching though Dalmia: I would much rather, no I would much rather, you know, leave as much money as possible Rooney: Okay, getting the idea of inequality here. Dalmia: possible to people to use as they choose. Rooney: Let me ask Walter, at what point does inequality, you know, income inequality, create you know, just a huge social and political problem? There’s so much resentment on the bottom. What is the government’s role then to help mesh that, to help, you know? Williams: I don’t believe that government has a role whatsoever in doing, in getting rid of inequality. See, see the point that you have to recognize is that there’s no Tooth Fairy or Santa Claus giving the congressman the money. So, the only way the government can give one American citizen $1 is though, first through intimidation, threats, and coercion, confiscate that $1 from some other American. Now, you should not confuse my disagreeing with the redistribution with my saying, Well, you shouldn’t take care of people who are in need. I believe in helping your fellow man by reaching into your own pockets to help your fellow man, is praiseworthy and laudable. Reaching into somebody else’s pockets to help your fellow man in need is despicable. And, for the Christians among us, when God gave Moses the Commandment, thou shall not steal he did not mean, thou shall not steal unless you get a majority vote in Congress. [some laughter] Dalmia: And, by the way [crosstalk] Bouman: What if you have a majority vote in Congress that isn’t stealing? Williams: Yes it is. Bouman: Oh my God. Dalmia: Well, its legalized stealing, but it is stealing. To your point, there’s resentment, you know, against the wealthy. Actually there is not, the Pew Economic Mobility Project did a survey not too long ago, actually within the last six months, 1 percent of Americans put income inequality in their top ten issues. So Rooney: But, you ask them a more, a more pointed question about whether they resent somebody, somebody’s income versus theirs, its, its, they do. Bouman: You can do amazing things with numbers and polls. Rooney: Yes, exactly. Bouman: The, but I actually don’t disagree over here. Dalmia: People, let me just say something Bouman: Let me agree with you for a second. Dalmia: The Pew Economic Mobility Project is no bastion or Bouman: No, I get it. Rooney: No, but its all about the way a question. Bouman: But, the, I was actually trying to agree with you there for a second. Ah…that ah… I don’t think income inequality is resented that much by people as long as there’s fair opportunities on the front end, you know, that people understand I represent a lot of poor people for over 30 years. Most of them are just fine with the fact that they’re not gonna end up making as much money as someone else, if they feel like they haven’t been blocked unfairly or that there haven’t been conditions that have gotten in the way, they actually admire and love to follow the people with money and so forth. And, that’s an important part of American life that you can strike it rich, right? People love that, even poor people love that. Rooney: All right, on to the next point by Milton Friedman. Not everyone will win, but Friedman believed that when a few win big, it ultimately helps the losers. That may sound like a contradiction, but I’ll let Milton explain. CARD Dealer: Cards are coming out now, wager players saying they have nothing, banker has two Friedman: When the evening started, all of these players had about the same number of chips in front of them. But, as the play progressed they surely didn’t, some won, some lost. By the end of the evening, some of them will have big pile of chips others will have small ones. There’ll be big winners, there’ll be big losers. In the name of equality, should the winnings be redistributed to the losers so that everybody ends up where he started? That would take all the fun out of the game. Even the losers wouldn’t like that. They might like it tonight, but would they come back again to play if they knew that whatever happened, they’d end up exactly where they had started? But, what does Las Vegas have to do with the real world? A great deal more than you might think. Its one very important part of our life in highly concentrated form. Every day, all of us, are making decisions that involve gambles, sometimes they’re big gambles as when we decide what occupation to pursue, or whom to marry. More often, they’re small gambles as when we decide whether to cross the street against the traffic. But each time, the question is: who shall make the decision, we or somebody else? We can make the decision only if we bear the consequences. That’s the economic system that has transformed our society in the past century and more. That’s what gave the Henry Ford’s, the Thomas Alva Edison’s; Christian Barnard’s the incentives to produce the miracles that have benefited us all. Its what gave other people the incentive to provide them with the finance for their ventures. Of course, there were lots of losers along the way. We don’t remember their names, but remember they went in with their eyes open, they knew what they were doing, and win or lose, we society, benefited from their willingness to take a chance. Rooney: All right, Walter, interesting concept. Do losers benefit when a few people when big? Williams: Well, if it makes the pie bigger… they do. But, I think one of the things we have to recognize is that winnings are a result. That is, you cannot judge a game by the results. For example, if you look at the poker players coming out of Las Vegas, some have won a lot of money; some have lost a lot of money. Now, by just knowing the result, you can’t tell whether there’s been poker fairness or poker justice. What you have to do, you have to say, we have to look at the process. We have to look at the rules of the game. And, if the cards were dealt evenly from the top of the deck, if nobody was cheating, then any outcome is consistent with poker justice. And, that’s what we have to look at with the income distribution in our country. It is a result of something. So, what people have to ask in advance, Is the game being played fairly? Does everybody have equal access to the market? And, there are many, many restrictions that we mentioned tonight where people don’t have equal access to the market. Rooney: No, you mean you could buy your way in? I mean, which came first, you know, he uses the example of Henry Ford. What about Gates, or Steve Jobs, Bill Gates? Bouman: Well, and I actually don’t have anything to quibble with what Professor Williams just said. You know, if everything is fair, then the outcomes are the outcomes, except to the extent that there are, if some of the outcomes are sort of things that society doesn’t wanna have, like abject poverty or, you know, people in dire need. um…But, for I think for the government to ensure fairness and so on, I think you need some taxation in order to have revenue to do these functions. The functions of which create the conditions where a guy like Gates can strike it rich by his own account, or Warren Buffet. Rooney: But, presumably he had a leg up, he had invested money, he had something that a lot of people don’t have. Same with the guy at the poker table, if I come in with $1 million and you come in with $10, my chances of winning more are greater than yours. Bouman: And, I think that’s why you have things like small business loans and stuff. I mean, there’s a government attempting to level that playing field somewhat, but somebody’s still gotta take a risk. And, I think that’s okay, I mean, that’s the kind of life we have here. The issue about government regulation and taxation is the one where its not all or nothing, its finding the right tipping point and its a thing where there’s always going to be tension. And, there’s always going to be forces pulling one way and forces pulling the other. Rooney: I mean, one of the questions is: Should we do anything to protect losers? I mean, the vast majority of these people, of the people in the country who go bankrupt, they go bankrupt because of some catastrophic health situation. You know, do we wanna be in a situation where we’re seeing American families, you know, lose everything they have because somebody has cancer? Should the government be doing, well we are, we’re trying to do a universal healthcare? Bouman: Or somebody else took an adventure with their money on Wall Street. Yglesias: I think we ought to do something. I mean, Milton Friedman’s talking about incentives and how you have to have incentives for people to take risks. And, I think that’s completely true. That’s why you don’t wanna have a completely flat society. At the same time, people can take more risks and can be more entrepreneurial if they know that their downside losses are bounded to some extent. People know, if people know that they will be treated when they fall ill, that makes it a lot easier for them to go start their own business, something like that. If people know that some retirement benefits are going to exist, as long as, you know, participate in society, that lets you go do things. Dalmia: Can I just say that, you know, we actually just tried Williams: But, one thing, I wanna address one of the points about government. Today, the federal government is close to 30 percent of the GDP. Williams: Between 1787 and the 1920s, the federal government’s only 3 percent of the GDP, except during wartime. So, one has to ask the question, how in the world did we go from a third-world country in 1787 to the richest country in the 1920s, without all the programs that you are saying are absolutely necessary? Yglesias: There were different programs at that time. There was a large-scale government program to appropriate land in the West and hand it out to people. And, it was a great program; it was hugely successful! Williams: Oh, come on, when the poor Yglesias: And, it built exactly as you said Williams: when the poor Irish were landing here in the 1840s, fleeing the potato famine, when they got off the ship- was there a food stamp program for them? Yglesias: They didn’t haven’t was different programs at that time. Williams: And if and if, and if there’s not a food stamp program, how in the world did they make it? Dalmia: Well, but no, actually there were not. What there were, were, there were no government programs at that time. What there were, were Williams: Private. Dalmia: there were private mutual aid societies that actually were really, that were all Yglesias: Actually no, the most important economic resource at that time was the land. And, the government Bouman: It was 40 acres and a mule. was giving people free land. Yglesias: There was a large-scale program, there were land grant colleges, there was a transcontinental railroad, there was Rooney: The question here Dalmia: Those emerged much, much later. Rooney: Do we have any obligation? Dalmia: Between 1860 to 1916 Yglesias: That’s when they emerged! when they there were huge! Yglesias: Between 1860s and 70s. Dalmia: I think Rooney: Let me ask the question bluntly, this is what we’re talking about, we’re talking about gambling. Let’s get back to that metaphor. Do we have any obligation to protect losers? Dalmia: Well, two points over there, the gambling, the casino situation there’s a huge dis-analogy because in a casino, you go and play a zero-sum game where there are winners and losers. In a free market economy, there are no- its a win-win situation because people are trading with each other voluntarily and they, you are constantly increasing the pie with the result that even the poorest over a period of time do better. And, this is, you know, this is not a historically disputable fact. I mean countries that have free markets have done much better by the lowest rung of society than countries that don’t have the free market. Williams: But I think I Dalmia: As far as, you know, as far as, think of the things that can I just make one more point? As far as protecting the losers, Matt’s point that there should be protection for losers, that that actually has been tried- and it was tried with Fannie Mae and Freddie Mac, where, you know, the government essentially ah…ah… bailed out or you know, gave a guarantee against bad subprime loans and look at what we got. Yglesias: But see…this is Dalmia: When you have a guarantee against Yglesias: …this is the two-step; this is the two-step that I’m talking about. Dalmia: When you have a guarantee against losses, you encourage undo risk and that’s the problem. Rooney: Matt. Yglesias: Okay, so this is the thing, right? You talk about Henry Ford, talk about how America became such a wealthy society. And, you know, this is the system, he says, that we’ve had for the past 100, whatever years. But, the system that we had during that period was not a pure free market system. It was a mixed regulated economy. Williams: Of course it was. Yglesias: It had progressive income taxes. It had Fannie Mae and Freddie Mac. It had Social Security. It had Medicare, it had Medicaid. No obviously, no one is going to say that every single government program is a great idea. And, I wouldn’t, I would say that there’s some programs we ought to have. But, its very strange to look at the success of a regulated, welfare state capitalism to point to that success and then use it as evidence for how we should deregulate everything and eliminate redistribution. Rooney: Go ahead. Williams: One of things, look, in your city of Chicago, if you go to the poorest neighbors in Chicago you’ll see some people will have some nice cars, some nice cell phones, some nice clothing, but no nice schools, why? How come not at least some nice schools? Well, it has to do with how cars, clothing and cell phones are distributed through the market mechanism, and how schools are distributed through the political mechanism or through the government mechanism. And, whenever goods are allocated through the government mechanism, you’re gonna find that the people at the bottom are gonna be worse off than they otherwise would be. And, the basic problems of poor people in our country, particularly poor black people, are represent the failure of government, whether its in education, whether its even just things as police protection, it is the failure of government. And so, what a lot of people are saying, well, in light of this great failure of government, we’re asking for more government. And I think, I think we should move in the opposite direction. Rooney: John, John? Bouman: I think, I think the argument would be for better government, do a better job. It isn’t necessarily more. I don’t think the answer to the school problem is to pull the government out of schools. Williams: No, give the parents some money, right? Bouman: I think to have better schools and to try new things and so forth. I’m fine with that and there are some nice schools in a number of Chicago neighborhoods by the way; but, some of them are experimental, they’re trying new things. But, they’re not pulling the government out of it. They’re just loosening the reins and letting people try things. Rooney: Right, final thought here tonight, before we close, we wanted to give Milton Friedman the final word and perhaps the defining ethos of his economic theories. Milton? Friedman: The society that puts equality before freedom will end up with neither. The society that puts freedom before equality will end up with a great measure of both. Rooney: All right, so let me repeat that, “The society that puts equality before freedom will end up with neither. The society that puts freedom before equality will end up with a great measure of both.” Final thoughts on that, Matthew? Yglesias: Well, you know, I don’t think its a real either or decision. I think that a free society is part of society that treats all of its citizens equally, and with equal concern for all of their interests. Bouman: And yeah, I think its hard, it sounds great, but its hard to know exactly what he means by it. I think a more productive juxtaposition is the interest of the common good versus the interest of individual freedom, and there has to be a balancing point for those. Those are both valuable goals. There has to be a balancing point for it in order to maximize both of them consistent with an ordered society. Dalmia: You know, I think the historical record is extremely clear. I grew up in a country like India, which was socialistic for, you know, most of the time that I was there and the poor only got poorer in India. The, you know, the great gains in eradicating poverty in India have come after it liberalized its economy. Three-hundred-million people lifted out of poverty within in like less than two decades. So, I think, yeah the historical record here is extremely clear that countries that put freedom ahead of equality get a great measure of both. Williams: I think he’s absolutely right and I think that freedom is very, very important for economic growth and human welfare. And, its main ingredient is limited government as our Founders envisioned. Rooney: Do you think America today, has a great measure of both, freedom and equality? Williams: I think we’re losing it. Rooney: On which end? Williams: We still have a whole lot, but we’re losing it. Rooney: Which end? Williams: We’re losing it that is as Thomas Jefferson said: “The natural tendency for government is for government to gain ground and for liberty to yield.” Rooney: Anybody differ with that, America, freedom and equality? Yglesias: I think this is a free country. Bouman: Yeah. Yglesias: I think its, I think its obvious to everyone. Bouman: I think we’re doing a good job with it and we have this struggle with this tension between these two poles. And, I think we do a good job of finding the compromise points and trying to move the ball forward on both. Dalmia: Yeah no, I am with Walter on this. I think we are losing it. We are tipping the balance much more on the side of so-called equality. And, the tragedy is going to be that we’ll get less equality we’ll get less freedom. Rooney: Through government programs, is that? Dalmia: Through government programs, through universal health coverage, which is just going to keep increasing the cost of healthcare to a point that it will become less affordable to more people, to just use one example. Bouman: I wish we had more time to debate that one. Rooney: You would drop all of these programs? You would drop them all, you would keep them? I mean simple as that? Yglesias: Yeah, I agree with him about the taxis though. Rooney: The taxis? Yglesias: Yes. Williams: And the other areas of licensing as well. Yglesias: Yes absolutely. Williams: Yeah. Dalmia: But, what about education? I mean, that’s another area where the government has a very heavy presence and the outcomes keep getting worse and worse, and the achievement gap keeps getting greater and greater. So, you know every every industry in which the government is involved, whether its healthcare or education, you see the gap between the, you know the so-called winners and the so-called losers just increasing. Bouman: You know, I’d rather see the focus on trying to figure out how to address big problems, rather than on kind of ideological concerns about the way we go about it. Williams: That’s what we’re talking about. Bouman: The big, the big problem that plagues every single kitchen table is this healthcare, and the cost of healthcare and the cost of health insurance. We know what people are against, but they never talk about how you solve this problem. Rooney: All right, and we are not gonna solve it right now, either. All right, thank you all for being here. My thanks to Walter Williams, Shikha Dalmia, Matthew Yglesias, and John Bouman. I’m Emily Rooney, good-bye.