18 November 2013

CLASSIC: Young 'Conservative' David Brooks
-Arguing for Federal Subsidies/Bailouts-
Crushed By Milton Friedman (1985)

Should higher-education be subsidized?

Friedman: 'You have a case in which you are imposing taxes on relatively low-income people to confer very large benefits on upper-income people...'

Brooks: 'I think as soon as you start offering people economic incentives to get educated -or to use the education that they get for economic means- in other words when you put a price-tag on knowledge, I think that you're gonna be...

Friedman: 'What are you talking about? You mean to say that the graduates of colleges and universities don't use their capacities in a direction influenced by the money they can earn...?

'In what way do you think that governmental financing of higher education in any way changes the incentives to which the people who get the education react?'

'...here you are, defending these welfare-state payments to students going to institutions of higher education... do you feel the same way about welfare for business?'

Brooks: 'I think that if we can't get a great car through private industry... then we should federally fund it' 

Friedman: 'And who is going to decide -and how are you going to decide- whether government is more effective than private... than the market itself?'

Brooks: 'I really can't defend (the 1979 Chrysler bailout) on principle, but the fact is a tremendous amount of our population is reliant on the auto industry -and on Chrysler in particular. 

Friedman: 'What would have happened if Chrysler had gone bankrupt?'

Brooks: 'I dunno...' (w/ dumb look on face)

Friedman: 'Would it continue to operate?' It would have traded under a receiver, and the people who would have been hurt would have been the people who owned Chrysler shares -or who had loaned money to Chrysler. 

In fact, the odds are that properties would have been taken-over by more efficient automobile producers -and for all know you would have had more jobs...

'That's why I say this is welfare... the Chrysler loan is a form of welfare to the people who own stock and bonds... just as government subsidies to higher education is a form of welfare'

h/t Klaus

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