Tag Archives: Libertarianism

Milton Friedman’s Voucher Plan

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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?

What Is the Value of a Human Life?

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People are getting older and older and demand better and better (medical) care. Also, advancements in technology and medical knowledge allow what once seemed to be incurable illnesses to be cured – or at least treated. These trends result in an ever increasing rise in the medical expenditures of countries. This begs the question: how far should we go in saving a patient’s life? What is the value of a human life? Should we be prepared to save someone at all costs? Or should we think about the financial consequences of our decisions? And if so, what is the (financial) limit?

There are several ways in which this question can be answered. One response would be that we should go as far as possible in trying to save a person’s life. That is, as far as possible given the boundaries set by our medical and technological knowledge. And although this might cost us (as a society) a lot of money, the money spent on saving a person’s life is nothing compared to the value gained by prolonging their stay on our planet; the emotional gain experienced by the person – and not to forget his family – is of an extraordinary value: a value that can impossibly be expressed in terms of money. Therefore any means available should be employed in order to let people experience (an extension of) life.

However, given that the value of a human life would be ‘impossible to express in terms of money’, why then should we come to the conclusion that – because of that – we should be prepared to save a person’s life at all costs? Wouldn’t that be a rather arbitrary decision? After all, given that (human) life is of a such value that it is inexpressible in terms of money, why then even bother to make the transition to talk about costs? If a human life would truly be invaluable, it would be just as nonsensical to talk about trying to save a person’s life at all cost as it would be to say that we shouldn’t be prepared to pay any money in order to do so, right? The value of life is after all of an entirely different dimension; irreducible to monetary terms in any sense – no matter whether this value is in millions or pennies.

Well, that seems a little radical, doesn’t it? Another option would be to say that we should go as far as could be considered economically reasonable. In welfare countries where civilians have to pay relatively high taxes, that for a huge part are gobbled by the nation’s medical expenses, it seems fair to not only think in the interests of the patient and his family but to also consider the economic prospects of the relevant patient. After all: would it be reasonable for society to pay a huge sum of money to save someone’s life, while the person being saved might be unable to ‘repay’ (in terms of making an economic contribution to society) the medical expenses in any sense? From a purely utilitarian viewpoint, this seems to be an unwise (and even a wrong) decision. Surely, it might be ‘fair’ to save the person’s life, in the sense that the person probably has paid taxes all his life (taxes that were used for paying the medical treatments of others). But that doesn’t change the fact that, at this point in time, it would be unprofitable/utility-degrading to pay for the patient’s treatment.

A solution to cover this seemingly unfair attitude – although it might sound counter-intuitive – would be to make people decide for themselves how much they are prepared to pay for saving a patient’s life. Subsequently, it would be this amount of money that the person would contribute (in the form of taxes) for covering the country’s medical expenses. However, the other side of this plan would be that, whenever the tax payer himself would have to be treated in hospital, this person’s treatment costs will be compared with the amount of money he contributed to society for covering its medical expenditures/saving a person’s life. Based upon this comparison will be decided whether or not the person should be treated. When the contribution-fee is decided upfront – before the person ‘officially’ enters society (let’s say at the age of 18) – no conflict of interests can occur, and everyone’s wishes are taken into account.

A totally different option would be to shove the full responsibility for covering one’s medical expenditures down to someone’s own wallet: to make people pay for their own medical costs. After all: who would mind a person spending thousands of dollars coming from his own pocket? No-one I suppose. Unless, of course, this person is you. Because what to do if you don’t have the money required to cover your medical expenses? It doesn’t seem fair to let you die just because you haven’t earned as much money as the richest ten percent of the population, right? However, even if you would be the person becoming sick and having to pay for your own medical costs, you might still consider this libertarian attitude towards ‘paying my own costs’ to be the true righteous manner to live your life.

It is in no way an easy question. It is about much more than medical costs/finance: it’s about values/ethics, which implies that there is likely to be no definite answer to this question.

But what do you think?

The Inevitable Unfairness of the Free Market

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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?

Elections and the Duty to be Genuine

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Voting: the only legitimate manner in a democratic society for distributing power. The question is: how do we want to distribute this power? Do we want liberals in charge and hope for the government to back off? Or would we rather see our state becoming more social; helping those that have been unfortunate? In this relatively long article, I want to make claim in favor of being anti-social, or at least not being disingenuously social. But why would that be a good thing? In order to see that, we first have to understand a little about free markets and prices.

Maybe you have heard the name of Friedrich Hayek. He was one of the, if the not the most, prominent economists of the 20th century. Hayek was a leading figure in the battle for free markets. He condemned intervention by the government in the market, and he condemned central planning by the government even more. By “central planning” I am referring to the state deciding where its resources should be allocated to. The reason Hayek objected against central planning was as follows: Hayek believed that the economy was incredibly complex; that there is an infinite amount of interests that have to be dealt with. And, Hayek said, it is impossible for a state to get to know all the interests and all of the individual preferences of its citizens. That is, it is impossible for a state to know that John likes shoes and that he is prepared to pay a lot money in order to buy some, and that Susan absolutely hates shoes and doesn’t want to pay any money in order to buy some.

The only manner, according to Hayek, by which to get a clear insight into the tremendous complexity of people’s preferences is through the market. Or, to be more specific, through the price that comes about in the market. Only by taking a look at the price that comes about through totally unhindered supply and demand, we would be able to come to grips with the (possibly) conflicting preferences of society’s members. And it is not just that the market informs us about the value of goods: it also regulates buyers’ and sellers’ behaviors.

You can see why central planning doesn’t provide this opportunity to extract all the relevant information from its citizens: there is no price mechanism that can take care of the interplay of individual preferences, and make sure that goods (or services) are distributed in a fair manner. Thus, it is only when the state starts messing around, when it takes control of the market process, that the only source of tremendously valuable information get’s ruined.

I want to take a look at Hayek’s explanation of the price as being the most perfect indicator of the individual preferences of the members of society. That, through the market mechanism, each member of society can obtain all the information (s)he needs in order to make a reasonable decision. Thus, and I am sorry if I am repeating myself, if every member of society would act according to his or her set of desires, the market would take care of the rest; the prices will come about in such a manner that everyone’s interests are taken care of. This is the closest we would be capable of getting to know all the relevant information required to allocate resources perfectly.

Now, let’s imagine that we would apply Hayek’s free market idea to the election process in a democratic society. The process in which the citizens of a state decide who they want that represents them in parliament. We could interpret the number of votes a party receives to be equal to the notion of price in a free market, and the parties people vote for to be an expression of their individual preferences. But this is not “just” an expression of their individual preferences; it is the most complete expression attainable. Parliament is, given that all of society’s members act in line with their true beliefs about how society should be, a direct representation of the preferences of society. And it this representation that could have never been attained by even slightly deviating from a fully genuine voting system. The only difference between an economy and politics seems that, instead of the price, the resulting equilibrium is the distribution of seats in parliament.

So, what are the implications of this observation? First of all, a rather obvious implication is that dictatorial regimes can impossibly posses all the relevant information in order to distribute its resources (the seats in parliament and thus, indirectly, the state’s money) in perfect harmony with the complexity of the preferences of the state’s members. Another, less obvious, implication is that each member of society should be completely genuine in expressing his or her individual preferences in the election process. That is, we should not vote according to the preferences of our mother or daughter, or not even because of our “empathy” with the sick, unless this empathy is genuinely meant by the voting person. If not, the ideal of a perfect representation of society has become unattainable.

Thus, the moral of this story is, don’t be disingenuous in expressing your vote. Don’t vote for a party if you don’t genuinely consider this to be the best possible option. Don’t vote for a party because society finds this the “most decent thing to do”. Because it is only by being fully genuine about what you believe to be right or wrong that all individual preferences can be listened to and processed in the market mechanism called election.

But what do you think?