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Key Takeaways
- Laissez faire, the invisible hand, and competition lead to more innovation and efficiency in every aspect of life whereas nationalization and state-run companies lead to bureaucracy and a slow down in innovation. Making the regulatory changes will be difficult to impossible to reverse but if the US wants to stay on top and keep moving forward, it is be necessary.
- Free trade (no tariffs) is in the consumer's best interest
- America is an economic and political miracle arising out of two ideals - Adam Smith's invisible hand and the Declaration of Independence
- Greatest threat to human freedom is concentration of power
- Even if can produce everything more efficiently than another country, it is not in our interest to produce everything. Should focus on what we do best
- Huge difference between equal opportunity and equal outcome. Not everybody will, or should, "finish the race at the same time". Equality of outcome destroys freedom
- Competition is better for the consumer not because of businessmen's altruism but because it is in their self interest
What I got out of it
- Some very powerful arguments which call for fewer government handouts and less economic restrictions. Undoubtedly many of these changes would be very difficult to implement due to governmental gridlock but they should be striven for. I think this book pairs well with Taleb's Antifragile.
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Free to Choose
Intro
- Agricultural revolution was mainly due to private ambitions
- Great Depression was the government's fault as they had mishandled money
- Invisible hand should be used so that people's private ambitions end up helping the public. Public ambitions should not takeaway from private ambitions as now is often the case (welfare)
Chapter 1
- Cooperation rather than coercion and a central figure much more effective in meeting the citizen's demands
- Russia attempts to have a central figure but their extremely inefficient government shows this method's flaws
- Voluntary exchange a necessary precursor to freedom and prosperity but does not guarantee it
- Wealth of nations a key point - in a voluntary exchange system, both parties will not participate unless they feel they will both be better off
- Prices transmit large amounts of information such as supply and demand and provide an incentive to act on that information
- Whenever everyone owns something then nobody has an incentive to take care of it or improve it
- Sovereign has only 3 duties - protecting society from violence or invasion of other societies (army), protecting individual members from other individual members (police), erect and maintain certain public institutions (Adam smith meant this quite narrowly but it has grown - highways, pollution) and should help rule out much government intervention
Chapter 2
- Hong Kong has nearly zero government intervention and is one of the most prosperous countries in the whole world. Government handles Adam Smith's 3 duties and that's about it. US and UK are other very good examples. Voluntary cooperation lead to the largest charitable contributions of all time
- Interest of everyone to buy from those who can sell it cheapest
- Argues against tariffs and says free trade should be implemented everywhere. Steel industry in US would be just fine even without tariffs
- Creation of jobs is not a desirable end. Productive jobs necessary
- Idea of exports good and imports bad is wrong too - exports are the price we pay to get imports
Chapter 3
- Do not need to protect dollar and exchange rates either. Weak dollar a big deal because from beginning foreign exchange (FX) rates have been determined by governments. If simply let natural forces take over there would be more but smaller corrections as opposed to outright FX crises
- 4 possible arguments for tariffs - national security, infant industry argument (a budding industry needs help initially and once established is fine), protection from other countries (namely OPEC but likely to illicit retaliation from said countries), free trade good only if all countries practice but Friedman says this a poor argument
- Should move slowly but surely to free trade
- From Waterloo to WWI was one of the most peaceful times in US history and there was essentially free trade and no passports
- Where state takes central role in planning, it's ordinary citizens have a low standard of living. Great example is East vs West Germany
- Japan and India were in very similar positions at one point in time but Japan took off whereas India lagged behind because they based their country around central economic planning as opposed to free trade.
Chapter 4
- Great Depression occurred because government failed their responsibility to oversee the coining of money and managing money and FX
- Before WWI and at the early stages of the federal reserve system, Britain was the financial capital of the world and we were on a gold standard but just as well could have been a sterling standard. Fed meant to help avoid panics and protect people but it ended up having a much bigger role and often shaping global events
- After war there was a lot of inflation and a short but brief depression from 1920-1921
- Great Depression - October 24, 1929. In 1933 economy was 1/6 what it was in 1929. Run on banks intensified the depression and especially after bank of US failed
- Hoover was lame duck before FDR took office and neither really wanted to take steps as they were both not really in power and didn't want to be responsible
- Depression started in US and spread to rest of world - no outflow of gold from us to other countries
- 1932 was a change in trend in politics - democrats began winning most of the elections and roles in government. Federal spending has increased substantially (~ 10x)
Chapter 5
- New Deal enacted by FDR to ease Great Depression
- WWII boosted New Deal too by boosting government's budget
- Idea that nationalization increases efficiency has widely disappeared
- Welfare has hurt public housing, education, health care negative income tax proposed instead but sea impossible to implement in today's world
- Britain and Sweden best examples of welfare states but they have been experiencing high inflation and unemployment recently
- New York is the biggest welfare state - spending more than double of Chicago
- Social security is a transfer from young to old and from worse off to better off (as poor tend to have to work more years and then would thusly receive pension for fewer years)
- Public housing is a breeding ground for violence as a huge percentage of the people living there are from broken families
- Negative income tax - people below a certain income level receive subsidies from the government instead of paying it taxes
Chapter 6
- Spending on healthcare and education sky rocketing but quality actually down
- Free market system and care for the poor are by no means mutually exclusive. Philanthropy reached it's peak with the Rockefellers and Carnegies and other robber barons
- Adam Smith thought it was an innate human drive for all people to want to work hard and better their condition. Not necessarily materially though
- Schools were set up immediately by the puritans upon colonizing America. Parents have recently lost their power to choose the type of education their children need and this has gone to a central power.
- When written, UCLA undergrad only graduated 50% of its students and this was one of the best state schools! Their focus more on grad school since that is where the money is
Chapter 7
- Drug and medicine production and innovation has lagged due to extremely lengthy FDA process and the expense to create a new drug
- Labor unions unnecessary and actually hurt workers and economy
- Considers minimum wage laws one of the most anti black laws out there because it keeps so many black teenagers out of a job
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