By Milton Friedman
National Review
May 19, 1970.

There is today a widespread tendency to take it for granted that growth of population, advancing technology, expanding output of goods and services, increasing complexity of our industrial structure -- the whole set of developments we label economic growth -- necessarily repress individuality and enforce conformity. In the words of the brochure describing a recent symposium, "many thoughtful persons view these [scientific and technological] advances as creaing new forms of bondage as grave threats to the integrity of the individual."

I believe that this view is, to say the least, a great oversimplification. True, new forms of bondage are being created, and there are grave threats to the integrity of the individual. But the history of mankind -- from primitive times to the present -- is mostly a record of bondage, of tyranny of man over man. We do not need any sophisticated analysis to explain why freedom is threatened. Tyranny is the natural state of mankind. The remarkable thing about our era is the freedom we enjoy, not the threats to that freedom. And these threats themselves are not an inevitable consequence of the growing complexity of our society. They are a result of the social policies we have chosen to adopt. They are a result of a lack of understanding, not of harsh inevitability.

The causal relation between growth and freedom is almost the opposite of that which is commonly assumed: freedom produces growth and prosperity, and growth and prosperity in turn provide greater scope for freedom -- though imperfect man may fail to grasp this potentiality and may instead use hs material wealth to exploit his fellow man, in which case he will also destroy his prosperity.

Whether we look at the Golden Age of ancient Greece, or at the early centuries of the Roman era, or at the Renaissance, we see that widening individual freedom and quickening of economic growth went hand in hand -- and that when freedom was destroyed, economic decline was not far behind. To come closer to our own times, the breaking down of feudal relations, the loosening of control over economic activity by the state, the widening of the scope assigned to individual initiative produced the great scientific and technological advances of the seventeenth and eighteenth centuries. It is no accident that the industrial revolution which followed had its home in Britain, where the ties of bondage were loosest, or that it had its greatest flowering after Britain adopted laissez faire as a national policy, or that the leadership moved to the United States at a time when we too had limited intervention by the government into economic affairs.

These developments illustrate that great insight which Adam Smith expounded so effectively. The free market enables millions of men to cooperate with one another in complex tasks without compulsion and without centralized control. The invisible hand of the free market, whereby men who intend only to serve their own interests are led to serve the public interest, is a far more sensitive and effective source of both growth and freedom than the dead hand of the bureaucrat, however well intentioned he may be.

Growth and development do of course produce new problems of reconciling the freedom of one man with the freedom of others -- problems of congestion, pollution, and so on. And many of these can best be met by coordinated action through governmental channels. But growth and development also reduce the problems of preserving freedom in other areas. For example, growth of population and improvements in transportation and communication have greatly widened the scope for effective competition and so have reduced the need for governmental concern with monopolistic behavior -- though unfortunately, as most notably in transportation itself, we have often reacted by protecting entrenched monopoly from competition rather than taking full advantage of the new scope for competition.

Whatever may be the net balance of the effects of growth, the most obvious threats to the integrity of the individual have very different source: in area after area of our national life, we have adopted policies that unnecessarily threaten the integrity of the individual. In each of these, there are alternative polices that would promote our objective better and strengthen individual freedom. The areas in which this is true are varied, and they refer to many different aspects of our lives. Yet there runs through them a common element: the substitution of bureaucratic organization and control for market arrangements, the rejection of Adam Smith’s great insight.

I shall illustrate this generalization by discussing three specific areas: radio and television, schooling, and public welfare. I have chosen three different areas out of the many available to show under how varied a guise the same basic issue arises.

Radio and Television

Here are marvelous technological achievements that we are failing to exploit effectively. We have a “wasteland” of highly repetitive, standardized programs directed at the great masses -- which by itself is all to the good -- but with all too little in the way of imaginative, exploratory, or simply high quality programs directed at minorities. The medium promotes deadening uniformity rather than variety, diversity, and individuality. The preferences of a minority, however strong they may be, must give way to the preferences of the mass audience, however weak.

Equally important, a medium that could promote vigorous and lively discussion of public issues seldom ventures into controversial areas. Truly free speech is held in check by the fear of losing a license and is replaced by “fair” speech. The occasional slightly venturesome documentary or expose is trumpeted far and wide as a sign of the independence of the station or network. The magnificent coverage of many news events -- from the Olympics to the moon landing by American astronauts -- shows the potential of the medium, so far largely unexploited.

This indictment is widely accepted. What has been the response? A string of privately supported educational television stations and, because these seemed inadequate, the enactment of a new Public Broadcasting Act under which the Federal Government will subsidize the production and distribution of programs. Talk about carrying coals to Newcastle. As we shall see, the problem is that there is now too much control by the Federal Government -- through the Federal Communications Commission -- over radio and television. To cure this, we establish another federal body to be a monopoly supplier of programs. To quote my colleague, Ronald Coase, who dubbed the measure “a wholly objectionable poverty program for the well-to-do,” “the Public Broadcasting Act of 1967 is unnecessary, inefficient, inequitable and subject to dangerous political influences.”

I suggest that the key to the present defect is the federal licensing of broadcasters. This gives the Federal Communications Commission the power of life and death over a station. If a person wants to start a newspaper, and has the capital, he needs merely buy a printing press, rent a location, publish his paper, and see if he can get the public to buy it. Once he is in business, his readers and advertisers are the only ones he must satisfy. But if he wants to set up a radio or television station, he also must convince the FCC that he is a person of good moral character and that there is a “need” for additional facilities. This may not be easy to do -- ask those who have tried to get a license for Austin, Texas. And once the FCC grants him a license, he must satisfy it that he is presenting a “balanced” and “fair” program.

If newspapers were subject to the same controls, the New York Times would have to change its motto to “All the news that the FCC believes fit to print,” and neither the New York Times nor the Chicago Tribune, as presently constituted, could conceivably get a clean bill of health. Fortunately, newspapers developed in an earlier era and have so far escaped control. Had they developed in say, the 1920s or 1930s, there would almost surely be today a Federal Publications Commission -- as indeed was recommended in the famous Hutchins Report on the press.

One specific measure taken by the FCC has perhaps done more than any other single thing to stifle and enshrine mediocrity. That is its refusal to authorize subscription or pay television. The FCC has ruled that we may not spend our money to see programs we wish to see. We must accept the programs that are provided as a by-product of advertising, except by contributing to and watching an educational television station.

To understand how this measure has such a far-reaching effect in enshrining mediocrity in television and radio, let us consider what the effect would be of applying the same rule in a comparable area to which it is now applied. Suppose it were legislated that reading matter could not be sold but must be given away, that all newspapers must be like the “throwaways” now often given out, that all magazines must be available without charge, financed only by the revenue from advertising they contain or by a subsidy from a church, foundation, or other organization, and similarly that any books published must be financed in the same way and distributed without charge to readers. It takes no great act of the imagination to see the results: those books and magazines that appeal to relatively small groups with specialized tastes would disappear. Few if any advertisers would deem it worthwhile to pay for the publication of avant-garde poetry in order to insert pages extolling the virtue of Gleem or Dream or Steem. Far better to put those pages in a Western that millions would pick up and read avidly. The book publishing industry would become like television -- a wasteland of Westerns, mysteries, and popular romances, with an occasional serious work appealing to a limited audience sponsored by a firm trying to improve its public image, or just with unusual tastes.

Your immediate reaction will be to regard this as a fantastic horror story and to dismiss it out of hand. But let me urge you not to let yourself be a victim of the tyranny of the status quo. The distribution of reading matter is almost strictly comparable to the distribution of television programs. I have not seen any argument in favor of forbidding pay television that does not apply with roughly equal force to forbidding pay publishing. And conversely -- no argument in favor of pay publishing that does not apply with roughly equal force to permitting pay television. The two strike us as “of course” different only because they happen to have developed differently.

Why has the FCC prohibited pay television these past many years, except for a few so-called “pilot” projects? Because the networks are firmly established as the dominant distributors of national advertising, and they believe, rightly or wrongly, that they would fare less well than they do no if a new way of distributing programs were permitted. The networks exert enormous influence over the FCC -- and it is inevitable that they should, just as it is inevitable that the railroads will exert enormous influence over the ICC, the banks over the Federal Reserve, and the producers of automobiles over the federal agency to promote automobile safety. If the FCC had not stood in the way, pay television would now be a major factor, and the range, quality, and variety of television programs would now be far closer to that of book publishing.

How can we take advantage of the potentialities of television and radio and eliminate the present standardizing hand of the state? By abolishing the FCC and having a truly free radio and television to parallel a free press. But I will be told, that is absurd. There are only a limited number of pieces of television channels; someone must assign them. It is regrettable that we should have to have federal control over radio and television, but that simply reflects the technological characteristics of the industry. Noting of the sort. There are only a limited number of pieces of land on which a newspaper plant can stand. Why does that not require assignment of land? Because there is private property in land and the allocation of land can be performed by purchase and sale.

Precisely the same solution is available for radio and television. Let the FCC auction off to the highest bidders the right to specified channels now embodied in licenses (for example, the right to broadcast on a specified frequency from a specified location at specified times at a specified maximum power). That was what the Federal Government did a century and more ago with its land. The FCC could then be abolished. The private owners could trade these rights back and forth and rearrange them in various ways to make them more valuable. There would be problems of interference -- of one man trespassing on another’s frequency -- but they would be handled as trespassing on land now is, through the regular courts.

I cannot here elaborate this proposal and consider all its implications in full detail, even if I had the competence to do so. Let me only state that this is not a crackbrained, off-the-cuff suggestion. It is a proposal that has been extensively studied, in particular by R. H. Coase. All the serious objections raised have been examined. There is little doubt that it is a perfectly feasible way to handle the allocation and use of radio and television channels without special government control, little doubt that it would produce a far more efficient use of the radio spectrum, in many different ways, than prevails today. And there is little doubt that it would convert what is today a homogenizing influence into a major force widening avenues for the expression of individuality.

Schooling

For reasons of space, I shall restrict myself to higher schooling -- or as it is euphemistically called, higher education. (Personally, I prefer the more descriptive term because no all schooling is education nor all education schooling.) I may, however, note that lower schooling offers an equally striking example of my main theme.

The trend is clear. Government expenditure on higher schooling has been growing rapidly. A steadily increasing fraction of students is enrolled in governmentally run institutions. There are more complaints about the impersonality of the mega-universities, the neglect of the individual student, the standardization and routinization of the educational process. And the private schools, like Reed, that provide a welcome contrast and that have been leaders in fostering quality education, find it more and more difficult to compete for students and funds with the governmental institutions. They are themselves becoming increasingly dependent on tax monies for support.

These developments raise two separate issues: First, how much of a governmental subsidy, if any, there should be for higher schooling; second, now any subsidy should be distributed.

Strictly speaking, only the second of these issues is relevant for my theme -- how we have been unnecessarily curbing individuality by the social policies we have been following. But I cannot forbear from a few comments on the first issue, because I feel so strongly about it.

The present use of tax monies to subsidize higher schooling seems to me one of the great suppressed scandals of our day. Compare the young men and women who receive this subsidy by attending state-supported institutions with their contemporaries who do not go to college at all. The youngsters in college come from higher income families than those who are not in college -- but both sets of families pay taxes. More important, the youngsters in college will on the average have higher incomes for the rest of their lives than the youngsters who do not go to college. We have imposed a major tax on the poor to subsidize the not-so-poor. We in the middle- and upper-income classes have in this area -- as I am afraid we have in many others -- conned the poor into supporting us in a style that we take to be no more than our just deserts.

It is eminently desirable that every young man and woman, regardless of the wealth or religion or color or social standing of his or her family, have the opportunity to get whatever schooling he or she can qualify for, provided that he or she is willing to pay for it, either currently or out of subsequent higher income that the schooling will make possible. There is, that is , a strong case for assuring the availability of loans or their equivalent, by governmental means, if necessary. There is no case that I can see for providing subsidies.

Having relieved myself of these obiter dicta, let me turn to the second question: How should any subsidy be distributed? Currently, we distribute the subsidy primarily by having the government run institutions of higher learning and by charging tuition that is far below the costs incurred on their behalf. This is both inequitable and inefficient. Moreover, it is this practice, much more than the subsidization of higher schooling, that promotes conformity and threatens individuality.

Under current arrangements, the state of Oregon says to its young men and women, “If you meet certain academic standards, we shall automatically grant you a scholarship worth something like fifteen hundred or two thousand dollars a year regardless of ‘need’ -- provided that you are smart enough to go to the University of Oregon or Oregon State. If you are so perverse as to want to go to Reed, let alone Stanford or Harvard or Yale or the University of Chicago, not a penny for you.” Surely, it would be more equitable to proceed instead along the lines of the G.I. educational benefits for veterans. Let whatever money the state of Oregon wants to spend on higher schooling be divided into the appropriate number of scholarships, each of, say, $2000 per year, tenable for four years. Let there be a competitive exam -- or some other method of selection -- and let these scholarships be awarded to individuals to be used to attend any approved institution of their choice that will in turn accept them. If Oregon wants to continue to run the University of Oregon, let that institution charge tuition sufficient to cover its costs, and compete on even terms with other institutions. If it is more attractive to students than other institutions, the University will flourish; if not, I will decline.

Today, there is no reason for faculties and administrators of the existing state institutions to pay any attention to their students, except as this will indirectly affect the legislature which votes them funds. The thing for them to do, as they well know, is to engage in activities that will appeal to the legislature while paying to students the minimum attention that will keep them from being too obstreperous. This is the valid element in the drive for student power.

The arrangement I suggest gives the student a wider range of choice and enables him to exert more influence on the kind of schooling he is offered. It eliminates the present unfair competition between state-run and other institutions.

It gives the faculties and administrations of state-run institutions an incentive to server the students. It would open up the opportunity for new institutions to serve their students. It would open up the opportunity for new institutions to enter the field and seek to attract customers. The strengthening of competition would promote improvements in quality and foster diversity and experimentation. Because the money would go to individuals, not institutions, it would be clear who are the recipients of the subsidy and bring into the open this question of who should be subsidized. Also, it would give the individual greater freedom of choice, greater opportunity to express his own values and to develop his own capacities as effectively as possible.

All of these are advantages of the scholarship plan. But they are also, to speak cynically, the major political obstacles to its enactment. As usual in such matters, the people who would benefit from the change do not know that they would; the vested interests that they have developed under the present arrangement will recognize the threat to them at once.

Public Welfare

The methods by which we subsidize the poor have the same defects as those by which we subsidize the rich: they involve giving too much power to bureaucrats to determine who gets the subsidy and in what form, too little power to the people who are being subsidized, and too little incentive to them to reduce the

subsidy they receive. The defects of our present welfare program are by now widely recognized. In the midst of great prosperity, the welfare rolls mount. Once on the rolls, many people find it difficult to get off. We have been creating a permanent class of welfare recipients, who devote their energies to wheedling a bit more welfare for themselves or bringing pressure to bear to improve welfare payments rather than to raising their own incomes to a level at which they can be off welfare. We have an army of welfare workers administering the system. They find themselves bogged down in paper work, engaged in being policeman and spies, with little time left to perform their proper function -- helping the unfortunate people who are under their charge. The whole process is degrading for the welfare recipient and demeaning for the welfare workers.

What is wrong? At bottom, I conjecture, the belief that the state through administrative machinery can deal with persons needing assistance in the way one person spending his own money can deal with another person. If, out of charitable inclinations, a man takes an interest in someone suffering misfortune, it is entirely understandable that he may want to make a detailed investigation of that person’s circumstances, to assure himself that the misfortune is real, the he will want to explore the items needed and provide help for those he thinks most urgent, and then try to guide the person he is assisting to use the help most effectively. But translate this into a large-scale governmental program, and it ends up as the kind of administrative nightmare we now have. The welfare workers are not distributing their own, so there must be controls over them. The criteria we need must be standardized. The forms of help must be the specified. The dispersers of funds must be supervised. In the process, the human element is squeezed out and replaced by frustration and mutual distrust.

This system clearly is a “grave threat to the integrity of the individual” receiving welfare. Before a welfare recipient may move from one apartment to another, he must get the approval of a civil servant; equally, before he may buy second-hand furniture, have the gas turned on, or make any one of a thousand other deviations from an approved budget. Needless to say, the welfare recipients have become skilled in finding ways around the regulations, but nonetheless, the whole atmosphere is one in which they are treated like irresponsible wards of the state, like children, not like responsible citizens. Clearly, if the taxpayer does subsidize them, he has in some sense the moral right to impose such requirements. But is it wise to do so?

Most important of all, carrying over the notion of meeting the other person’s “needs” has had the unfortunate effect of largely eliminating any incentive for the welfare recipient to help himself. If a welfare recipient earns an extra $100, that is interpreted as meaning that he or she can meet an additional $100 of “needs,” and therefore that welfare aid can be reduced by $100. In consequence, the recipient has no incentive to earn money unless he can earn enough to completely replace welfare. This is the main reason why there tends to develop a permanent class of welfare recipients.

As in each of the two prior examples, the way to improve the situation is to put greater reliance on impersonal market arrangements and less on bureaucratic administration. For welfare, the device that recommends itself is the negative income tax, under which all persons with incomes below the level now taxable would be entitled to receive a fraction of their unused exemptions and deductions. This method would give assistance to the poor in the form of money, which they could spend as they wish, on the basis of the impersonal criteria of the size of their income and the number of persons in their family, and in such a way as to give them an incentive to raise their income from other sources.

This is not the place for a detailed exposition of the way a negative income tax would work or of its advantages and disadvantages. It is sufficient for the present purpose to note that it has bee studied carefully and that there is every reason to believe that it would be a feasible substitute for the present direct relief and aid to dependent children programs; that it would, over a period, simultaneously give more assistance to the truly needy and cost the taxpayers less.

The crucial point for our present purpose is that a negative income tax would permit the elimination of the bulk of our present welfare bureaucracy, would end the division of our population into two classes, would give those receiving assistance greater freedom and independence to shape their own life and greater opportunity to take advantage of their own abilities and capacities. In addition, whereas our present programs have essentially destroyed private philanthropy, the negative income tax, by assuming the basic load of income maintenance, would reduce the hardship cases, which no general program can eliminate, to a level that private charity could handle. We have been stifling private philanthropic agencies, converting them to agents or contractors of the state, by our conception of government welfare. The diversity, flexibility, and efficiency of free enterprise has a role to play on philanthropy no less than in other areas.

Conclusion

In recent decades, there has been a steady tendency to enlarge the role of the government, either to undertake new tasks or to take over tasks formerly entrusted to private and voluntary action. By now the process has gone very far indeed, even in a country like the United States which prides itself on being the country of free enterprise. Today, probably over one-third of all the income of the people in this country is channeled through the government -- being extracted by taxes and loans, and spent for governmental programs. And this grossly understates the influence of the government. The wages many an employer we may enter, the countries to which we may travel, and many other aspects of our daily lives are subject to governmental control.

This expansion of the role of the government has been sold to the American people on the ground that it would enhance both their material well-being and their personal freedom. The promises have been an remain glowing. Yet, when we look at performance and not promise, the story is very different. We have adopted reform after reform, program after program, without achieving the promised objectives. Consider those programs which have one after the other been proclaimed as great progressive achievements: the National Recovery Administration, the Agricultural Adjustment Act and its successors; the Securities and Exchange Commission; public housing; the Wagner Labor Act; social security; relief and aid to dependent children; urban renewal; federal aid to education -- which of them has achieved the objectives that aroused such high hopes in their disinterested supporters? The problems each was touted as solving are with us yet, often in exaggerated form. Or pass from the dramatic federal level to the local level. What are the major governmental responsibilities at the local level? Schooling and police protection. What are the major areas of social concern? Inadequate schooling and crime on the streets.

It is fascinating question of political science to explain this sequence of events. What is it that explains what activities are taken over by government and when? Why is it that so many measure work in accordance with the original intentions of the disinterested for a year or two, but then soon become devices whereby special interests enrich themselves? Why is it, that is, that well-intentioned liberals have so often turned out to be front men for special interests they would never knowingly have supported? Why is it that, in a democracy supposedly run by a majority, there are so many measures pandering to special interests?

These questions take us far afield from the more limited object of this paper: to show by example that the lack of success of many government programs and the threats they raise to freedom and individuality is a necessary consequence of neither the objectives sought nor the increasing complexity of our society. Television and radio, higher schooling, and welfare arrangements are very different areas in which we have very different objectives. Yet there is a common strand running through all three. In all, we have tried to substitute central direction and bureaucratic control for voluntary arrangements. In all, we could achieve our objectives far better by using arrangements that give a greater scope to the market, that rely on “participatory democracy” rather than on bureaucratic democracy.

If we are to meet the recurrent threats to freedom that are bound to arise, it is important that the informed public become more sophisticated than it is now about government programs. It must come to understand that the business community has no monopoly on misleading advertising, that promises must be distinguished from performance. We must try to repress the tendency to say, “Let’s pass a law,” whenever a problem arises and recognize that the indirect route through government action. And when we do turn to government action, we shall do best if, so far as possible, we try to restrict government action either to setting up arrangements under which private action can be effective (as in radio or television), or to giving money in an open and aboveboard way to specific individuals under specified conditions rather than to providing the relevant good or service by a government organization.