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Milton Friedman - Is Capitalism Humane? (Lecture) The Humanitarian Case for Free Markets! — Transcript

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0:00it is my very great pleasure to present
0:03to you our speaker today Professor
0:05Milton
0:06[Applause]
0:21freed what I want to talk about is
0:25really an issue which is very much
0:27related to the whole problem of human
0:29fre Freedom it has to do with the
0:32question of whether capitalism is Humane
0:34and what you mean by
0:36that I am sure many of you have heard
0:39the funny the old story about the two
0:41polls who met one another and one pole
0:44said to the other tell me do you know
0:46the difference between capitalism and
0:48socialism and the other poll said no I
0:50don't know the difference and the first
0:52poll said well you know under capitalism
0:55man exploits man the other fellow shook
0:58his head well under social ISM he said
1:00it's vice
1:08versa well now that as a matter of fact
1:11in the present uh intellectual
1:13atmosphere of the world is a relatively
1:15favorable evaluation of
1:18capitalism the interesting thing to me
1:20about this is that the O the arguments
1:23the issues in this debate which has been
1:26going on for so long about the form of
1:28government have changed
1:31the argument used to be about strictly
1:33the form of economic organization should
1:35we have government control of production
1:37and distribution or should we have a
1:40market control and the argument used to
1:42be made in terms of the supposedly
1:45greater efficiency of centralized
1:48government and of centralized control
1:51nobody makes that argument anymore there
1:53is hardly a person in the world who will
1:55claim that nationalized Industries or
1:59socialist as a method of economic
2:02organization is an efficient way to
2:04organize things the examples of Great
2:06Britain the examples of Russia the
2:10examples of some of the other states
2:12around the world that have adopted these
2:14measures plus the domestic grown
2:17examples of the post office and its
2:19fellows have put an end to that kind of
2:22talk but the interesting thing
2:25is that nonetheless there is widespread
2:28opposition for C to capitalism as a
2:32system of organization and there is
2:35widespread s support for some vague
2:38system labeled socialism the most
2:42dramatic example of the change in the
2:44character the argument and the Paradox
2:47that I'm really bringing out is
2:49Germany here was Germany which
2:52experienced all the horrors of the Nazi
2:54totalitarian state in the
2:561930s here is Germany which after the
3:00war under the airh hard policy of social
3:03Mark vof social market economy had an
3:07economic Miracle with an enormous rise
3:10in total income enormous rise in the
3:12well-being of the German people of the
3:15ordinary people and yet in Germany
3:19despite the demonstration of the horrors
3:22on the one side of a totalitarian state
3:26and on the other of the benefits of a
3:29relative free market here in Germany you
3:31will find a very large fraction of all
3:34intellectuals remain and not only remain
3:37have become even more strongly anti-
3:39capitalist have become proponents of
3:42collectivism of one form or another only
3:45a small number have gone into the more
3:47extreme versions that you've been
3:48reading about in the paper of the of the
3:53U uh terrorists but a very large
3:57fraction of the intellectuals those who
3:59for the newspapers those who are on
4:02television and so on are fundamentally
4:04anti- capitalist in their mentality and
4:06the question is why what is it that has
4:10produced this shift now one of the most
4:13in or not this shift what is it that
4:16produces this consistent attitude of
4:19anti- capitalism on the one hand and
4:21pro- something called collectivism on
4:24the other among
4:26intellectuals one of the most
4:27interesting analysis of these problems I
4:30know is by a Russian dissident
4:33mathematician named
4:36shafarevich his essay which has never
4:40been published needless to say in
4:43Russia but uh it appears in English
4:47translation in a book called under the
4:49rubble which has been edited by
4:52Alexander saniton and I strongly
4:54recommend that particular paper to you
4:58in it he discusses the appeal of
5:00socialism over the ages he goes back a
5:02thousand or 2,000 years and he comes out
5:05with the conclusion that just as Freud
5:08pointed to the Death Wish in individuals
5:11as a fundamental psychological
5:13propensity the appeal of capitalism he
5:16argued I'm sorry the appeal of socialism
5:19and the opposition to capitalism is
5:22really a fundamental sign of a Death
5:23Wish for Society on the part of
5:26intellectuals it's a very intriguing
5:31strange and at first sight highly
5:34improbable kind of an interpretation yet
5:37I urge you all to read that essay
5:39because you will find that it is very
5:41disturbing by having a great deal more
5:44sense to it than you would suppose such
5:45a position could possibly
5:48have I'm not going to take that
5:50line maybe he's right but I think
5:53there's a very much simpler analysis A
5:55simpler reason for this and that simpler
5:58reason is a
6:01combination of a supposed emphasis on
6:04moral
6:06values and ignorance and
6:08misunderstanding about the relationship
6:11between moral values and economic
6:14systems I may say the emphasis on moral
6:16values is almost always on the part of
6:19people who do not have economic problems
6:22it's not on the part of the
6:24masses but the problem with this
6:27approach the problem of trying
6:31to interpret and analyze a system either
6:34Pro or Con in terms of such Concepts as
6:37a morality of the system or the humanity
6:39of the system whether capitalism is
6:41Humane or socialism is Humane or moral
6:44or
6:45immoral the problem with that is that
6:47moral values are individual they are not
6:50Collective moral values have to do with
6:52what each of us separately believes and
6:55holds true what what our own individual
6:58values are
7:00capitalism socialism Central planning
7:04are means not
7:07ends they in and of themselves are
7:09neither moral nor immoral Humane nor
7:11inhumane we have to ask what are their
7:15results we have to look at what are the
7:18consequences of adopting one or another
7:21system of
7:23organization and from that point of view
7:26the crucial thing is to look beneath the
7:28surface don't look at what the
7:30proponents of one system or another say
7:32are their intentions but look at what
7:34the actual results
7:36are
7:39socialism which means government
7:41ownership and operation of means of
7:43production has
7:45appealed to
7:48high-minded fine People to People of
7:51idealistic views because of the supposed
7:54objectives of socialism especially
7:57because of the supposed objectives of
7:59equality of equality and social justice
8:03now those are fine objectives and it's a
8:06tribute to the people of Good Will that
8:09those objectives should appeal to them
8:12but you have to ask the question does
8:13the system no matter what its proponents
8:16say produce those results and once you
8:19look at the results it's Crystal Clear
8:21that they do not where are social
8:24injustices
8:26greatest social injustices are clearly
8:28greatest
8:30where you have central control the
8:32degree of social injustice and torture
8:35in a place like and and incarceration in
8:38a place like
8:40Russia is of a different order of
8:42magnitude than in is in those Western
8:45countries where most of us have grown up
8:47and in which we have been accustomed to
8:49regarding Freedom as our natural
8:51heritage social
8:53injustice in a country like
8:56Yugoslavia which is a much more benign
8:58communist State than Russia and yet you
9:02ask Jos who lishes in prison for having
9:04written a book you ask the people at the
9:08University of belgrad who have been sent
9:10to
9:11prison or many others who have been
9:14ejected from the country social
9:16injustice in
9:17China where you have had thousands of
9:21people murdered because of their
9:24opposition to the
9:26government again you look at the
9:28question of any equality of equality
9:30where do you have the greatest degree of
9:33inequality in the Socialist states of
9:35the world I remember about 15 years ago
9:39my wife and I were in Russia for a
9:41couple of weeks we were in
9:43Moscow and we were uh we were going with
9:47our urist uh guide and happened to see I
9:50happen to see some of the fancy Russian
9:52limousines up there the zibs they were
9:55sort of a takeoff on the 1938 American
9:57Packers
10:00and I asked our urist guide out of
10:02amusement how much do those sell for oh
10:05she said those aren't for sale those are
10:07only for the members of The polit
10:11Bureau you have in a country like Soviet
10:14Union enormous inequality in the
10:16immediate literal sense that there is a
10:19small select group that has all of the
10:23services and amenities of life and very
10:25large masses that are in a very very low
10:28standard of living indeed in a more
10:30direct way if you take the wage rate of
10:32Foreman versus the wage rate of ordinary
10:35workers in the Soviet Union the ratio is
10:38much greater than it is in the United
10:42States I am reminded again of another if
10:45I I seem somehow to be referring to
10:47Poland but on this same trip that we
10:49took to Russia we stopped in Poland in
10:51Warsaw for a while and we met there a
10:54marvelous man a man by the name of
10:56Edward Linsky who was in this country a
10:58year ago at the age of 83 or four I
11:01believe was arrested when he got back to
11:03Poland because he had been one of those
11:05who had signed and authored a
11:07declaration against the suppression of
11:10of freedom of thought and speech in
11:12Poland but at the time we met Edward
11:15Linsky he was seemed to be fairly
11:17free he is a was a man who had been a
11:20socialist all his life and this was
11:23really very hard for he was now in his
11:2470s I may say when we saw him he was
11:26retired very hard thing for a man to go
11:29back on all of his lifelong beliefs and
11:32so he said as follows to us he said you
11:34know he said I used to believe in
11:36socialism I still do but socialism is an
11:39ideal we can't have it in the real world
11:42he said until we're rich enough to be
11:43able to afford it and he said socialism
11:47will be
11:48practical when every man in Poland has a
11:52house and two servants and I said to him
11:55including the servants and he said yes
12:01now capitalism on the other hand is a
12:05system of organization that relies on
12:07private property and voluntary
12:09exchange it has repelled people it's
12:12driven them away from supporting it
12:15because they have thought it emphasized
12:18self-interest in a narrow way because
12:21they were repelled by the idea of people
12:25pursuing their own interest rather than
12:26some broader
12:28interest yet if you look at the
12:30results it's clear that the results go
12:33the other way
12:34around there is it's in the capitalist
12:37societies of the world where C only
12:39where capitalism has prevailed over long
12:41periods if you had both freedom and
12:44prosperity the greatest measures of
12:46Freedom if you look at the Western
12:48countries where Freedom prevails it
12:51doesn't Prevail perfectly we all have
12:53our defects but by and by and on the
12:56large few would deny that in the United
12:59States in Great Britain in France in
13:01Germany in the Western Europe we have a
13:04greater degree of freedom on an
13:06individual and personal level than you
13:07do in most other places around the world
13:09in
13:10Australia Japan to a considerable extent
13:13today though not 200 years ago if you
13:16look you will find that freedom has
13:18prevailed where you've had capitalism
13:21and that simultaneously so has a
13:24well-being and the prosperity of the
13:25ordinary man there's been more social
13:28justice and less
13:30inequality now the question is that you
13:33have to ask and you have to ask the
13:35proponents of these two systems has
13:37socialism failed because its good
13:41qualities were perverted by evil men who
13:43got in charge was it simply because
13:46Stalin took over from line that
13:49communism went the way it did has
13:51capitalism succeeded despite the immoral
13:55values that
13:56pervaded I think the answer to both
13:58questions is in the
14:00negative the
14:02results have
14:04Arisen because each system has been true
14:06to its own values or rather a system
14:10doesn't have values I don't mean that
14:12has been true to the values it
14:14encourages supports and develops in the
14:18people who live under that
14:21system what we're concerned with in
14:23discussing moral values
14:25here are those that have to do with the
14:28relations between
14:29people it's important to distinguish
14:31between two sets of moral considerations
14:34the morality that is relevant to each of
14:36us in our private life how we each
14:39individually conduct
14:41ourselves behave and then what's
14:44relevant to systems of government and
14:46organization are the relations between
14:49people and in judging relations among
14:52between people I do not believe that the
14:56fundamental value is to do do good to
15:00others whether they want you to or
15:03not the fundamental value is not to do
15:05good to others as you see they
15:08good it's not to force them to do
15:12good as I see it the fundamental value
15:15in relations to among people is to
15:17respect the dignity and the
15:19individuality of fellow men to treat
15:22your fellow man not as an object to be
15:26manipulated for your purpose
15:29but to treat him as a person with his
15:30own values and his own rights a person
15:33to be persuaded not coerced not forced
15:37not bulldozed not brainwashed that seems
15:40to me to be a fundamental value from in
15:44Social
15:45relations in all systems whether you
15:49call them socialism capitalism or
15:50anything else people act from
15:54self-interest the citizens of Russia act
15:57from self-interest in the same way as a
15:58citizens of the United States do the
16:01difference between the two countries is
16:03in what determines
16:06self-interest the man in the United
16:08States who is serving as a foreman in a
16:11factory his self-interest leads him to
16:14worry about not getting
16:16fired the man in Russia who is acting as
16:19Foreman in a factory his self-interest
16:21leads him to worry about not being fired
16:24at
16:28[Applause]
16:32both are pursuing their own
16:34self-interest but the sanctions the
16:36effects what makes it in their
16:38self-interest is different in the one
16:40case than in the other but self-interest
16:43should not be interpreted as narrow
16:45selfishness I quote a man who speaks
16:47much more eloquently than I can this is
16:50thoro and I quote him from Walden here's
16:53what th Thor Ro said about unselfishness
16:56as a moral virtue he said there is no
17:00odor so bad as that which arises from
17:03goodness
17:04tainted if I knew for a certainty that a
17:08man was coming to my house with the
17:10conscious design of doing me good I
17:12should run for my
17:15life
17:16philanthropy is almost the only virtue
17:19which is sufficiently appreciated by
17:22mankind nay it is greatly
17:25overrated and it is to our it is our
17:27selfishness which over rates it if
17:31anything a a man so that he does not
17:34perform his functions if he have a pain
17:36in his bowels even for that is a seat of
17:41sympathy he forth with sets about
17:43reforming the world being a microcosm
17:47himself he discovers and it is a true
17:50Discovery and he is the man to make it
17:53that the world has been eating green
17:55apples to his eyes in fact the globe
17:57itself is a great green apple which
18:00there is danger awful to think of that
18:02the children of men will nibble before
18:04it is ripe and straight away his drastic
18:07philanthropy seeks out the Eskimo and
18:09the Patagonian and Embraces the populous
18:12Indian and Chinese
18:14Villages that's Thor on unselfishness as
18:18a moral
18:20value more important and more
18:23fundamentally whenever we depart from
18:26voluntary
18:27cooperation and Trum try to do good by
18:29using
18:31Force the bad moral value of force
18:35triumphs over good
18:37intentions and you realize this is
18:39highly relevant to what I am saying
18:41because the essential notion of a
18:43capitalist society which I'll come back
18:45to is voluntary cooperation voluntary
18:50exchange the essential notion of a
18:52socialist society is fundamentally
18:55forced if the government is the m
18:59if Society is to be run from the cent
19:02center what are you what are you doing
19:05you ultimately have to order people what
19:07to do what is your ultimate sanction go
19:10back ways take it on a milder level
19:13whenever you try to do good with
19:15somebody else's money you are committed
19:18to using
19:20Force how can you do good with somebody
19:22else's money unless you first take it
19:23away from
19:25them the only way you can take it away
19:27with from them is by the threat at a
19:28force you have a policeman a tax
19:30collector who comes and takes it from
19:32them this is carried much farther if you
19:34really have a socialist society if you
19:37have an organization from the center if
19:39you have supposed government bureaucrats
19:41running things that can only ultimately
19:44rest on
19:46Force but whenever you resort to force
19:50even to try to do good you must not
19:53question people's
19:54motives maybe they're evil sometime but
19:58look at the results of what they do give
20:01them the benefit of the doubt assume
20:02their motives are good you know there's
20:05an old saying about the road to Hell
20:07being paved with good
20:09intentions you have to look at the
20:10outcome and whenever you use Force the
20:14bad moral value of force triumphs over
20:16good intentions the reason is not only
20:20that famous aphorism of Lord Acton you
20:23all know it you've all heard it absolute
20:25power corrupts Absol I'm sorry power
20:29corrupts absolute power corrupts
20:32absolutely that's the whole aphorism
20:35that's one reason why trying to do good
20:38with methods that involve Force lead to
20:41bad results because the people who set
20:43out with good intentions are themselves
20:46corrupted and I may add if they're not
20:48corrupted they're replaced by people
20:50with bad intentions who are more
20:52efficient at getting control of the use
20:54of
20:56force but also
20:59the fundamental reason is more
21:02profound the most harm of all is done
21:07when power is in the hands of people who
21:10are absolutely persuaded of the purity
21:12of their instincts of their and the
21:14purity of their
21:18intentions Thor Roose says that
21:21philanthropy is a much overrated virtue
21:24sincerity is also a much overrated
21:26virtue Heaven preserve us
21:29from the sincere reformer who knows
21:32what's good for you and by by Heaven is
21:34going to make you do it whether you like
21:36it or not that's when you get the
21:38greatest harm done I have no reason to
21:40doubt that lenine was a man whose
21:42intentions were good maybe they weren't
21:45but he was completely persuaded that he
21:48was right and he was willing to use any
21:50Methods at all for the ultimate
21:53good again it's interesting to contrast
21:55the experience of Hitler versus muselin
21:58musolini was much less of a danger to
22:00Human Rights because he was a
22:03hypocrite because he didn't really
22:05believe what he was saying he was just
22:06in there for the game he started out as
22:09a socialist he turned to a fascist he
22:10was willing to be bribed by whoever
22:12would bribe him the
22:13most as a result there were at least
22:16some protections against his arbitrary
22:17rule but
22:19Hitler was a sincere fanatic he believed
22:22in what he was doing and he did far
22:24greater harm or if I may take you onto a
22:27minor key
22:29in which you may not join me I realize
22:31Ralph nater is a modern example of the
22:33same thing I have no doubt that Ralph is
22:36sincere I have no doubt that he means
22:39what he
22:39says but that's why he's so dangerous a
22:42man who is threatening our
22:47[Applause]
22:51freedom in the past in the past few
22:56decades in the past few decades there
22:59has been a great decline in the moral
23:02climate there are few people who doubt
23:05the decline in the moral climate we see
23:08evidences of it here the lack of
23:11Civility in discussions among people the
23:15resort to chance instead of arguments
23:19these are all evidences on one level of
23:22a decline in moral climate but we see it
23:25also in the rising crime statistics in
23:28the lack of respect for property in the
23:30kind of rioting that broke out in New
23:32York After the
23:35Blackout in the problems of maintaining
23:38discipline in elementary schools why why
23:42have we had such a decline in moral
23:45climate I submit to you that a major
23:48factor has because been because of a
23:51change in the
23:53philosophies which have been prominent
23:55in society from a belief in individual
23:58re
23:59responsibility to a supposed belief in
24:01social
24:02responsibility from a tendency to get
24:04away from the individual from his
24:06responsibility for his own life and his
24:08own behavior if he doesn't behave
24:11properly that's his responsibility and
24:13he's to be charged with it to a belief
24:16that after all it's society that is
24:19responsible if you adopt the view that
24:21everything belongs to society then it
24:23belongs to
24:24nobody why should I have any respect for
24:26property if it belongs to everybody
24:29if you adopt the view that no man is
24:31responsible for his own behavior because
24:34somehow or other Society is
24:36responsible well then why should he seek
24:39to make his behavior good now of course
24:42don't misunderstand me on a scientific
24:45level it's true that what we are is
24:47affected a great deal by the society in
24:49which we live and grow up of
24:52course all of us are different than we
24:54would have been if we had grown up in a
24:55different Society
24:58so it's not I'm not denying in the
25:01slightest the effect on all of us of the
25:04social institutions within which we
25:06operate both on our values and our
25:08opportunity on our
25:10opportunities but I am only saying that
25:12a set of social
25:15institutions which stresses individual
25:18responsibility which stresses the
25:20responsibility for the of the individual
25:23given the kind of person he is the kind
25:25of society in which he operates to be
25:27responsible for himself
25:30is a kind of a
25:31society which is likely to have a much
25:34higher and more responsible moral
25:36climate then the kind of a society in
25:38which you stress the lack of
25:41responsibility of the individual for
25:43what happens to him let me note the
25:45schizophrenia in the talk about social
25:48responsibility there's always a
25:51tendency to excuse the
25:54people who are harmed by what happens or
25:58the people who are regarded as the
26:02victims there's always a tendency to
26:04excuse them from any responsibility they
26:06didn't riot in Harlem because they had
26:08no control over their emotions because
26:11they were bad people or because they
26:13were irresponsible people no they rioted
26:16because of what Society did to them
26:18that's the argument but nobody ever
26:21turns it around and argues the other way
26:23if the people who
26:25rioted are innocent of guilt because
26:27Society did it to him then aren't the
26:30people who are singled
26:32out as the oppressors also free of
26:36guilt do you hear these see same people
26:39say oh no we mustn't blame those bad
26:41people who trample the poor under their
26:43feet because they're not doing it out of
26:44their own individual will Society is
26:46making them forcing them to do it if
26:50you're going to use the doctrine of
26:51social responsibility you ought to be
26:52even-handed both ways it
26:55excuses both the victim
27:00and the person who is resp who I can't
27:03say responsible because that would be
27:05inconsistent the person who is alleged
27:08to be responsible for the
27:10victimization and similarly you must be
27:12even handed on both sides we must all of
27:15us be individually responsible for what
27:18we do to our fellow men whether that be
27:21harm or
27:26good there's an additional reason why
27:28you've had a decline in the moral
27:30climate you'll pardon me for returning
27:32to my my discipline of Economics but
27:35there's a fundamental economic law which
27:38has never been contradicted to the best
27:40of my knowledge and that is if you pay
27:43more for something there will tend to be
27:45more of that something
27:47available if the amount you're willing
27:49to pay for anything goes up somehow or
27:52other somebody will supply more of that
27:55thing we have made
27:58immoral Behavior far more
28:01profitable we have in the course of the
28:04changes in our
28:06society been establishing greater and
28:10greater incentives on people to behave
28:13in ways that most of us regard as
28:14immoral on each of us separately we've
28:17all been doing
28:18it one of the examples that has always
28:21appealed to me along these lines is the
28:22example of Great Britain not now but in
28:25the 19th century
28:28and 18th
28:30century you know in the 18th century
28:32Britain was regarded as a nation of
28:34Smugglers of law of voiders of people
28:37who broke the
28:38law in the 19th and early 20th century
28:42Britain got the reputation for being the
28:44most law obedient country in the world
28:46an Incorruptible Civil
28:48Service everybody knew about the fact
28:51that you couldn't bribe a civil servant
28:53in Britain the way you could one in say
28:56Italy or New York
29:01how did that come about how did a nation
29:04of Smugglers with no respect for the law
29:07get converted into a nation of people
29:09obedient to the law very simply by a by
29:13by the L aair policy adopted in the 19th
29:15century which eliminated laws to
29:20break if you had complete free trade if
29:23you had complete free trade as you did
29:25after the abolition of the Corn Laws
29:29there was no more smuggling it was a
29:30meaningless term you were free to bring
29:32anything into the country you wanted you
29:33couldn't be a Smuggler it was
29:35impossible if you didn't need a license
29:38to establish a business you didn't need
29:40a license to open up a factory what was
29:42there to bribe a civil servant for the
29:45civil servants became Incorruptible
29:47because there was nothing to bribe them
29:49for now of course these patterns there's
29:52a cultural lag as you have all learned
29:54in your anthropology
29:55courses and these patterns once they
29:58develop last for a while but what has
29:59been happening in Britain in the last 30
30:01and 40 years is Britain has been moving
30:03away from essentially L say far and
30:06toward a much more controlled and
30:07centralized
30:09economy this reputation for law
30:11obedience is disappearing you've had
30:13repeated
30:15scandals about Ministers of the
30:17government about members of parliament
30:19about civil servants who have been bried
30:21about the rise in gang Warfare and the
30:24rest why because you're establishing an
30:27incentive you've got more laws to break
30:29now it's much more
30:31fundamental when the only
30:34laws are those laws which everybody
30:37regards as right and valid they have
30:40great moral Force when you make laws
30:43that people separately do not regard as
30:45right inv valid they lose their moral
30:47force is there anybody in here who has a
30:49moral compunction to
30:51speeding I'm not saying you may not have
30:53a Prudential objection to speeding you
30:56may be afraid you'll get caught but does
30:58it seem to you immoral to speed maybe if
31:01so you're a small minority I have never
31:04yet found anybody who regarded it
31:06immoral as immoral to violate the
31:09foreign exchange regulations of a
31:11foreign
31:13country here are people who would never
31:16dream for a moment of stealing a nickel
31:18from their neighbor who have no
31:20hesitancy on manipulating their income
31:22tax returns so as to reduce their taxes
31:26by thousands
31:29why because the one set of laws have a
31:32moral value that people recognize
31:34independent of the law of the government
31:35having passed these laws the other set
31:38do not appeal to people's moral
31:40instincts so I believe well let me give
31:43you some more examples from the United
31:45States prohibition of liquor which was
31:47attempted as you
31:49know had disastrous effects on the
31:51climate of law obedience and morality
31:53something which had been legal to buy
31:55and drink some alcoholic beverages
31:57became illegal and you converted
31:59law-abiding citizens into boot
32:02Lakers I heard over the 60 Minutes on
32:05program last Sunday night a great story
32:07on butt
32:08legging this has to do with the fact
32:11that the New York state tax on
32:13cigarettes is very much higher than the
32:16tax on cigarettes in the state of South
32:18Carolina so you have people going down
32:20to South Carolina and buying the South
32:23Carolina low taxed cigarettes and
32:26smuggling it into New York State and
32:30forging New York state tax stamps on it
32:33and then selling it to publicly a large
32:36fraction of all cigarettes sold in New
32:38York state are
32:40buttl now there you've provided an
32:42incentive for people to break the law so
32:44they break the law it's like Prohibition
32:46in a different form the obvious answer
32:49is for New York state to lower its taxes
32:52and you will eliminate butt legging
32:53overnight and and be able to take
32:56whatever may be the number of policemen
32:58who are devoted to enforcing that kind
33:00of thing you will be able to take them
33:01and turn them to useful
33:04work I go back however to the to the
33:08essence of capitalism and its relevance
33:11to the question of
33:13humanity as I say the essence of a
33:16capitalist system in its pure form is
33:18that it is a system of cooperation
33:21without compulsion a voluntary exchange
33:24a free
33:25enterprise now I hasten to add
33:28no actual system conforms to that notion
33:31in the actual world you're always
33:33dealing with approximations with more or
33:36less in the actual world you always have
33:39impediments and interferences to
33:41voluntary
33:42exchange but the essential character of
33:45a capitalist system is that it relies on
33:49voluntary exchange and you're agreeing
33:51with me that you will buy something from
33:54me if I will pay you a certain amount
33:56for it the ESS IAL notion is that both
33:59parties to The Exchange must benefit
34:02this was a great vision of Adam Smith in
34:04his Wealth of Nations that individuals
34:07each separately pursuing their own
34:09self-interest could promote the social
34:12interest because you could get exchange
34:15between people on the basis of mutual
34:18benefit now I want to emphasize to you
34:20here for this purpose that this notion
34:23extends far
34:25beyond economic matters narrow
34:28conceived that's really the main point I
34:30want to get across here and I want to
34:32give you some very different kinds of
34:35examples consider the development of
34:38language the English language there was
34:42never any central government that
34:43dictated the English language that set
34:45up some rules for it there was no
34:47planning board that determined what
34:50words should be nouns and what words
34:52vowels and I mean what words
34:54adjectives language grew through the
34:56free market through voluntary
34:58cooperation I used a word you used a
35:01word if it was mutually advantageous to
35:04us to keep on using that word we keep on
35:05using it language grows it develops it
35:08expands it contracts through the free
35:11market consider the body a common law
35:15not legislated law which is a very
35:16different thing but the body of common
35:19law people voluntarily chose to go to a
35:22court and allow the court to adjudicate
35:24their dispute in the process there are
35:27Rose and developed the body of common
35:29law again no Central plan no Central
35:33coordination you are here in an academic
35:35institution how did scientific knowledge
35:37and understanding arise how do we get
35:39the development of
35:41science is there somehow or other a
35:44government agency that decides what are
35:46the most important problems to be
35:48studied that prevents cooperation
35:50unfortunately there are developing such
35:52agencies but in the history of science
35:54that isn't the way science
35:56developed science developed out of free
35:59market exchange it developed on
36:02occasion with the patronage of an
36:05authority but voluntary cooperation
36:08among the scientists I read voluntarily
36:10the work that is done by economists and
36:12other lands they read my work they take
36:14the parts of it they like they discard
36:16the parts they don't in the process you
36:18build a more and more complicated system
36:20through voluntary free voluntary
36:23exchange based on the principle of
36:25mutual benefit similarly to a free
36:27market and
36:30ideas
36:32again that is a free market of exactly
36:35the same kind of economic market and no
36:37different and the two are very closely
36:39interrelated is it a violation of the
36:42free market in Goods or the free market
36:45in ideas if a country as Great Britain
36:49did immediately after the war has
36:51exchange control under which no citizen
36:54of Britain may buy a foreign book unless
36:57he got authorization from the bank of
36:59England to acquire the foreign currency
37:02is that any restriction on human and
37:04economic freedom or is it a restriction
37:06on ideas on the free market in
37:09ideas I want to give you a final example
37:11which goes back to the fundamental
37:14question we've been raising and that's
37:15voluntary charitable
37:18activity I want you to ask you a
37:20question go back to the 19th century in
37:22the United States it was a period when
37:25you had about the closest to Pro Pro
37:27imation to a capitalist Society you can
37:30imagine in which the federal government
37:33was spending roughly an amount equal to
37:36roughly 3% of the national income almost
37:38entirely on the Army and Navy state and
37:41local governments were spending about 6
37:43or 7% of the national income mostly on
37:46schooling very
37:48little of what has come to be regarded
37:51as welfare activities yet the 19th
37:54century was a period of the greatest
37:56burst of voluntary charitable activity
37:58that we have seen in this country or any
38:00other country at any other time when was
38:03Cornell established how it was
38:06established by the voluntary benefaction
38:08of the man who gave you your name
38:10sometime what was it 1860
38:13something that period of the 19th
38:15century saw the emergence of a host of
38:18private colleges universities throughout
38:21the country my own University of Chicago
38:23was established in 1890 in voluntary by
38:26voluntary El AR activity it was also the
38:29period which saw the growth and
38:31development of the nonprofit charitable
38:34hospital it saw the establishment of
38:37foreign missions of the society for the
38:39prevention of cruelty to animals of the
38:42Boy Scouts you name it there is hardly a
38:45voluntary activity Carnegie libraries
38:48the free public libraries why was it
38:52that voluntary activity flourished
38:55because again the free market voluntary
38:58cooperation among
38:59people cooperating to pursue their
39:02common interest is a far more effective
39:05and efficient way of producing
39:07charitable results than any other known
39:09to man I ask you what is a common
39:13element in all of these cases I've
39:15mentioned language common law scientific
39:19knowledge ideas charitable
39:22activity the development of an elaborate
39:24and complex structure without any
39:27Central planning and without
39:29coercion no Central planning in language
39:32in common law in scientific knowledge in
39:35ideas involuntary activity and yet you
39:38develop complex mechanisms complex
39:41structures with
39:43order with structures which after the
39:45event you can analyze in logical terms
39:48without coercion you have progress
39:52through
39:53Harmony rather than the attempt to
39:56impose progress through
39:59coercion capitalism is often reproached
40:02as being
40:04materialistic it's often reproached as
40:07erecting money as the chief motives but
40:09yet again look at the facts I may say
40:12you know money is not a very Noble
40:14motive but it's cleaner than
40:17most but look at the facts who has
40:20produced The Great achievements of
40:21mankind can you name me a great play
40:24that has been written by a government
40:25committee
40:28can you name me an invention that was
40:30produced by a government
40:32Bureau the great works that are the
40:36great achievements of mankind have all
40:37been the achievements of individuals of
40:40a Shakespeare or a George Bernard Shaw
40:44George Bernard Shaw is a beautiful
40:45example because of course as you know he
40:47wrote the book the famous book The
40:49intelligent woman's guide to
40:51socialism he regarded himself as a
40:54socialist but his career and his Prof
40:57performance is a striking demonstration
41:00of the virtues of the capitalist system
41:01he
41:03opposed
41:05again in science it's Einstein
41:11cernus Galileo who are the great
41:15contributors of scientific ideas not
41:18through government Central organization
41:20but mostly in spite of it in Galileo's
41:23case as you know despite persecution by
41:26the centralized authorities of his time
41:29again in the areas of Charity Florence
41:33Nightingale was not a government civil
41:36servant she was a private individual
41:38human being who was seeking to achieve
41:42the objectives she held dear she was
41:44pursuing her
41:46self-interest the plain fact is that in
41:48any society whatever may be its form of
41:52organization the people who are not
41:54interested in material values are a
41:56small minority
41:58there are no Societies in the world
42:00today that are more
42:01materialistic than the collectivist
42:04societies it's the Russian societies
42:07it's the Chinese societies it's the
42:09Yugoslav societies that put all their
42:11stress on
42:13materialism on achieving economic goals
42:16and 5-year plans that destroy the
42:19non-materialistic achievements of
42:21mankind why because they are in a
42:24possession a position to suppress
42:28minorities what we want for a society
42:30that is at once Humane and gives
42:33opportunity for great human achievements
42:35is in a society in which that small
42:37minority minority of
42:40people who do not have materialistic
42:42objectives who are interested in some of
42:44these other achievements have the
42:45greatest degree of freedom and the only
42:48society that anybody has ever
42:50invented that anybody has ever
42:52discovered that comes close to doing
42:55that is a capitalist Society
42:58when you hear people objecting to the
42:59market or to capitalism and you examine
43:03their objections you will find that most
43:05of those objections are objections to
43:08Freedom itself what most people are
43:11objecting to is that the market gives
43:13people what the people
43:14want instead of what the person talking
43:17thinks the people ought to
43:19want this is true whether you are
43:23talking of the objections of a galb to
43:25the market whether you you are talking
43:27of the objections of a nater to the
43:29market whether you are talking of the
43:31objections of a Marx or an angles or a
43:34lenon to the
43:35market the problem is that in a market
43:39Society in a society in which people are
43:41free to do their own thing in which
43:44people make voluntary deals it's hard to
43:46do
43:48good you got to persuade people and
43:50there's nothing in this world
43:53harder but the important thing is that
43:55in that kind of society it's also hard
43:57to do
43:59harm it's true that if you had a
44:01concentrated power in the hands of an
44:03Angel he might be able to do a lot of
44:06good as he viewed it but one man's good
44:09is another man's bad and the great
44:12virtue of a market capitalist Society is
44:15that it by preventing a concentration of
44:18power it
44:20prevents people from doing the kind of
44:23harm which really concentrated power can
44:25do so that I conclude that capitalism
44:29per se is not Humane or inhumane
44:32socialism per se is not Humane or
44:34inhumane but capitalism tends to give to
44:38give free reign much Freer Reign to the
44:42more Humane values of human beings it
44:45tends to develop a climate which is more
44:48favorable to the development on the one
44:51hand of a higher moral atmosphere of
44:54responsibility and on the other to
44:57Greater achievements in every realm of
44:59human understanding thank you

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