In Memoriam: Interview With Milton Friedman

On March 21, 2006, Milton Friedman spoke with the national reporter of The New York Sun, Josh Gerstein. The following are excerpts from that interview:

On whether his economic theories helped trigger the downfall of the Soviet Union and economic transformations across the globe.

Friedman: If I look around the world, the major change that occurred was not due to me, not due to thinkers or intellectuals. It was due to such events as the collapse of the Soviet Union and the change in China. Those are the really important events that have changed things. They are supported backed up by what people like myself, we do. What we do keeps ideas open until the time comes when they can be accepted….I hope what I wrote contributed to that but it was not the moving force.

On the area where his views had the greatest impact

Friedman: Monetary policy has vastly improved over the last 20 years…I think I did play a considerable role in bringing that about.

On the size of American government

Friedman: Government today controls something like 40% of the resources of the country. A decent government controls like 10% or 15%. The virtue is that government is so inefficient, it waste great bulk of those resources. If it used those resources efficiently, it could do great damage.

On public schools

Friedman: I have found no reason whatsoever for having a public school system. You would have a better educational system—elementary and secondary system, if the government were not involved.

On whether terrorists defy the notion of rational actors

Friedman: Unfortunately, they are rational actors but they are rational in respect to objectives that we do not regard as valid objectives. They are using reasonable reflectiveness….After all, the operation on the towers on 9/11 was a brilliant operation. Its hard to understand how people behave that way but you have to given them credit for conceiving an ingenious policy.

On the securities law passed in 2002, known as Sarbanes-Oxley, which imposed stricter accounting and reporting standards

Friedman: Sarbanes-Oxley is terrible. It ought to be eliminated. It's costing the country a great deal. It's holding back innovation and development….It goes too far. It does exactly the wrong thing. Sarbanes-Oxley says to every entrepreneur, "For God's sake, don't innovate. Don't take chances because down will come the hatchet. We're going to your head off." We want a risk-taking society, not a society afraid of taking risk.

On the flap over a Dubai-owned firm operating American ports

Friedman: It's absurd, absolutely absurd….It's a strictly protectionist reaction. If you eliminate all transactions with foreign entities, we would have cut our standard of living more than in half.

On the trade deficit

Friedman: I don't believe it exists. I believe that's a statistical artifact….The income accounts, as reported, they make no sense at all….We underestimate the income that we get from abroad. Its understandable that people hold assets in untied state as a political safe haven. Such assets pay lower rates of return. We invest abroad our assets on a risk seeking basis and get higher returns. Not all those returns are reported. I wouldn't be concerned about it whatsoever.

On the Republican Party and the Bush Administration

Friedman: I think it's really disgraceful that the Republican Party, which preaches holding down the size of government, should have been, and the Bush administration should have been, such a big spender.

Please see the Sun's special section, Remembering Milton Friedman.