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Milton Friedman on What government is for

On a more fundamental level, our present problems, both economic and noneconomic, arise mainly from the drastic change that has occurred during the past six decades in the relative importance of two different markets for determining who gets what, when, where, and how. Those markets are the economic market operating under the incentive of profit and the political market operating under the incentive of power. … And the importance of the political, or government, market has greatly expanded. We have been starving the market that has been working and feeding the market that has been failing.

Context. From a talk at the banquet celebrating the opening of the Cato Institute’s new building in 1993.

The Real Free Lunch: Markets and Private Property
Speech, 1993, Remarks at the banquet celebrating the opening of the Cato Institute’s new building, Washington, May 6, 1993 (Cato Policy Report, July/August 1993); reprinted in Toward Liberty: The Idea That Is Changing the World, ed. David Boaz (Cato Institute, 2002), pp. 56–57
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Milton Friedman, “The Real Free Lunch: Markets and Private Property” (1993), Remarks at the banquet celebrating the opening of the Cato Institute’s new building, Washington, May 6, 1993 (Cato Policy Report, July/August 1993); reprinted in Toward Liberty: The Idea That Is Changing the World, ed. David Boaz (Cato Institute, 2002), pp. 56–57. https://miltonfriedman.org/quotes/two-markets-profit-power-starving-market-that-works-1993

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He also said

  1. The issues that will arise will be a continuation of those that have bothered us these past decades. The main ones seem to me to be as follows: 1. The appropriate relation between the level of taxes and the level of expenditures on the average of good and bad years. 2. Criteria for determining the fraction of national income that is appropriately spent through the Federal Government. …

    Context. A short written statement he submitted when the Joint Economic Committee’s fiscal policy subcommittee asked economists which fiscal policy issues the coming decade would raise. He closes by saying he kept to fiscal policy broadly conceived and avoided questions of the equity of the tax and expenditure structure.

    Statement to the Subcommittee on Fiscal Policy
    Testimony, 1965, Fiscal Policy Issues of the Coming Decade: Statements by Individual Economists and Representatives of Interested Organizations, Subcommittee on Fiscal Policy, Joint Economic Committee, 89th Congress, 1st Session (1965), p. 55
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  2. That illustrates a general rule: If a private enterprise is a failure, it closes down—unless it can get a government subsidy to keep it going; if a government enterprise fails, it is expanded. I challenge you to find exceptions.

    Context. Contrasting the bottom line faced by the same group of people running an enterprise in the private sector and in government.

    Why Government Is the Problem
    Journal article, 1993, Hoover Institution Press, Essays in Public Policy no. 39, p. 9
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  3. I conclude that Keynes’s political bequest has done far more harm than his economic bequest and this for two reasons. First, whatever the economic analysis, benevolent dictatorship is likely sooner or later to lead to a totalitarian society. Second, Keynes’s economic theories appealed to a group far broader than economists primarily because of their link to his political approach.

    Context. From his essay on John Maynard Keynes, written for the volume of commentaries accompanying a 1989 German facsimile edition of Keynes’s General Theory (1936) and published in English by the Federal Reserve Bank of Richmond in 1997. “Benevolent dictatorship” is his name for Keynes’s view that society is best improved by persuading well-meaning officials, chosen for their moral values, to follow economists’ advice.

    John Maynard Keynes
    Journal article, 1997, Federal Reserve Bank of Richmond, Economic Quarterly, vol. 83, no. 2 (Spring 1997), pp. 1 to 23; first published in German translation in 1989, in the commentaries accompanying a facsimile edition of the General Theory (Verlag Wirtschaft und Finanzen, Düsseldorf)., p. 22
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