49 pages • 1 hour read
Milton Friedman, Rose FriedmanFree To Choose
Nonfiction | Book | Adult | Published in 1980A modern alternative to SparkNotes and CliffsNotes, SuperSummary offers high-quality Study Guides with detailed chapter summaries and analysis of major themes, characters, and more.
Chapters 6-8Chapter Summaries & Analyses
Chapter 6 Summary: “What’s Wrong with Our Schools?”
In New York state, in 1836, nearly all children between the ages 5 and 16 attend schools, yet these institutions are mostly private and attendance is not compulsory. Such schooling is also widely available in other states. At about the same time, teachers and officials, led by Horace Mann, campaign for universal education provided by the government at taxpayer expense, on the theory that the state has a duty to educate its children: “Ever since, most children have attended government schools” (153).
Unfortunately, “the government takeover reduced the quality and diversity of schooling” (154). At first, local control is the norm, but by today, control of schooling is largely in the hands of county, state, and federal authorities: “As professional educators have taken over, control by parents has weakened” (155). Schools now promote social agendas beyond mere education. Between 1970 and 1978, spending and staffing rises but the number of school districts drop due to centralization; meanwhile, the number of students and schools decrease, and grades and test scores decline.
A chief problem is that parents, as consumers, have fewer options and influence when schooling is wrested away from local control, while teachers and bureaucrats, as producers, gain power. Worst hit are families in inner cities, who often cannot afford to escape bad public schools by paying for private schooling or moving to wealthier areas. This tends to “exacerbate the stratification of society and provide highly unequal educational opportunity” (158). Social reformers often believe that these parents “have little interest in their children’s education and no competence to choose for them. That is a gratuitous insult” (160).
One solution is vouchers, which give parents a stipend to enroll their children at a school of their choice: “The public schools would then have to compete both with one another and with private schools” (161). Vouchers would use tax money already collected from parents, who would no longer have to pay twice for the privilege of placing their children in private schools.
Some fear that vouchers would increase segregation, but inner-city schools are already heavily segregated, and schools that specialize in the arts or sciences and do well at it would attract students from all races.
Another concern is that the wealthy would be able to add cash to their vouchers and send their children to better schools than can the poor. This overlooks the point that families at the bottom of the inner-city educational ladder would make the most upward progress: “Vouchers would improve the quality of the schooling available to the rich hardly at all; to the middle class, moderately; to the lower-income class, enormously” (168).
Government teachers argue that vouchers would destroy public schools and their contribution to society. If they are valuable, though, they should have no fears: “The threat to public schools arises from their defects, not their accomplishments” (170). The good ones would thrive in any event.
The educational bureaucracy “has adamantly opposed every attempt to study, explore, or experiment with voucher plans” (171). Nonetheless, many groups now support vouchers: “Vouchers keep being rejected and keep emerging with more and more support” (175).
Higher education is non-compulsory, and there are many choices. State-sponsored universities, however, subsidize student costs to the point where the quality of learning suffers: many students attend merely as “a pleasant interlude between high school and going to work” (175), and many classes are “often depressing rather than inspiring” (176). Even the best public universities “are not noted for undergraduate teaching” (176). The dropout rate is high. Private institutions, on the other hand, charge more; students and parents have more at stake. Completion rates are much higher.
Supporters of public colleges and universities argue that education benefits society and should be subsidized. Factories and other enterprises also benefit society, “yet hardly anyone would conclude that tax money should be used to subsidize the capital investment of General Motors or General Electric” (179).
Supporters further contend that public higher education improves equality of opportunity, but more low-income students than middle-class students attend private universities in 1971. Ironically, “students from higher-income families benefit the most from the subsidies” available at public universities (182). High-income families get more back from the subsidies than they pay in taxes, while middle- and low-income families suffer a net loss.
Student loans can burden some graduates more than others, depending on their post-college earnings. A few universities work around this problem by investing in students’ tuition and later receiving payback in the form of a percentage of the students’ expected higher earnings. Meanwhile, a voucher system, like that proposed for grade schools, would allow more low-income students to attend private colleges. Such a system would level the playing field between public and private institutions.
Chapter 7 Summary: “Who Protects the Consumer?”
Between 1970 and 1979, the number of federal regulators triple and spending goes up fivefold: “During the same decade, economic growth in the United States slowed drastically” (191). Regulation is supposed to protect the consumer from bad products, yet high on that list are the “[p]ostal service, elementary and secondary schooling, railroad passenger transport” (191), which are served up by government. Meanwhile, the best, including “appliances, television and radio sets, hi-fi equipment, computers […] supermarkets and shopping centers” (192), come from the private sector.
Today’s government watchdogs—the FDA, the EPA, and the ICC, among others— “exemplify the more recent type of regulatory agency—cutting across industry and relatively unconcerned with the consumer’s pocketbook” (194).
In the 19th century, railroads crisscross America; competition is fierce. Rail companies “were a steady source of stories of financial manipulation and skullduggery in high places” (196). The Interstate Commerce Commission (ICC) is formed in 1887 to resolve the problems but does so by raising long-distance rates and otherwise benefitting railroads, who develop cozy relationships with Washington regulators.
Railroad dominance is threatened in the 1920s by the emergence of long-distance trucking: “The artificially high freight rates maintained by the ICC for railroads enabled the trucking industry to grow by leaps and bounds” (197). Railroads respond by pressuring the ICC to control trucking; truckers are thereafter required to apply for permits to carry long-distance loads. During the initial rollout, fewer than one in three are approved. From then until 1972, intercity freight tonnage increases twenty-seven-fold but the number of permits drops by nearly half. This system keeps freight costs artificially high, which benefits both railroads and trucking companies: “the elimination of ICC regulation of trucking would drastically reduce costs to shippers” (198).
Eventually, however, railroads wither, overburdened by a regulatory regime partially of their own making. Airlines have avoided the same fate via recent deregulation; increased competition and lower fares improve their bottom lines.
Regulation often gets support both from reformers and special interests. Laws are enacted, the reformers move on, and the special interests—usually the companies to be regulated—work with officials to fine-tune the rules to their benefit. Over time, bureaucratic bloat increases: “In the end the effects are precisely the opposite of the objectives of the reformers and generally do not even achieve the objectives of the special interests” (201).
During the 19th century, meat packers and pharmacists suffer losses when they hurt their customers with unsanitary or poisonous products. Believing this penalty inadequate, legislators pass the Pure Food and Drug Act of 1906 and the Food, Drug, and Cosmetic Act of 1938. Reports of medical disasters persist, though, especially the thalidomide tragedy of 1961, and in 1962 the Food and Drug Administration (FDA) gets broader powers. New drugs must undergo years-long testing before approval; costs skyrocket.
Regulators face an unsavory choice: if they approve a drug that later causes deaths, they will suffer terrible publicity, but if they fail to approve a drug that might have saved lives, few will notice. As a result, the new authority “has done more harm by retarding progress in the production and distribution of valuable drugs than it has done good by preventing the distribution of harmful or ineffective drugs” (206). Many regulators are well meaning; however, “social, political, and economic pressures determine the behavior of the people supposedly in charge of a government agency to a far greater extent than they determine its behavior” (209).
The Consumer Products Safety Commission (CPSC) is formed in 1973 to regulate most products produced in the US. Standards are somewhat arbitrary; as always, manufacturers have the most to gain or lose, and they involve themselves in CPSC rulings: “The result will be to strengthen the competitive position of existing domestic manufacturers and to make innovation and the development of new and improved products more expensive and difficult” (211).
Meanwhile, regulatory errors cause damage or death. Certain aerosol spray adhesives are banned because they might cause birth defects, and a number of pregnant women undergo abortions, fearing their offspring will be malformed; the birth defect claim is later disproven. Flame retardant is mandated for children’s sleepwear, and the product used, Tris, is later found to be a potent carcinogen:
Had the market been allowed to operate […] Tris would have been introduced gradually. There would have been time for the information about Tris’s carcinogenic qualities to have been discovered and to lead to its withdrawal before it was used on a massive scale (213).
To remedy pollution, the Environmental Protection Agency (EPA) is established in 1970. By 1978, “[s]omething between a tenth and a quarter of total net investment in new capital equipment by business now goes for antipollution purposes” (213). The purpose is to remove effluence, but perfection is impossible: for example, people exhale carbon dioxide, a potent pollutant.
Environmentalists tend to “proceed as if bad, malicious people are pouring pollutants into the atmosphere out of the blackness of their hearts” (215). Usually business is blamed, but ultimately “the people responsible for pollution are consumers,” who create demand for the products (215).
Costly regulatory burdens could be reduced by replacing complex rules with a simple tax on effluents: “The difference between the effluent charge and the regulations is that the effluent charge would control pollution more effectively at lower cost, and impose fewer burdens on nonpolluting activities” (217).
In 1971, the government imposes price controls and other restrictions; oil shortages begin, then worsen under the OPEC production rollback of 1973. Greedy businessmen are blamed for this supposed energy crisis, and the Department of Energy is formed in 1977 to manage a problem originally caused by federal interference.
Market competition, much more than regulation, protects the consumer “because a private firm that makes a serious blunder may go out of business. A government agency is likely to get a bigger budget” (223).
Chapter 8 Summary: “Who Protects the Worker?”
Successful labor unions tend to represent skilled labor; airline pilots and doctors are prime examples, along with police, teachers, and other government employees. Unions enable higher pay for their members chiefly through restricting membership. In fact, “the gains that strong unions win for their members are primarily at the expense of other workers” (233). Unions achieve this “primarily through licensure” with the aid of government (235).
Labor organizers argue that if all workers were unionized, they would be paid better “at the expense of profits” (234). However, 80% of national income goes to wages, while only 6% is after-tax profit, so raising all wages is impossible to achieve. Meanwhile, privately financed innovation has “raised the productivity of the worker and provided the wherewithal for higher and higher wages” (234).
High union wages attract more applicants; unions must resort to arbitrary, sometimes prejudicial, criteria for selection. Union contracts are often enforced with the threat of violence. Helping unions are state and federal governments, who often demand union wages of their contractors.
Minimum wage laws are intended to help the poor, but they increase their unemployment: “The minimum wage law requires employers to discriminate against persons with low skills” (237). Persons with skills worth less than the minimum wage won’t be hired, and this has especially hurt black teens. The Friedmans “regard the minimum wage rate as one of the most, if not the most, antiblack laws on the statute books” (238).
Many trades, unionized or not, campaign for licensing on the grounds that this will protect consumers from incompetent peddlers. However, “[t]he lobbyists are invariably representatives of the occupation in question rather than of the customers” (240). The true purpose, then, is to restrict competition.
Another way to improve wages is for unions, who are exempt from anti-trust laws, to collude with business to keep prices artificially high with strikes and threats.
Government workers are among the best protected. They make more money than average, receive nearly automatic promotions and raises, have excellent pensions, and are nearly impossible to fire: in one case it “took nineteen months to do it” (224).
The Friedmans state that “[t]he most reliable and effective protection for most workers is provided by the existence of many employers […] Competition for his services—that is the worker’s real protection” (246). The rule is always the same— competition creates alternatives that protect everyone in the marketplace from exploitation: “Why do we have poor postal service? Poor long-distance train service? Poor schools? Because in each case there is essentially only one place we can get the service” (246).
Chapters 6-8 Analysis
Recent developments serve to validate the Friedmans’ case for regulatory relief. One example is education. Government schooling is “an island of socialism in a free market sea” (154). Vouchers are an attempt to re-introduce competition and alternatives into schools, but such proposals meet with stiff resistance, largely from government administrators and teacher unions. Recently, though, public magnet schools have created options for parents that achieve some of the benefits of vouchers while avoiding much of the political controversy. This does not exonerate or validate public schooling so much as it proves the power of alternatives and competition in improving education.
Another recent disruption brings to mind the Friedmans’ discussion of long-haul truckers, who must obtain hard-to-get permits before they can do work. Like taxi medallions, these permits can be bought and sold and are valuable because they restrict competition and help keep rates up. Disruptive companies such as Uber and Lyft bring fresh competition to transport by working around regulatory protections for the old businesses. Taxi owners may scream at the supposed injustice, but their medallions are themselves a form of unfairness that limits competition and growth.
“Fuel from shale, tar sands, and so on, makes sense if and only if that way to produce energy is cheaper than alternatives” (221), and this is precisely what happens in the mid-1990s, as hydraulic fracturing of oil wells and shale deposits becomes economic. Though environmentally controversial, this new production pushes the US toward energy independence from war-torn oil-producing regions, and it makes the case for innovation, rather than regulation, as the solution to otherwise sticky problems.
