The following is a series of questions and responses based on the Free or Equal documentary on Free to Choose, a network dedicated to providing information on economics. In Free or Equal, Swedish author, commentator and Cato Senior Fellow Johan Norberg takes us through some of Milton Friedman’s economic theories by showing us some of the places that inspired his ideas.
Before this assignment, I knew nothing about Hong Kong’s incredible rise from the slums to one of the most productive economies in the world. Along with many others, Free or Equal gives Hong Kong’s history as proof that a free market economy is the fastest way to lower poverty and higher standards of living. It’s interesting to compare very regulated economies to those with few regulations. I am reminded of our own economy and its apparent turn towards a more regulatory government.
While I admit I’m not generally in favor of fill in the blank assignments, this one did force me to listen to every word in hopes that I didn’t miss something from the questions. This in turn made me think critically about the information that was pouring through my screen. Is is true? Was Estonia’s modern economy founded on principles applied after their leader read Milton Friedman’s book? Does this offer substantive proof that they work? In my experience, people say a lot of things but the proof is in the pudding. What happens as information is applied? Does it work or does it not? In this case, I have to lean towards yes; it does work and the proof is in all those countries that gave trial to Friedman’s ideas. You really cannot have freedom and equality of outcome. Please, read on to explore this concept further.
Free or Equal Questions
While watching Free or Equal, complete the following statements for questions 1-9. Use the precise language from the video. Question 10 asks you to analyze a proposal and provide your unique perspective.
1. Professor Milton Friedman’s research led him to believe in the power______of and______.
- free markets
- economic freedom
2. If the government gives everybody the same freedom to work . . . some will do better than others. The result will be ____ , but not ____ .
- equality of opportunity
- equality of outcome
3. After World War II, Hong Kong became a refugee camp with millions of extremely poor people. Hong Kong had no _______, no _____________ and little _______________________. But almost by accident it was given ____________________________. . . . As a result, Hong Kong became an ___________________.
- prospects
- natural resources
- land that could be cultivated
- economic freedom
- economic powerhouse
4. In the small Baltic country of _________, Prime Minister Mart Laar took his inspiration from Professor Friedman’s book Free To Choose. What three things did he do to imitate the Hong Kong model?
- Estonia
- Zero tariffs
- Flat taxes
- Minimum (economic) regulation
5. Adam Smith’s concept of the “invisible hand” was illustrated in the example of buying a tomato. The following 3 points were made:
We vote with our ____________.
Every purchase ______________ .
To make your life better, you have to ____________________.
- pocketbooks
- send a message
- better the lives of others.
6. Economists call the constant renewal of the economy _______________. To increase our wealth and opportunities, we have to stop doing old things in __________ and start doing innovative things in ___________.
- creative destruction
- old ways
- better ways.
7. Swedish entrepreneurs are the ________ in the world. Young Swedes and entrepreneurial immigrants have moved from Sweden to Britain and the U.S. because the ______ are much greater there, where ______ are lower.
- oldest
- rewards
- taxes
8. The Founding Fathers had learned the lesson of history. The great danger to freedom is the ___________________, especially in the hands of a ________________.
- concentration of power
- government.
9. As Milton Friedman said, “The society that puts equality before freedom will _________________________. The society that puts freedom before equality will end up with a __________________________________.”
- end up with neither.
- great measure of both.
10. Short answer
Professor Friedman compares the concept of “equality of opportunity” to a race where everyone begins at the starting line at the same time. In contrast, “equality of outcome” guarantees that everyone finishes at the same time. Today, “equality of outcome” is referred to as “fair shares for all.”
If we applied the “fair shares for all” concept in this class, all students would receive an average grade of “C.” This would be accomplished by taking points away from students earning A’s and B’s to give to students earning D’s and E’s. Distributing points equally would result in “fair grades for all.”
Would you approve of this method in calculating your final grade? Why or why not?
How would this differ from “fair shares for all” economically?
For example, what’s the difference between a successful student being required to give up some of his/her hard-earned grade and a successful person being expected to give more of his/her hard-earned income? If you support “redistribution of income and wealth,” shouldn’t you also be willing to redistribute academic grades? After all, many of your fellow students may not have had the advantages in education and upbringing that you’ve had.
Address the above questions in your own words, in a minimum of 3 paragraphs.
I would not approve of a “redistribution” method of grading. It doesn’t make sense, just like redistribution of wealth makes no sense. Money is a commodity. If someone were to take a farmer’s harvest, split it up ten ways and give it to other farmers who didn’t do well, the harvest’s value would be lost and the farmer would not reap the reward of his effort. The first farmer whose heart and soul went into producing a crop to sell and make money to put towards his family and farm for clothes, new tools and food on the table, is now making less. Maybe he’s still doing okay financially, but he’s a producer and now his producing power has been limited by people who were not able to produce. Maybe they didn’t produce because they weren’t worried about the consequences. Maybe those farmers knew in the end, even if they didn’t fertilize this time or water another time that they would still get a little something even if their money died in the hole they buried it in. That’s as good as burying dollar bills for the worms to eat.
Think about it, when somebody makes an effort to get a good grade that effort shows through their GPA and college transcripts. A future employer would see that hard work reflected in grades and potentially reward that applicant with a good job and steady income. People do what they have always done. If they’ve worked hard and received good grades they’re more than likely going to do the same in employment. This now producing member of society is going to be very productive and add a great deal of value to the company.
If grades were redistributed however, a poor student may suddenly be able to get a job he or she really doesn’t qualify for. From the employers point of view, the grades various applicants got in school are no indication of who was a producer and who was a leech. If no other screening methods are used, the employer would more than likely get someone with a history of mediocre performance who will add little value to the company. The company is now less productive, does fewer tasks in less efficient ways, and it’s competitive edge will be blunted. Prices go up, quality goes down, and everything slowly blends into a foggy pea soup of mediocrity.
Redistribution, or “safety net” schemes limit the impact of failure, one of humanity’s greatest fears. A lack of consequences for one’s actions, be it moral, physical, or financial, cause people not worry about what might happen if they don’t try hard enough; someone will always be there to catch them. A “fair shares for all” economy, like a “fair shares for all” grading system would mean stagnation and putrefaction. Why work hard when my government check will keep me well fed and entertained? Why try when someone will earn my grade for me?
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