Free To Choose A Personal Statement - Friedman, Milton & Rose

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This work addresses copyrights and permissions related to the book “Free to Choose” by Milton Friedman and Rose D. Friedman.

• Copyright for the book is held by Milton Friedman and Rose D. Friedman from 1980 and 1979.

• No part of the book can be reproduced without written permission from the publisher, Harcourt Brace Jovanovich, Inc.

• Requests for permission to copy parts of the work should be sent to Harcourt Brace Jovanovich’s permissions department.

• The authors thank various publishers for permission to quote excerpted materials from other works.

• Publication and cataloguing details are provided, including the Library of Congress classification.

• A list of Milton Friedman’s other books is included.

• The book is dedicated to Ricky and Patri Friedman.

So in summary, it outlines the copyright and permissions information and includes acknowledgments for quoted materials in the book.

• Mass immigration to the United States swelled after the American Revolution, driven by hardship in other countries and attracted by promises of freedom and prosperity in America. Immigrants worked hard and many succeeded through ingenuity and perseverance.

• The US achieved an economic and political miracle through implementing two key ideas from 1776 - Adam Smith’s principles of free market economics in “The Wealth of Nations” and the principles of individual liberty and equality in the Declaration of Independence.

• Free market capitalism and economic freedom are necessary for political freedom. They allow voluntary cooperation without coercion and dispersal of power to prevent tyranny. This produced a golden age of prosperity in the 19th century US and Britain.

• Agriculture was transformed through private initiative on free land, not government programs. This allowed industry to develop too through a growing workforce.

• Founders like Smith and Jefferson saw strong government as a threat to individual freedom and limited it to protecting citizens from harming each other. The success of freedom reduced its perceived importance until the Great Depression, when it was incorrectly blamed on capitalism instead of the government’s role in monetary policy. This shifted thinking toward bigger government roles.

This summarizes the key points:

• The modern world seems highly coordinated, with goods readily available for purchase. But we rarely think about how everything is coordinated without centralized command or planning.

• It is natural to assume coordination requires central ordering, as in an army. But command can only effectively work in small groups. No large army or economy can be run entirely by orders from the top.

• The Soviet Union is often portrayed as a centrally planned economy, but in reality incorporates significant elements of voluntary cooperation and market forces. Privately owned small plots account for a third of Soviet farm output despite being only 1% of agricultural land.

• Labor allocation in the USSR mostly involves wages and job applications rather than direct ordering of people to jobs. Entrepreneurial activity also persists illegally despite being banned.

• All societies have some command elements, but none operate entirely through command or entirely through voluntary cooperation. Even supposedly centrally planned economies rely on market forces and voluntary cooperation to function effectively.

The passage discusses how commands/regulations and voluntary exchange shape societies and economies. Commands can be explicit, like military conscription, or more subtle, like taxes intended to change behavior. A purely command economy relies on tyranny while a primarily voluntary exchange economy promotes prosperity and freedom.

Voluntary exchange, while necessary for prosperity and freedom, is not sufficient on its own based on history. The story of how a pencil is made highlights how voluntary exchange allows millions of unknown people around the world to cooperatively produce goods through a global supply chain.

Prices enable this complex cooperation without central planning. When buyers and sellers voluntarily agree to exchanges, it means both benefit. This principle explains how economic order can emerge without intention as individuals pursue their self-interest. Prices transmit information about supply and demand throughout the economy, incentivize efficiency, and determine incomes. The passage provides the example of how price signals would respond to increased pencil demand to efficiently adjust production globally.

This passage discusses how the price system efficiently transmits information and provides incentives in a free market economy. It explains that prices communicate information about supply and demand conditions for various goods upstream and downstream through the production and distribution process. Profit motives and competition ensure that firms and individuals act on price signals to optimize production and resource allocation. While government interference can distort price signals, a free market allows for flexibility and continuous adjustment to changing conditions via price changes.

• A higher wage for loggers signals that the demand for loggers’ labor has increased. The higher wage gives workers an incentive to choose logging over other occupations.

• Some workers who were indifferent may now choose to become loggers. More young people entering the labor market may also choose logging.

• However, government minimum wages or trade union restrictions could distort the information conveyed by higher market wages or prevent individuals from responding to higher wages.

• Non-monetary factors like job satisfaction also influence occupational choices, and may compensate for lower wages or higher wages for less desirable work.

• The higher market wages for loggers distribute more income to loggers by rewarding their scarce labor that is in high demand. But some view this distribution of income as unequal and aim to alter it through government intervention.

• However, using prices only to redistribute income without also transmitting information and incentives would not work, as it removes incentives for individuals to respond to market prices and signals. Command allocation of resources would be required instead of a market-based system.

• Communist governments have been unable to run a pure command economy and completely separate income from prices.

• For physical resources like land and buildings, they have been able to make them public property but this led to lack of incentives to maintain and improve them.

• For human resources, communist governments have not been able to go as far and still had to let people own themselves and make decisions guided by prices and market forces to some extent.

• The inefficiencies of the command system have led socialist countries to discuss using market forces more in production, but attempts to do so while not distributing income through markets failed in theory and practice.

• Voluntary exchange through markets can produce complex structures like language, scientific knowledge, culture, and values in an evolutionary way without central planning, similar to how economic systems develop.

• Government is a form of voluntary cooperation but also has a monopoly on legitimate use of force, and its role in using force to impose restraints has changed over time and societies.

• Adam Smith argued that the role of government should be limited to three main duties: protecting society from external threats, protecting citizens from injustice/oppression by others in society, and providing certain public goods that private markets cannot efficiently provide.

• The first two duties relate to protecting individual freedom and preventing physical coercion. However, governments do not always fulfill these duties as intended and can sometimes become a threat to freedom themselves.

• The third duty raises more complex issues, as it is often used to justify a wide range of government activities beyond what Smith envisioned.

• Valid government activities under this duty include addressing externalities or “third-party effects” where private markets fail due to the high costs of transacting with all affected parties. Examples include public infrastructure, pollution, and neighborhood effects.

• However, government actions also create externalities, so there is a risk of “government failure” replacing “market failure.” The burden of proof is on proponents to show clear benefits of interventions over costs. Overall role of government should be limited to clearly justified cases of market failure.

• The passage discusses four duties of government that Adam Smith did not explicitly mention, including protecting members of society who are not “responsible” individuals like children. However, introducing this concept introduces ambiguity into the goal of freedom.

• It argues that while some level of paternalism is needed for those deemed not responsible, like children, assigning parental responsibility is mainly expedient, and parents do not have unlimited rights over their children.

• Adam Smith’s three duties of government provide a framework to balance considerations for and against government intervention, ruling out much existing intervention like tariffs and price controls.

• Hong Kong is presented as a modern example of a society relying primarily on voluntary exchange through free markets, with limited government focused on security, law, and infrastructure. This has led to high economic growth and standards of living.

• Great Britain and the US in the 19th century are also discussed as historical examples where limiting government restrictions on industry, trade and immigration led to significant economic growth and prosperity despite rapid population increases.

Here is a summary of key points about vice organizations from the passage:

• Vice organizations emerged in the late 19th century to address various social issues and organize charitable activity. Examples given include the Society for the Prevention of Cruelty to Animals, the YMCA, YWCA, Indian Rights Association, and Salvation Army.

• These organizations showed that voluntary cooperation could be effective for organizing charitable/social welfare activities, just as it was for organizing commercial/business activities.

• Their emergence coincided with a burst of cultural development in cities and towns, such as the founding of art museums, opera houses, symphonies, museums, and public libraries.

• The passage suggests vice organizations played an important role in organizing social welfare activities through voluntary cooperation during the late 19th century in the U.S. They helped address social issues and spur cultural development.

The key argument being refuted is the idea that “high-wage” American workers need to be protected from “unfair” competition from lower-wage workers in other countries.

The passage makes several key points in refuting this argument:

1. Wages between countries cannot be directly compared due to differences in currencies and purchasing power parity. What matters is the real standard of living wages can buy in each country.

2. If another country truly had a permanent cost advantage across the board, its currency would appreciate until costs and standards of living were roughly equal with trade partners on average.

3. Countries have a comparative advantage in different industries based on relative productivity differences. Specialization and trade benefits both through increased efficiency.

4. Calls to restrict imports ignore benefits to domestic consumers from access to cheaper goods. Subsidies from other governments represent a transfer of resources from their taxpayers to benefit US consumers.

5. Disruptions from trade are no different than those from new technologies, and policies to ease adjustment should apply evenly domestically and internationally. Protectionism risks losing the gains from trade and specialization.

In summary, the key fallacy is looking at wages in isolation rather than real standards of living, and ignoring the mutual benefits of trade based on comparative advantage between countries. Free trade does not pit “high” vs “low” wages when costs are properly understood.

• If tariffs and quotas on steel imports were removed, steel imports to the US would increase sharply, driving down steel prices in the US. This would force US steel producers to cut output and cause unemployment in the steel industry.

• However, lower steel prices would mean products made from steel could be purchased more cheaply, leaving buyers with extra money to spend elsewhere. This would increase demand and employment in other industries.

• Over time, unemployed steel workers could find jobs in other industries to replace workers now employed elsewhere. So there need not be a net loss of employment.

• Imposing tariffs on other industries like textiles would similarly protect domestic producers but harm export industries and reduce overall output.

• National security arguments for protecting industries like steel are not valid since defense needs take up a small portion of total domestic production. Free trade would not destroy the industry.

• If cheaper to import all steel, alternatives like stockpiling or maintaining idle production capacity could ensure national security needs are met. The national security argument is often just an industry self-interest rationalization.

• Three arguments potentially justify tariffs: national security, infant industries, and “beggar-thy-neighbor” policies by major exporters to indirectly raise prices through export taxes. But in practice tariffs are rarely removed and arguments are often pretexts to protect incumbent industries.

• A country may impose a tariff on imports to gain monopsony power, driving a hard bargain with foreign sellers and imposing an unduly low price. The tariff is effectively paid by the foreign sellers, as it reduces their net return below the sale price.

• However, this nationalistic approach is likely to promote retaliation by other countries. And political pressures tend to result in tariff structures that do not actually take advantage of any monopoly/monopsony positions.

• Free trade is the best policy, even if other countries do not practice free trade. Imposing trade restrictions in retaliation only adds to the harm for all countries involved through reduced trade. Countries are better off cooperating through free trade.

• Free international trade promotes harmonious political relations among nations, as it allows for voluntary cooperation between private entities rather than conflict through government interventions and trade disputes. It fosters economic and political freedom.

• Eliminating trade barriers is the most effective way to ensure competition, as it opens domestic markets to competition from foreign producers on a global scale. This makes the establishment of monopolies or cartels much more difficult.

• The passage argues that central economic planning tends to lead to tyranny and controls over the economy and citizens, while limiting individual freedom and living standards. Countries with free markets and private enterprise tend to prosper more with higher living standards and more individual freedom and control over destiny.

• Examples provided are contrasting East and West Germany, with West Germany prospering after adopting a free market under Erhard, while Russia and Yugoslavia also show contrast with Yugoslavia doing better after decentralizing and using more market forces.

• In the Middle East, Israel has done better than Egypt despite socialism due to more market sector involvement. Asian countries like S. Korea, Taiwan, Hong Kong using markets have boomed vs. India, Indonesia, China using central planning.

• The passage argues experience shows countries using free markets after political changes like post-Meiji Japan did dramatically better economically than countries using central planning like post-independence India. This provides a “controlled experiment” showing the importance of economic organization method.

• Japan in 1867 emerged from isolation and sought rapid economic growth and transformation into a great power. India in 1947 gained independence from Britain with similar goals.

• India had many advantages over Japan - it experienced some economic growth pre-WWI, had a modernized infrastructure and skilled civil service thanks to British rule, and received large volumes of foreign resources after independence.

• However, unlike Japan which dismantled feudal structures and extended opportunities through free markets, India made little progress eliminating caste barriers or reducing inequality. Its economic growth stagnated despite population growth.

• The key difference was the economic approaches - Japan relied on voluntary cooperation and free markets while India implemented centralized economic planning, controls, subsidies and import restrictions that constrained growth. Japan’s initial hands-off approach fueled much faster development than India experienced under planning.

• The passage contrasts the economic policies and outcomes of India and Japan since the late 19th century.

• Japan allowed market forces to operate with little government intervention after 1867. This released entrepreneurial energy and drove development. The textile industry transitioned quickly from homemade to factory production.

• India adopted extensive government controls and protection of industries like hand-loom weaving after independence in 1947. This frustrated private initiative and led to inefficient allocation of resources. The hand-loom industry continued to receive government subsidies and protection despite being less productive.

• The experiences show that reliance on markets in Japan led to more dynamic development, while extensive government controls in India held back development and protected inefficient industries.

• The passage criticizes the expansion of government intervention in the US economy over the past 50+ years. This has limited both economic freedom by reducing disposable income and political freedom by concentrating decision making power.

• Economic freedom requires freedom over how to spend one’s income as well as freedom to participate in businesses and occupations without excessive licensing and regulation. The passage argues government in the US has impinged on these freedoms too much.

This passage summarizes the origins of the 1929 Great Depression and the creation of the Federal Reserve System that followed. Some key points:

• The 1929 depression was catastrophic for the US and world economy, reducing output and increasing unemployment dramatically. This boosted support for increased government intervention in the economy.

• It also shifted mainstream economic opinion, discrediting the view that monetary policy could ensure stability and helping Keynesian ideas of government intervention take hold. However, the depression was actually caused by failures of government monetary management, not private enterprise.

• In 1907, a “bank run” on the Knickerbocker Trust Company in New York precipitated wider banking panics across the US. This highlighted the need for a central banking authority to manage monetary crises.

• In response, Congress established the Federal Reserve System in 1913 to serve as the nation’s central bank and lender of last resort, aiming to prevent future panics and recessions through monetary policy management. However, failures of Federal Reserve policy would later contribute to the onset of the 1929 depression.

• In the banking panic of 1907, many depositors tried to withdraw their deposits from banks all at once due to fears of bank insolvency. This led to “bank runs” as everyone tried to get their money out before banks failed.

• Bank runs strained banks’ resources as they did not actually have sufficient cash on hand to pay all depositors immediately. Fractional reserve banking meant banks typically only held a fraction of deposits in cash reserves.

• To stop the bank runs from causing widespread failures, some states legally sanctioned banks restricting payments to depositors. Banks stayed open but did not have to pay out cash on demand.

• This restriction of payments halted bank failures but caused hardships as cash became scarce. It exacerbated the economic recession.

• The crisis led to the Federal Reserve Act of 1913, which created the Federal Reserve System to act as a lender of last resort for banks and prevent liquidity shortages. It enabled banks to convert assets to cash without restricting payments.

• The Fed was meant to serve as a centralized banking system that could provide emergency cash to banks and stop panics from occurring or spreading through the banking system.

• The Federal Reserve System was established in 1914, shortly before World War I began. The war changed the Fed’s role from a passive player to a major force shaping global monetary policy.

• During WWI and after, the Fed increased the money supply to help finance government spending, fueling inflation. It took steps in 1920-21 to reduce inflation.

• In the 1920s, under the leadership of Benjamin Strong, the Fed generally did a good job stabilizing the economy through calibrated monetary policy changes.

• Strong’s death in 1928 led to a power struggle within the Fed that undermined its effectiveness.

• The US recession began in late 1929 before the stock market crash, but the crash amplified economic difficulties.

• In 1930, rather than expanding the money supply to offset contraction as in the past, the Fed allowed the money supply to slowly decline, exacerbating the recession.

• Banking crises began in late 1930, marking the transition from recession to the severe Great Depression of the early 1930s. By early 1933, monetary contraction had decreased the money supply by about one-third.

This passage describes key events in the banking panics and failures that occurred during the Great Depression in the US. Some key points:

• The recession was initially not too severe but bank failures started spreading confidence issues. Runs on banks led to widespread attempts to withdraw deposits as currency.

• The largest bank failure up to that point was the Bank of United States in New York in December 1930, further damaging confidence.

• Efforts to save the Bank of United States failed due to anti-Semitic sentiments toward its largely Jewish ownership and clientele.

• This sparked bank runs nationwide and over 350 bank failures in December 1930 alone further destabilizing the financial system.

• The Federal Reserve failed to sufficiently engage in large-scale measures like open market bond purchases to provide liquidity and stop the bank failure contagion.

• Repeated failures to act aggressively contributed to multiple banking panics in 1931-1933 until the eventual bank holiday was declared under Roosevelt in March 1933.

• The monetary stock (deposits and currency) drastically declined during the Great Depression, falling from $3 per person in 1929 to less than $2 per person in 1933. This monetary collapse was unprecedented.

• This decline in the money supply can be interpreted as either a cause or effect of the economic collapse. It both originated from Federal Reserve policies but was also exacerbated by the economic collapse further depressing the banking system.

• Evidence suggests the Federal Reserve had the ability to prevent the monetary collapse by engaging in large-scale open market purchases as recommended by the NY Fed. However, it failed to take decisive action due to power struggles and indecisive leadership.

• The depression originated in the US and spread abroad, as evidenced by the initial gold inflows into the US as other countries’ economies deteriorated. This shows the US was leading the global downturn initially before it spread internationally.

• The failure of the Federal Reserve to act appropriately in response to this gold inflow by expanding the money supply, in line with the gold standard rules, helped cause and deepen the depression both domestically and abroad.

• The end result was a victory for the Federal Reserve Board in its power struggle with the NY Fed and other regional banks, strengthening the belief that more government intervention was needed to regulate the economy.

• The 1932 presidential election marked a watershed politically and philosophically in the US. FDR and the Democrats won, having promised a “New Deal” to tackle the Depression.

• FDR’s “brain trust” advisers saw the Depression as a failure of capitalism and believed active government intervention was needed to protect people and direct the economy. This reflected the growing influence of theories advocating more centralized government planning and control.

• The New Deal programs that emerged in FDR’s first term reflected these views, with some aiming to reform the overall economic structure and others providing social safety nets like Social Security and unemployment insurance.

• Some programs like the WPA were intended as temporary emergency measures to deal with widespread distress, though some became permanent. While hastily devised, these programs served a useful purpose in alleviating distress and restoring confidence during the Great Depression crisis.

So in summary, the 1932 election marked a major ideological shift toward more active government intervention and a larger role for the federal government in managing the economy and providing social programs, as epitomized by the programs launched under FDR’s New Deal.

The passage discusses how government intervention in the economy expanded greatly during and after World War II. The war demonstrated the capacity of centralized government planning to efficiently direct resources and eliminate unemployment through massive production. This led many to believe central planning was the future.

However, extensive experience since then has shown that detailed central planning and nationalization of industries is not successful at achieving goals and conflicts with freedom. Welfare programs expanded rapidly but also failed to meet objectives, due to using poor means to achieve good ends. Problems include skyrocketing costs, disappointing results, and the programs becoming saturated with fraud and corruption.

Despite failures, pressure continues to expand programs by attributing shortcomings to lack of funding rather than flaws in the approach. The passage argues experience has put an end to hopes that central planning or further nationalization is desirable, though government has grown substantially in new directions of welfare and regulation.

The passage discusses the origins and development of welfare states in Britain and Sweden starting in the late 19th/early 20th century. Key early measures included old age pensions in Britain in 1908 and Sweden in 1915. Britain also introduced national insurance for illness, unemployment, and health. Over time both countries greatly expanded social programs like public housing, healthcare, unemployment insurance, etc.

However, both welfare states have faced increasing difficulties paying for these programs. Taxes are resented and inflation has reduced the value of benefits. Productivity has lagged and unemployment has risen. Dissatisfaction led to political changes like Margaret Thatcher’s election on a platform of reforming Britain’s welfare state. Sweden also saw increased opposition to taxes and ‘brain drain’ of talent.

New York City tried to meet every social need through expansive government programs but this led to a fiscal crisis as costs overwhelmed revenues. The passage argues liberal compassion focused on redistributing wealth instead of fiscal discipline, exacerbating New York’s issues.

It concludes the largest US welfare program, Social Security, faces complaints about inadequate benefits, heavy payroll taxes, and projections that current funding cannot sustain projected obligations into the future given America’s aging population. Both public assistance and Social Security costs have grown substantially over time.

• In 1978, Social Security payments totaled more than $130 billion and were made to over 40 million recipients for retirement, disability, unemployment, hospital/medical care and survivor benefits. Additional public assistance payments of over $40 billion went to over 17 million recipients.

• The author will focus the discussion on old age and survivor benefits, which accounted for nearly two-thirds of expenditures and three-quarters of recipients in 1978.

• Social Security was enacted in the 1930s and has been promoted through misleading language branding payroll taxes as “contributions” to a “trust fund.” In reality, current taxpayers’ money is used to pay current beneficiaries.

• Workers have no assurance that funds will be available when they retire, as benefits rely solely on future taxpayers’ willingness to fund the program. This system is a “one-sided compact” rather than a true insurance program.

• The long-term financial problems stem from fewer workers having to support more retirees as lifespans increase. This amounts to a transfer from the young to the old. It also disproportionately transfers from the less well-off to the better-off.

So in summary, the author criticizes the misleading framing of Social Security and argues it represents an unsustainable transfer system rather than true insurance.

• Social Security is a large program benefiting the middle class that is financed by taxes paid partly by the poor and wealthy. It fits Director’s Law that public programs mainly benefit the middle class.

• There are over 100 federal welfare programs that have grown rapidly despite increasing affluence. The programs are inefficient, encourage dependency, have high administrative costs, and don’t effectively target the truly needy. Expenditures vastly exceed what is needed to lift families above poverty.

• Public housing projects have frequently deteriorated into slums with high crime rates. They concentrate broken families and children from such families, negatively impacting neighborhood schools. Privately developed housing has improved conditions more despite government subsidies for housing.

• Housing subsidy programs have failed to meet initial objectives, destroying more housing than building. Public housing units often become dilapidated while middle-income subsidies mainly benefit those above middle income levels. Urban renewal displaced families without rebuilding equivalent housing.

So in summary, the passage critiques the inefficiency, overspending, unintended consequences, and failure to target the truly needy that characterize large US social welfare programs according to the author. Director’s Law of benefits flowing mainly to the middle class is evoked.

Urban renewal programs in the 1950s-1960s claimed to improve blighted urban areas, but in practice destroyed many minority neighborhoods and displaced residents. Four housing units were destroyed for every one built. This led critics to nickname it “slum removal” and “Negro removal.”

The main beneficiaries were property developers, higher-income families who got new homes, and institutions that improved their areas. Low-income renters suffered as affordable housing deteriorated under rent control policies.

Government spending on healthcare rapidly increased after 1965 with Medicare and Medicaid. By 1977 it reached over $68 billion or 4.5% of national income, doubling its share. This led to rising medical costs and physicians’ incomes.

Proponents argue socialized medicine is needed due to rising costs. But critics say government is less efficient and individuals should pay their own costs through private insurance. The experience of Britain’s National Health Service after decades shows decreasing care quality, long wait times, physician shortages, and rising costs - not a model to follow. More government intervention in healthcare risks a fully socialized system.

Here is a summary of the key points made in the excerpt from Milton Friedman’s book “Free to Choose”:

• Welfare programs have been disappointing because as they expanded, more people are now paying taxes to fund benefits for others rather than a few paying to help a few in need.

• There is little incentive to economize or maximize value when spending someone else’s money on someone else (Category IV spending in Friedman’s table). This leads to wastefulness and ineffectiveness.

• Politicians, voters, and bureaucrats all spend other people’s money, not their own, weakening incentives to spend carefully.

• Efforts to direct government spending to oneself lead to benefits going to middle/high income groups, not the poor. It also wastes resources through lobbying and political contributions.

• Category IV spending tends to corrupt both the administrators who decide what’s best for others, and the beneficiaries who become dependent.

• The use of government force to take and redistribute money also threatens freedom.

• Existing welfare programs should be replaced by a universal basic income program through a negative income tax, and Social Security should be unwound over time by allowing personal retirement accounts.

This passage summarizes the key components and purpose of a negative income tax system. Specifically, it notes that under a negative income tax:

• People receive a tax subsidy when their income is below an allowances threshold, rather than getting no benefit from unused allowances as under the current system.

• The subsidy rate is meant to be set at the same level as the tax rate on positive income above the allowances threshold, so that total taxes paid are even over time regardless of income fluctuations.

• A numerical example is given showing how subsidies would phase out and taxes phase in as income rises relative to the allowances threshold.

• The goal is to provide a minimum income level for families while preserving work incentives and reducing bureaucratic overhead compared to the current welfare system.

So in short, it outlines how a negative income tax aims to simplify the tax code, maintain work incentives, and guarantee a minimum standard of living, all while reducing the size of the public assistance bureaucracy. The key focus is on explaining the mechanics and purpose of a negative income tax system rather than their own condition.

• In the early days of the US, equality meant equality before God - the idea that all people have intrinsic worth and inherent rights as creations of God. This did not mean literal equality in abilities or attributes.

• Equality before God was consistent with liberty, as it recognized each person’s right to shape their own life according to their own values and pursuits. It meant respecting individual difference rather than imposing uniformity.

• Over time, the understanding of equality shifted more towards “equality of opportunity” - the idea that no arbitrary obstacles should prevent people from using their abilities to pursue their goals. This also did not conflict with liberty.

• Recently, a new conception of “equality of outcome” emerged, where everyone should have the same level of living or income. This view of equality is in clear conflict with liberty, as it necessarily infringes on individual freedom and choice. The push for equality of outcome has led to bigger government and more restrictions on liberty.

So in summary, early conceptions of equality recognized individual differences but inherent rights, and were consistent with liberty, whereas equality of outcome conflicts with liberty by imposing uniformity.

The passage discusses the ideals of equality and equality of opportunity that originated in the founding of the United States. It argues that the founders like Jefferson did not see majority rule as the goal, but rather protecting individual rights and minorities against domination. Equality meant equality before the law and equal individual rights, not identical outcomes.

After the Civil War and abolishment of slavery, the focus shifted to equality of opportunity - the idea that one’s talents and abilities should determine opportunities, not characteristics like birth, ethnicity, religion, etc. This supported individual liberty by ensuring each person could pursue their preferred career.

The dominant economic policy of the time promoted free enterprise, competition and laissez-faire to maximize equality of opportunity. Material success through wealth accumulation was seen as a measure of one’s performance and talents. This release of human energy and social mobility helped America become more productive and dynamic. It also spurred charitable activity supported by growing wealth.

While practice did not always match the ideal due to things like social barriers, the rapid social mobility of groups demonstrated obstacles were not insurmountable. Tariff protection was a key deviation from free markets in foreign trade policy.

• Equality of outcome has become a more prominent ideal in public policy over the past century, especially in Western Europe and the US. It aims for “fair shares for all” and a more equal distribution of resources and outcomes.

• However, achieving equality of outcome requires restricting individual liberty, as someone must determine what is “fair” and enforce those decisions. This inevitably leads to less freedom and less incentive to work.

• Attempts to fully implement equality of outcome, like in communist regimes, resulted in states of terror and still failed to equalize outcomes. Even more moderate measures in the West restricted liberty and failed to achieve the goal.

• The concept of “fair shares” is vague and impossible to define in a way that satisfies everyone. It raises complex ethical questions around issues like unequal inheritance, compensation for unequal talents, and rewarding achievement.

• While inequality may seem “unfair,” banning it could deprive society of benefits from exceptional talents and reduce individual freedom and incentives. Life will always involve unequal outcomes to some degree.

The passage argues that increasing government intervention in personal decisions has undermined the system of people making their own choices and bearing the consequences. This older system incentivized innovation and risk-taking that transformed society for the better through the likes of Ford, Edison, Rockefeller, etc. Their private fortunes were then often used philanthropically to benefit society.

The passage questions whether people truly support equality of outcome given that governments promote lotteries and gambling for revenue, and intellectuals who advocate equality don’t practice it by redistributing their own higher incomes beyond a baseline global average. So rhetoric about equality often exceeds actual support in practice. Allowing compulsory redistribution would change the type of society in a negative way compared to voluntary acts of philanthropy, according to the passage.

• If redistribution were compulsory through enforced equality, only a small fraction of people (around 5%) would voluntarily choose to live in communes or systems that enforce equality of outcome. This is evidenced by the number of people who join communes and their lack of longevity.

• While graduated income taxes are publicly tolerated to a moderate degree, behaviors like choosing cheaper cities like Reno or Las Vegas over expensive cities indicate people prefer inequality and economic diversity over strict equality.

• Countries that have pursued equality of outcome, like Britain, have failed to achieve equitable distribution and instead created new privileged classes. It has discouraged productivity and driven out talented citizens, weakening economic growth.

• The pursuit of equality has also weakened respect for law generally and contributed to rising criminality.

• Free market capitalism, with equality of opportunity, has actually increased standards of living everywhere it has been permitted to operate. The widest inequalities exist in societies without free markets, where power and status are inherited or determined by government access rather than individual merit and effort.

So in summary, compulsory redistribution and enforced equality would likely have negative unintended consequences and fail to achieve equitable outcomes, based on evidence from communes, tax preferences, and experiences of countries that have pursued equality of outcome policies. Free markets have better promoted overall prosperity and opportunity.

• Education has always been important in the American Dream and public schools have historically played a role in assimilation and social cohesion.

• However, in recent decades the quality of education has declined, especially in inner cities. Parents, teachers, and taxpayers are unhappy with rising costs and declining outcomes.

• This is due to schools suffering from “the sickness of an over-governed society” - an excessive concentration of power in the hands of professional educators and centralized bureaucracies, at the expense of parental and local control.

• Both K-12 education and higher education have seen increasing government control and financing over time, with negative impacts like less responsiveness, less innovation, and less choice for students and families. Overall, excessive government power over schools has undermined education quality according to the author.

This passage discusses the problem of increasing bureaucratization and centralization of the public school system in the United States. Starting in the 19th century, there was a shift from a mostly private school system to a government-run system. Over time, control has shifted away from local communities and parents to larger bureaucratic entities like cities, counties, states, and the federal government. This has weakened parental control and changed the function of schools. Rising expenditures have not matched increases in output or quality of education. Standardized test scores indicate declining performance despite increased spending. Evidence suggests this is due to the bureaucratic structure, as supervisory roles have increased more than teaching roles. In short, bureaucratization and centralization of schools has reduced efficiency and quality of education despite higher costs.

Here are the key differences between the current school system and a proposed voucher plan:

• In the current system, school districts have control over schools and parents have little choice in where their children attend. A voucher plan would give parents greater control by allowing them to choose any public or private school and take a voucher worth a set amount (e.g. $2,000) to pay for tuition.

• This shifts power from school/district administrators to parents as consumers. It increases parental freedom to choose the best schooling options for their children.

• Proponents argue this will improve quality as schools have to compete for students/vouchers. It could especially help disadvantaged students in low-performing districts gain access to better schools.

• Critics argue it could exacerbate inequities if private schools cherry-pick top students. It may undermine public school systems and lead to Re-segregation along socioeconomic lines as families sort into different school choices.

So in summary, the key difference is around who has control - centralized administration vs empowering parental choice through a portable voucher system.

• Currently, taking a child out of public school and putting them in private school saves taxpayers $2,000 per year, but parents have to pay private school tuition on top of their taxes. This creates an incentive to keep children in public schools.

• The voucher plan proposes giving parents a voucher for a set amount (e.g. $2,000) that can only be used at an approved school, public or private. This removes the financial penalty for choosing private school.

• Vouchers are modeled on the GI bill, which allows veterans to choose any approved school for their education benefits.

• Vouchers could be used at any public or private school, not just local schools, increasing choice. Public schools would have to compete for students.

• This increases choice for parents but does not change how schools are financed or compulsory attendance laws. The authors favor going further in reform.

• Potential issues with vouchers are church-state separation concerns (but excluding religious schools may address this) and costs (but costs could be managed by making vouchers less than current public school spending per child).

Overall, the voucher plan aims to increase school choice for parents while addressing financial barriers to choosing private school over public school.

(1) The possibility of fraud in redeeming vouchers for cash instead of schooling. The voucher system aims to curb fraud by only allowing vouchers to be redeemed at approved schools for school-related costs, not converted to cash. This would reduce but not eliminate all fraud.

(2) Discrimination concerns. Discrimination can be prevented in voucher schools by only allowing them to accept vouchers if they do not discriminate. Some argue vouchers could increase segregation, but the authors believe it would promote more integration through voluntary choice.

(3) Racial issues. Forced busing that many oppose would be replaced with voluntary busing. Vouchers would give black families more control over their children’s education and reduce the political influence over schools. More black leaders now support vouchers.

(4) Class issues. Public schools have reinforced stratification, but vouchers could integrate schools more through common interest-based specializations and reducing forced neighborhood attendance. However, some fear allowings supplements to vouchers could worsen gaps, an view the authors disagree with.

(5) Doubt about new private schools emerging. This is dismissed as pipes dream, as the voucher system aims to include existing private schools not just hypothetical new ones.

The passage summarizes some key reasons why voucher plans could help develop alternatives to public schooling that currently do not exist, especially in urban areas, as well as addresses some concerns and obstacles to implementing voucher plans.

The key points are:

• The large amount of public funding for K-12 education could support a variety of school options if even a fraction of it was available through vouchers. This would create a market that could attract new entrants.

• Competition would force schools to satisfy customers/parents in order to survive, as with other private industries like restaurants.

• Concerns that only elite private schools would benefit ignore the potential for new options to develop, like non-profit or for-profit schools started by interested parties.

• Public schools may face transitional difficulties if higher performing students leave, but competition would improve quality across the board over time.

• The main obstacle is opposition from teachers unions and the educational establishment who don’t want to lose their monopoly power and be held accountable by competition. One experiment in Alum Rock, CA was limited and not a true test of a voucher system.

So in summary, the passage argues vouchers could create meaningful alternatives to public schools by opening up a market, especially in poorly served urban areas, but faces strong resistance from entrenched educational interests. Competition would ultimately force improvement across all schools.

• An experiment with educational vouchers in Kent, England was opposed by the local teachers’ union and educational establishment. The union headmaster, Dennis Gee, objected to giving parents a say over their children’s schooling through vouchers, preferring that bureaucrats and professionals make those decisions instead.

• Some parents in Kent disagreed and wanted more school choice. One parent, Maurice Walton, argued that the current system gave parents no freedom of choice and that vouchers could improve school standards by allowing parents to remove their children from underperforming schools.

• Despite support from local authorities, opposition from the educational establishment has repeatedly blocked experiments with vouchers in both the UK and US. However, proponents believe vouchers or alternative systems increasing school choice will continue gaining support.

• The passage argues against using government subsidies to support programs like classics departments and other humanities programs in higher education.

• It argues the market, through private donations and endowments, has historically supported these types of programs because they provide general benefits to society rather than just direct benefits to the donors. People donate to honor others or support public services like libraries.

• State universities often have large private endowments and their performance is better when private funding plays a larger role.

• Two justifications for government subsidies of higher education are discussed - supposed “social benefits” and promoting “equal opportunity.”

• The social benefits claim is rejected as it’s often not supported by evidence. Any benefits to individuals from more education would drive private incentives to get that education.

• Reports claiming social benefits often conflate individual benefits with social ones or don’t try to quantify the actual social impacts.

• Promoting equal opportunity through subsidies is also questioned as statistics show private institutions may provide more opportunity to those at the very bottom and top of incomes. So subsidies don’t necessarily promote the goal of equal opportunity.

In summary, the passage argues the market through private donations has historically supported programs like humanities, and government subsidies of higher education are not well justified by claims of social benefits or equal opportunity goals. The performance of universities is often better with less government intervention and more private funding and incentives.

Here is a summary of the key points made in the given passage:

• Government subsidies for higher education disproportionately benefit middle- and upper-income families more than lower-income families. People from higher incomes are more likely to attend college and for longer durations at more expensive institutions.

• Studies in Florida and California found that government spending on higher education transfers income from low-income to high-income groups. The top income class got significantly more benefits than they paid in taxes, while lower income classes paid more in taxes than they received in benefits.

• The author argues that subsidizing higher education at the expense of taxpayers is inequitable. A preferable alternative is making fixed-money loans available for anyone willing to pay for their education currently or through future higher earnings.

• The author proposes an “equity financing” model where the government advances funds for education in exchange for a share of the individual’s future earnings above a base level. This spreads the costs across individuals based on their outcomes.

• As a less radical alternative, the author suggests a voucher system where a set amount of tax money is divided evenly among a set number of students as vouchers to use at any accredited educational institution of their choice.

• Traditionally, economists and others have argued that relying solely on businesses’ self-interest to protect consumers is not enough, as businesses may deceive, overcharge, or sell shoddy products to consumers. Government intervention may be needed to supplement the market.

• In the 1960s, events like Rachel Carson’s Silent Spring and Ralph Nader’s criticism of the Corvair automobile sparked a major expansion of government regulation and consumer protection laws and agencies.

• Historically, regulation focused on specific industries, but new agencies established post-1960s covered broader issues like the environment, energy, product safety, and occupational safety.

• The pace of new regulatory agencies and rules increased greatly after the New Deal. While regulation was relatively moderate initially, the Federal Register documenting regulations grew substantially between 1936 and 1966.

• In the 1960s, there was an “explosion” of 21 new regulatory agencies established within a decade. These agencies had broader scopes beyond single industries and aimed to protect consumers and the public from various risks.

• This marked a major change in both the scale and nature of government involvement in the marketplace in the name of consumer protection.

This passage discusses the rise of government regulatory agencies intended to protect consumers in the latter half of the 20th century in the United States. Some key points:

• Government expenditures on consumer protection agencies rose dramatically from less than $1 billion in 1970 to around $5 billion estimated for 1979. Regulatory rules and employees also increased greatly in this period.

• However, economic growth and productivity gains slowed compared to the earlier post-war period of 1949-1969. Regulatory costs imposed on industry are estimated to be around $100 billion per year.

• All the major social movements of this era like environmentalism and consumer protection had the effect of being “anti-growth” and opposing new developments, resources use, and industrial innovation. Agencies added heavy costs on industries to meet rules.

• Examples are given of poorly performing government/regulated industries like mail versus better private industries like appliances. However, industries are increasingly regulated over time.

• The process of regulatory mission creep and agencies expanding their power/scope beyond initial intentions is discussed. The ICC and FDA are used as case studies to show this pattern.

• Newer cross-industry agencies like the CPSC, NHTSA, and EPA face similar tendencies to expand scope and impose heavy costs on industries over time. Energy regulation also increased sharply after the 1973 oil crisis.

So in summary, it traces the rise of consumer protection regulations but argues they had unintended consequences of slowing growth and innovation by private industries due to rising costs of complying with expanding rules and agency overreach over time.

• Railroad construction and competition was fierce in the late 19th century in the US, with the most track mileage exceeding all other countries. Low freight and passenger rates resulted from cutthroat competition.

• Railroads tried to form cartels to fix rates and markets, but these quickly collapsed as members secretively undercut each other. Discriminatory pricing and rebates also arose.

• Competition was strongest on long-haul routes between major cities, but railroads could exploit local monopoly power on short-haul routes. Rates for short hauls sometimes exceeded those for long hauls.

• Farmers and political groups attacked railroads as monopolies and pushed for regulation. The ICC was established in 1887 to regulate railroads, led initially by former railroad lawyers.

• Railroads realized regulation could enforce cartels and used the ICC to their advantage, fixing long-haul rates to match short-haul sums. Regulation protected railroads from competition and states.

• Trucking emerged as a competitive threat in the 1920s but was brought under ICC control in 1935 at railroad urging, leading to cartelization of that industry as well.

• ICC granted few new trucking licenses and recently blocked new competitive authority, protecting existing firms from competition. Trucking certificates became valuable assets. Studies showed deregulation would drastically lower shipping costs.

• The passage criticizes the ICC (Interstate Commerce Commission) for “sitting on its hands doing nothing” and stifling free enterprise and competition in the transportation industry.

• It cites comments from owners of a trucking company, Dayton Air Freight, who have applied three times to the ICC for approval to operate but been denied. They argue this prevents free enterprise and forces consumers to pay higher prices.

• However, another owner acknowledges that those already in the business do not want new competitors allowed to enter. So while they ask for exemptions, they don’t really want deregulation and free competition.

• Government intervention through the ICC has constrained the ability of railroads, trucking, and airlines to adapt and innovate over time. It led to inefficiencies, higher costs passed to consumers, and less optimal transportation networks.

• The ICC illustrates how initial good intentions to regulate are later exploited by special interests and lead to entrenched bureaucracies and problems rather than solutions. Deregulation is now slowly beginning.

• Temperance groups and consumer advocates campaigned for stronger food and drug regulation in the early 20th century. They were concerned about medicines containing alcohol and mislabeled or dangerous patent medicines.

• Meat packers supported regulation because it would certify their meat as disease-free and address foreign restrictions. Pharmacists supported it to curb patent medicines that competed with their services.

• The 1906 Pure Food and Drug Act set basic standards but had little impact. A 1937 tragedy from an unsafe drug led to stricter 1938 legislation requiring pre-market safety review. Cooperation developed between regulators and industry.

• The 1962 Kefauver-Harris Amendments strengthened requirements after the thalidomide crisis. Drugs now needed proof of efficacy and safety. But regulation also significantly increased drug development costs and times, reducing innovation. Many drugs were available sooner abroad. Stricter rules favored safety over timely access to effective treatments.

The passage discusses the challenges with regulatory agencies like the FDA and Consumer Product Safety Commission. It argues that the nature of these agencies inevitably leads them to be overly cautious and block potentially useful innovations.

Specifically, regulators are strongly incentivized to avoid approving any drugs or products that later cause harm, even if they also deny access to things that could save lives. Existing companies are protected from competition through stringent standards that make entry and innovation difficult. Reforms are difficult because the behavior of these agencies results from basic political and economic pressures, not just the individuals involved. While safety is an important goal, determining appropriate risk levels involves subjective judgments poorly suited to bureaucratic decision-making. Overall, the agencies tend to do more harm than good by unduly restricting choice and progress.

The key points are:

• When products enter the market normally, there is room for experimentation, trial and error, and small mistakes. Consumers can choose what they like.

• Government regulation through the CPSC makes things more expensive and difficult. All decisions must be made before extensive testing, standards apply uniformly without room for choice.

• Examples from the CPSC showed this problem. A ban on spray adhesives based on preliminary research caused abortions. Requirements on children’s sleepwear led to widespread use of the carcinogen Tris before its dangers were known.

• Regulation imposed heavy costs on producers and consumers, and mistakes had massive impacts instead of being discovered and addressed gradually in the market. Overall, regulation proved products more expensive and difficult to introduce compared to normal market processes.

• The same approach of establishing a government regulatory agency with enforcement powers has been used to address pollution as other issues like transportation, food/drugs, and product safety.

• However, this system lacks a mechanism to properly balance costs and benefits. It creates an adversarial context rather than one focused on optimization. It is also prone to regulatory capture by concentrated interests.

• Most economists argue a better approach is to introduce market discipline through effluent charges or pollution taxes rather than specific regulations. This would incentivize pollution reduction in the most cost-effective way while providing funds to compensate losses.

• Establishing a combined system of environmental quality standards and pollution charges would help resolve political conflicts over the environment in a transparent way.

• Government intervention similarly caused the energy crisis through imposing price controls on oil and petroleum products since the 1970s, resulting in shortages. Simply eliminating these price controls could end the crisis and shortages immediately at lower overall costs.

So in summary, the passage argues for market-based approaches like pollution taxes over regulatory agencies in addressing environmental issues and prices controls in energy, to balance costs and benefits more efficiently.

Here is a summary of the key points made in the passage:

• The government claims the US will run out of energy by 1990 unless it institutes a massive synthetic fuels program, but this is a myth. The free market has effective solutions that government policies are blocking.

• Government forces domestic oil producers to sell oil at prices well below what is paid for imported oil through long-term contracts or on the spot market. This subsidies imports over domestic production.

• Government regulations on the energy industry related to environmental standards and other rules add significantly to costs and delay new production without proper consideration of economic impacts.

• President Carter proposed an $88 billion, decade-long synthetic fuels program, but it doesn’t make sense to commit taxpayers to $40+/barrel synthetic fuel while limiting domestic producers to $5.94/barrel.

• The market is the most effective mechanism to determine if alternative fuels are economically viable - if private enterprises are allowed to profit from successful investments without fear of price controls or windfall taxes.

• Competition in the free market best protects consumers by giving them choices and motivating businesses to provide quality products that meet consumer needs and interests. Various private mechanisms like brand reputation, retailers, and product testing organizations also guide consumers without government oversight.

• While not perfect, the market approach generally serves consumers better than government regulation and intervention, which can delay progress and choice.

Here is a summary of key points from the passage:

• Labor unions have been incorrectly credited as the main reason for improved working conditions and standards of living for workers over the past two centuries. In reality, unions represented a small percentage of workers until fairly recently.

• Government regulation and intervention also cannot be cited as the primary cause, as government oversight of economic arrangements was minimal until the New Deal era.

• Using the term “labor” to refer only to labor unions is a misuse of language, as the vast majority of workers are not and have never been union members.

• Union interests do not necessarily align with the interests of union members in all cases. Union leaders may sometimes act in ways that benefit themselves at the expense of members.

• The role and influence of unions is commonly overestimated due to the newsworthiness of their visible actions, while the market forces that determine wages for most workers receive less attention.

So in summary, the passage disputes that unions or government were the main drivers of improved worker conditions, and warns against conflating unions with all workers or assuming complete alignment of union and member interests. Market forces played a larger role than is often recognized.

• Labor unions are often seen as a product of modern industrialization, but they have much older origins dating back to preindustrial guilds and organizations.

• One of the earliest recorded labor agreements was made among medical men in ancient Greece around 460 BC, led by Hippocrates. After his death, competition for patients grew fierce, so the medical practitioners created a code of conduct known as the Hippocratic Oath to regulate the profession.

• This oath established restrictive practices like only passing knowledge to apprentices, setting the precedent for closed shops and market sharing agreements that unions later adopted. While intended to help patients, it also protected practitioners from competition.

• Strong unions tend to represent higher skilled, higher paid workers who would command relatively high wages even without unions. Unions help raise their wages further.

• By limiting supply of certain jobs, unions drive up wages for their members but reduce availability of those jobs overall. The gains for union members come at the expense of other workers who are pricing out of those jobs or forced to settle for lower paying alternatives.

• Unions aim to raise wages for their members, but this usually comes at the expense of reducing wages for non-union workers. Higher wages for some groups means lower wages for others.

• Corporate profits, which union leaders target, only make up around 6% of national income after taxes. There is little room to raise wages substantially without hurting profits and investment.

• Unions gain power by restricting the number of available jobs or limiting the number of workers available for those jobs. They do this through enforcing high wage rates, limiting licensing/apprenticeships, and sometimes colluding with employers.

• Unions get government assistance to enforce their wage rates, such as minimum wage laws, Davis-Bacon Acts requiring union wages on public projects, and leniency towards violence/threats during labor disputes.

• Minimum wage laws discriminate against low-skilled workers by making them unemployable if their labor is worth less than the minimum. This contributes greatly to high unemployment rates, especially among black teenagers.

This passage discusses how some occupations, like medicine, try to restrict competition and limit the supply of workers in their field in order to raise wages. It introduces concepts like:

• Licensure - Requiring a license from the state to practice an occupation. Licensing boards are often dominated by existing practitioners who can restrict entry.

• Collusion between unions and employers - Unions have sometimes helped industries fix prices or quotas in exchange for higher wages. This effectively makes the union a cartelizing agent for the industry rather than just a labor organization.

The key points are that occupations use various legal and organizational strategies like licensure and cooperation with employers to restrict competition and numbers in their field. This allows them to artificially raise wages above what a free market would set. While designed to benefit practitioners, it may actually harm consumers and workers seeking entry into those occupations.

The passage discusses who protects workers and argues that competition between employers best protects workers. Unions have relied on government privileges which benefit some members at the expense of others. Government laws provide some protections but also bureaucratic problems. Civil service workers are very well protected by the government. Those without employment options, like minimum wage workers, have no protections. Effective competition between potential employers who want to hire a worker is what truly protects that worker, by ensuring they are paid the full value of their work to prevent other employers from poaching them. A free market with many employment options is the best, though imperfect, protector of workers as it allows wages and conditions to rise through productivity gains that benefit all parties, not at the expense of others.

The passage discusses the history of various items used as money, including cattle, salt, shells, beads, metals, and tobacco. It provides examples of tobacco being used as currency in the early American colonies, when it was the primary money used by settlers to purchase goods and pay taxes. As tobacco production increased over decades, it resulted in inflation as prices rose relative to tobacco. This made tobacco less valuable as a money. Efforts to control tobacco planting and limit its use as currency failed to stop the inflation. The passage illustrates Gresham’s Law, where poor quality currency drives out good currency, as tobacco planters would use lower quality tobacco to pay obligations and keep the better tobacco to trade for gold/sterling. Receipts for deposited tobacco eventually took on a currency-like function even into the 19th century.

• After WWII in Germany, cigarettes were widely used as an informal currency due to strict price controls imposed by the occupation authorities that kept legal currency prices below market-clearing levels. Cigarettes and cognac took on currency functions for smaller and larger transactions respectively.

• The general principles illustrated by tobacco money in colonial Virginia remain relevant today, even though modern money is fiat currency rather than commodity-backed. Rapid money supply growth relative to goods/services will still cause inflation, regardless of the reason for the money supply increase.

• Inflation is a monetary phenomenon caused by too much money chasing too few goods. While other factors may temporarily impact inflation, sustained high inflation is always due to excessive money printing by governments. This has been demonstrated throughout history and across different economies/systems.

• Charts showing money supply growth and inflation rates for various countries from 1964-1977 illustrate their close correlation over time. Faster money growth predicts higher inflation, confirming the monetary explanation of inflation.

The passage summarizes that a dramatic example of how reducing the money supply can lower inflation comes from the American Civil War. Specifically:

• The Confederacy financed the war largely by printing money, causing inflation to average 10% per month from 1861-1864.

• In an attempt to stem inflation, the Confederacy enacted a currency reform in May 1864 that reduced the money supply.

• This led to a sharp drop in the general price index, despite the South facing invading Union armies, impending military defeat, reduced foreign trade, a disorganized government, and low troop morale.

• Reducing the money supply had a more significant effect on prices than these other powerful forces pressuring inflation higher.

This example from the Civil War demonstrates how strongly reducing the money supply can counteract inflation, even during a time of major upheaval and adverse economic conditions for the Confederacy. It provides a real-world historical case study of the power of monetary policy over inflation.

The passage summarizes several key points about the relationship between government policies aimed at full employment and inflation:

1. Government spending can be seen as adding to employment, while taxes reduce private spending and add to unemployment. This gives governments an incentive to increase spending and lower taxes to pursue full employment targets, which fuels inflation.

2. Central banks like the Fed can also increase the money supply in ways other than financing government spending, such as buying government bonds. This too adds to employment but also inflation.

3. Government full employment policies have failed to achieve their goals but have contributed to persistent inflation instead.

4. Both fiscal policy (government spending/taxes) and monetary policy (by the Fed) have had an inflationary bias due to pressures to promote full employment.

5. Inflation effectively works as a tax on money holders, reducing their purchasing power, while giving governments a hidden source of revenue to finance spending.

So in summary, the passage argues that well-intentioned but misguided policies aimed at full employment have inadvertently fed inflation over the long run through both fiscal and monetary means. Inflation in turn benefits governments financially but hurts citizens.

• The cure for inflation is simple - reduce the rate of monetary growth since excessive money growth is the main cause of inflation. However, implementing this cure is politically difficult.

• Analogies are drawn between curing inflation and treating alcoholism or Buerger’s disease - the cure is straightforward but hard to follow through on due to pain/withdrawal and psychological addiction.

• When inflation first starts, the effects seem good as more money leads to more spending and jobs. But over time, prices rise which hurts consumers and makes business less profitable unless prices also rise.

• Reducing monetary growth will initially lead to slower growth and higher unemployment as the economy adjusts, but these are side effects of the cure, not the cure itself. Policies that slow growth may simultaneously increase inflation if not coupled with monetary control.

• Many people benefit from inflation, like homeowners, making it politically challenging to enact solutions. But high inflation ultimately damages society and creates support for action.

• When demand for pencils increases due to newly created money rather than a shift in preferences, demand increases across many goods, not just pencils.

• Initially sellers hold prices constant and increase production to meet higher demand. But workers and suppliers also see higher demand and raise prices assuming it’s specific to them.

• Eventually everyone realizes demand increased generally due to monetary growth, not just specific goods. As they raise prices further to allow for higher input costs, inflation results.

• Slowing monetary growth leads to initial declines in output and employment as impact works through system. Eventually inflation slows accompanied by economic expansion.

• Gradual reductions in monetary growth and advance announcements help mitigate side effects by giving time for economic adjustments. Escalator clauses in contracts also help by adjusting wages and prices in line with inflation.

Here is a summary of paragraph e:

• There has been a widespread reaction against big government in Western nations due to the failure of governments to achieve their proclaimed objectives.

• In the UK, Margaret Thatcher swept to power on a platform of reversing socialist policies that had been in place since WWII.

• In Sweden, the Social Democratic party was defeated after over 40 years in power due to this reaction.

• In France there was a policy change to eliminate government control of prices and wages and reduce intervention.

• In the US, the reaction manifested in widespread tax revolts, such as Proposition 13 in California.

• The authors believe the reaction is more than just a response to short-term inflation - inflation is partly a response to the reaction against big government as legislators resort to inflation to finance spending without having to directly raise taxes.

• The contrast between government program objectives and actual results has also contributed to the reaction against big government growing more than a temporary response to inflation.

The passage discusses how public opinion trends can strongly influence policy and ideology over time. In the late 19th century, there was a tide of opinion in favor of economic freedom and limited government inspired by Adam Smith and Thomas Jefferson. This influenced liberal policies in countries like Japan.

However, starting in the early 20th century, the tide turned towards Fabian socialism and New Deal liberalism, influenced by thinkers like Harold Laski. This trend lasted decades in countries like the UK and US, shaping greater expansion of government and collectivist policies.

Now, the passage argues, this tide has crested. Government failures and negative effects of big government like high taxes are widely evident. Young people are more drawn to the ides of Smith and Marx than past liberal models.

While the new tide has not been clearly defined yet, in favor of either more freedom or greater government control, the author argues public opinion will determine its direction first, and policy will follow. Significant examples are given of how intellectual climate of opinion has strongly influenced major policy changes and interpretations of institutions like the US Constitution over time. Evidence that the liberal tide is receding includes how people are now finding ways around government obstacles.

• Pat Brennan started a private delivery service in Rochester called messengers that delivered mail and packages around the city at a lower cost than the US Postal Service.

• Their business thrived as consumers preferred the lower prices. However, they were breaking the law according to statutes that gave the Postal Service a monopoly.

• The Postal Service took them to court and they ultimately lost after a legal battle that went all the way to the Supreme Court. Local businessmen provided financial backing for their defense.

• Brennan expressed resentment about bureaucrats in Washington controlling people’s lives and fates when they have no interest in individuals. He argued people have a right to pursue businesses and consumers have a right to choose inexpensive superior services.

• The passage discusses how over-regulation, high taxes, and lack of choice can lead to a “decline in respect for law” and even open revolt as people try to circumvent the system and control their own lives. It gives examples from Britain and Sweden of widespread tax avoidance and fiddling as people lose respect for unfair systems.

This passage discusses how political processes that seem intended to serve the general public interest can instead unintentionally promote special interests over time through concealed, indirect and delayed effects.

It gives examples of how industries like shipping, steel, and agriculture lobby for subsidies and import restrictions that benefit them individually at the expense of consumers and other industries. Individual citizens have little incentive to oppose these measures since the costs are distributed widely, while those benefiting can spend lavishly on lobbying.

It also notes how bureaucracy has grown substantially as the scope and functions of government have expanded. Bureaucracy has become a vehicle for special interests to achieve their goals and an interest group in its own right. Elected officials have less control over detailed policies and administration compared to unelected bureaucrats. Overall, the invisible hand in politics tends to promote special interests rather than the general welfare over the long run as the effects of policies become more indirect and concealed from citizens.

• Elected representatives are increasingly lobbied by businesses and special interests to intervene with bureaucrats and pass legislation that benefits those interests specifically.

• There has been a “revolving door” between government and business, as civil servants use their government experience and connections to later work in private industry.

• Conflict of interest laws only curb the most obvious abuses. Special interests promote legislation as being in the “general interest” even if it mainly benefits them.

• Administrative action through agencies like the ICC is even more susceptible to special interest influence than legislation, since it only requires convincing the bureaucrats, not a broader public debate.

• This has weakened the ideal of a “government of laws instead of men.” Citizens interacting with bureaucratic agencies feel more like subjects than masters.

• Adopting an “economic Bill of Rights” as a package of constraints on government power, like the First Amendment, could help shift public opinion back toward freedom and limit the influence of special interests over time. However, public support is also needed for such reforms to be effective long-term.

• The passage discusses the merits of amending the US Constitution to enact limitations and protections. Constitutional amendments require approval from either Congress or state legislatures, making the process decentralized.

• There are active movements at both the state and federal level to pass constitutional amendments limiting government taxes and spending. So far, 5 states have passed such amendments for the state level. Similar amendments are being proposed or voted on in over half of other states.

• At the federal level, groups are trying to call a constitutional convention to propose a balanced budget amendment, requiring 30 state legislatures. Another proposed amendment would limit federal spending.

• The goal of such amendments is to counter special interests by limiting the total budget/spending pie, rather than letting special interests collude to expand the pie through higher taxes. It would force trade-offs between programs.

• The passage proposes some sample amendments to limit tariffs, ban wage/price controls, restrict occupational licensure laws, and reform the personal income tax. However, more work is needed to develop appropriate constitutional rules in these areas.

• In summary, the passage advocates for constitutional amendments as a way to decentralize and limit government power, particularly around taxes, spending, trade, and economic regulation. Active campaigns are underway at both state and federal levels.

The 1928 Socialist party platform called for the nationalization and public ownership of key industries and economic sectors, including coal mines, water resources, electric power generation and distribution, railroads and other transportation, and communications. It also advocated for substantial federal government programs and spending on flood control, relief, reforestation, irrigation, and other public works to provide employment and relief for the unemployed.

Many of these planks have now been implemented to some degree in the U.S., such as the Tennessee Valley Authority, Amtrak, and large government flood control and public works programs. The platform reflected a vision of a largely government-controlled and centrally planned economy, with the means of production owned and operated by the state. It prefigured the expansion of the regulatory and welfare state that occurred in subsequent decades.

Here is a summary of the key points in the proposed “Proposed Constitutional Amendment To Limit Federal Spending” document:

• It proposes amending the Constitution to limit total federal outlays each fiscal year to no more than the percentage increase in nominal gross national product from the previous calendar year.

• If inflation is over 3% in the previous calendar year, the limit on spending increases is reduced further.

• Any budget surpluses would go towards paying down the national debt.

• Congress can approve emergency spending above the limit with a 2/3 vote.

• The limit can be changed with a 3/4 Congressional vote and approval by a majority of state legislatures.

• Spending on grants to states must remain at least the same share of total spending for the first 6 years.

• The federal government cannot require expanded state/local activities without full funding.

• Enforcement would be through lawsuits brought by Congress members in federal district court in DC.

So in summary, it aims to constitutionally cap federal spending increases based on GDP growth and inflation to control spending and debt.

This passage summarizes and cites several sources on the topic of public vs private education financing in the US:

• It discusses the history of increasing government involvement and funding of public schools in the US since the late 19th century.

• It notes criticisms that expanding public funding has led to government overregulation and control of schools.

• It presents Milton Friedman’s proposal for an education voucher system as an alternative way to fund schools through choice and competition.

• It references studies that have examined the costs and benefits of voucher programs.

• It discusses data showing that higher-income families currently benefit more from public subsidies of higher education than lower-income families.

• It cites statistics on the relationship between family income levels and attendance at public vs private primary/secondary schools and colleges.

• It includes two tables from other sources presenting estimates of the net costs and transfers of funds between income groups under public financing of higher education.

• 0-5,000 income range: Total income increased from $20.3 billion to $28.9 billion, an increase of $8.7 billion.

• 5,000-10,000 income range: Total income increased from $70.4 billion to $82.5 billion, an increase of $12.1 billion.

• 10,000 and over income range: Total income decreased from $64.3 billion to $39.6 billion, a decrease of $24.7 billion.

So overall income increased in the lower two brackets but decreased significantly in the highest income bracket of $10,000 and over.

• Salvador Allende was the democratically elected Marxist president of Chile who was overthrown in a 1973 coup.

• Raoul Berger was a Harvard law professor known for his critique of expansive Supreme Court interpretations of Constitutional amendments.

• Alum Rock is a school district in California that used voucher programs in the 1970s, allowing students to choose public or private schools with government funds.

• The American Federation of Teachers and American Medical Association have historically opposed school choice/voucher programs and government intervention in their industries respectively.

• Amtrak was created by the federal government in the 1970s to take over most intercity passenger rail operations in the U.S.

• Gunnar Biorck was a Swedish economist who helped design the modern Swedish welfare state.

• Otto von Bismarck established the first universal public pension and healthcare systems in Germany in the 1880s.

• The Army Corps of Engineers and federal Department of Agriculture play large roles in government infrastructure and agriculture policy.

• Various federal departments and agencies, as well as the Federal Reserve system, wield significant influence over economic and regulatory policy in different sectors.

Here is a 332-word summary of the key points:

The index covers a range of topics including Jimmy Hoffa, time delays in the Railway industry, Hong Kong’s free trade system compared to India’s central planning, and housing issues like inflation, subsidies, and variable interest rate mortgages.

It also discusses topics like immigration, incentives, price systems, the Indian economy’s development compared to Japan, and issues around the Japanese inflation rates. Labor and unions are discussed, covering aspects like collective bargaining, benefits to unions, differences between labor and unions, and government support of unions.

Monetary policy topics include the Federal Reserve System, foreign exchange rates, causes of the Great Depression, and inflation causes and remedies. Money is summarized, discussing the role of sound money constitutional amendments, inflation drivers, and reducing the money supply growth rate. Other economic concepts like monopoly, industrial revolution, and productivity are briefly touched on.

Specific people mentioned include Herbert Hoover, John Maynard Keynes, Estes Kefauver, and George Meany. Policies and legislation covered involve the New Deal, Medicare, Old Age Pensions, Sherman Antitrust Act and regulatory areas. Finally, it discusses Adam Smith’s views on government roles and international trade.

Here is a summary of the requested pages:

On pages 20-21 and 306, the document discusses stockholders. It notes that stockholders supported higher education between 175-183 and 188.

On other pages, the document discusses topics like:

• The 1929 stock market crash on pages 79-80

• Subsidies by foreign governments to industry between pages 45-46, 51-52, 62-63. It also discusses subsidies to higher education between pages 175-187.

• Social Security and related programs discussed on pages 102-107, 123, 127.

• Negative income tax proposals discussed on pages 97, 120-123.

• Welfare state discussed in terms of its emergence on pages 97-100, and results on pages 100-115, 245-246.

• Public school funding discussed on pages 151, 153, 158, 160-161, 164, 171.

• University and college funding discussed on various pages like 176-178, 180, 182, 185-188.

• Discussion of the Swedish system on pages 289-290.

• Discussion of other topics like theories of bureaucratic displacement on pages 114, 155-156, subsidies and industry, housing, education systems and reforms.

Let me know if you need any part of the summary expanded upon or have additional questions!