Milton Friedman’s Voucher Plan

More than 30 years ago – in 1979 – Milton Friedman and his wise Rose Friedman published the book Free to Choose, in which they made a (compelling) claim in favor of handing over authority to the free market, and taking it away from the government. The arguments they come up are profoundly grounded in empirical evidence, pointing at the inefficient and unequal spending of tax payers’ money on the ‘big issues’ of society (healthcare, Social Security, public assistance etc.). I want to focus at the expenditures on public education, about which the Friedmans say a lot, and in particular on the immoral and degrading effect this can have on citizens.

We humans are intelligent creatures. Some are – without a doubt – better equipped (mentally) for dealing with the whims of the free market than others, but still almost all of us are reasonably capable of fulfilling our needs in life. We can go the supermarket by ourselves, decide for ourselves what we want to eat for breakfast and dinner, and much more. The government doesn’t have to do this for us. We can decide for ourselves how we want to spend our leisure time: whether we want to go the movies or not. We don’t need the government to decide this for us. Not only because the government cannot know what each one of us wants – therefore inevitably being inefficient in the spending of its – or our – resources – but also because we know that we are intelligent beings, very much capable of making our own decisions in life.

And this intelligence of ours doesn’t have to confine itself to mundane decisions like how to spend our free time. We are equally competent in deciding for ourselves how we want to spend our money on more pressing issues in life: what hospital we want to attend, whether to assist our loved ones financially whenever the need might arise, and what school our children should attend. These issues are of such importance to our well-being – and our children’s – that, instead of putting the government in charge of these decisions, we should be the ones choosing what we consider to be best for our, and our children’s, future.

In 1979, the Friedmans noticed an upward trend in the government taking control of many of these decisions – decisions that, by the way, have a relatively big impact upon our financial resources. The most striking example of this might be the public financing of (elementary, secondary and higher) education. In 1979, the average US citizen paid 2.000 dollars per child that attended public education, even though not everyone’s child – assuming that you even have children – made use of public educational resources. The Friedmans found this state of affairs harming to the right of each individual to decide where to spend his money at, including the option to put one’s child at a privately financed educational institution.

Therefore they came up with a ‘voucher plan’: a plan in which every US citizen would – per child they have – get a voucher exchangeable for a certain amount of money – let’s say 2.000 dollars. They could cash in this voucher only if their child would attend an appropriate educational institution. This voucher plan would come in the place of the tax each US citizen is obliged to pay, irrespective of them having children and irrespective of their children attending a public educational institution. This plan would make sure that only the ones making use of pubic educational services would be charged, thereby excluding the non-using part of society.

The Friedmans made – primarily – financial arguments in favor of their voucher plan, saying that – on the whole – public educational costs would remain the same, and that parents would use their increase in autonomy to find the school that best suited the needs of their children. The relatively free market that would be created on the basis of the voucher plan, would improve the quality of both public and private education. I believe, however, that one argument in favor of the voucher plan, and the free market in general, has not received the attention it deserved – at least not in the Friedmans’ Free to Choose. And that argument has to do with human intelligence.

As pointed at above, humans are – for the biggest part – perfectly capable of deciding for themselves where to spend their money at. We wouldn’t want anyone else to do our groceries or schedule our leisure time for us – at least not for (our) money. But that is exactly what the government does when it comes down to public education. The government proclaims that – as the Friedmans explain – it is the only actor possessing the professional knowledge required for deciding what is best for our children – thereby implying that they are indispensable in order for our children to receive a qualitatively good education.

What this claim comes down to is the government saying – or not saying – that we (‘the crowd’) don’t understand what is important and what is not in regard to our children’s education, and that – because of that – they should step in and release us of this impossible duty of ours. We don’t understand what to do, but luckily they do. They are the father looking out for us, protecting us from doing harm to our children and to the rest of society.

I find this an insult to the basic level of intelligence the majority of the people has. We very well believe to know what is important in our children’s education – probably much better than the government, since, in contrast to the government, we know our children. Thus besides all the financial benefits of the voucher plan, by returning autonomy to the Average Joe, a voucher plan is required for respecting people’s intelligence. After all, we are no fools, are we?

What do you think?

The Inevitable Unfairness of the Free Market

I just finished reading Milton Friedman’s book Free to Choose: a plea for the free market. Friedman has some compelling claims against government intervention in economic transactions. Price is – as he claims – the most informative entity there is in communicating individuals’ demand and supply of goods and services, and, in a capitalistic society at least, provides people with the incentive to utilize this information, thereby satisfying the needs of those that demand the goods/services. Furthermore, by acting upon the information, individuals provide themselves with the resources required to live a decent life. But although the free market – as Friedman describes it – seems a beautifully simple and elegant construct, there are some ‘side-effects’ of the system that might run against our intuitions about the notion of fairness.

It seems clear that the free market is the most efficient medium there is for maximizing the value of each of the individuals involved. And that (the ‘maximizing of value of each person involved’) is, according to libertarians, what makes the free market a fair system. After all, if you want to sell a computer, and another person is prepared to pay you the price you charge, then it’s only fair to let this deal take place, isn’t it? There is mutual consent between the parties involved, so what – if anything – could give a third party the right to intervene in this seemingly flawless transaction?

While there indeed might be nothing wrong with the free-market mechanism from the perspective of exchanging value, it might be doubted whether it is fair to make this mechanism the only mechanism for exchanging value. For while it’s no problem – and might even be beneficial – for those parties in a free market that possess the means to participate in the ‘game’ of exchanging value, it might be harder for those that – by nature or environment – have been unfortunate in acquiring the means required for satisfying their needs.

Because what if you’re not as intelligent as the average person, therefore getting a relatively low-income job, such as being a plumber, because of which you are unable to satisfy your needs to the same degree as – let’s say – a banker or lawyer? Of course, a libertarian might say, the plumber can still participate in the free market, just like the banker or lawyer can. But, even though the three parties might have the same needs (for luxury or otherwise), the plumber cannot satisfy as many of his as the banker and the lawyer can of theirs: only because nature happened to endow him – in contrast to the banker and lawyer – with capabilities that apparently are less appreciated (since less demanded) in society. So the question is: is it fair to let nature – and thus chance – play such a drastic role in the ability of any person to satisfy his needs?

A libertarian can answer this question in either of two ways. Either he admits that the extent in which we’re able to satisfy our needs is indeed – in principle – determined by nature’s authority over our capabilities, or he must come up with an ingenious invention for how to solve this negative side-effect of the free market without thereby endangering the libertarian heart of his plan. The first option, although this appears to be mostly ignored by libertarians, seems to imply a notion of ‘fairness’ that I – and I assume many others – find highly questionable. On the other hand, it at least is a notion, and – given that this truly is the libertarian’s view of a fair world – should be accepted for what it is.

The latter option – on the other hand – provides more room for discussion. Because how – if ever – could it be possible to solve nature’s capability-casino by means of a libertarian solution? There are of course many plans one could come up with, all of them mitigating the negative effects, but all of them being either (1) in conflict with the libertarian aspiration of a free market or (2) don’t get down to the root of the problem (that is, the unequal distribution of capabilities over mankind). It seems fair to say that (2) is a kind of unfairness that is inextinguishable – not by socialism nor by libertarianism. We after all cannot redesign our beings in order to endow everyone with the same capabilities. And even if we could do so, it’s high questionable whether this choice would be beneficial to society as a whole. So it seems we’re stuck with (1), pointing us to the possibly unfair consequences of the free market.

The above reflection shows that there seems to be an intuitively unfair side-effect of the free market; a side-effect that is unsolvable by means of the free market-paradigm itself. It either requires us to adopt the libertarian notion of ‘fairness’, or requires some sort of (government) intervention in order to compensate for nature’s ‘unfair’ distribution of capabilities.

What do you think?