Capitalism and Freedom

One of my favorite books of all time is Capitalism and Freedom by the famous Milton Friedman. I think that Milton Friedman is familiar to most outside of economics. If not, I'll fill you in. Milton Friedman is widely considered one of the greatest economic minds of our century. He taught for many years at University of Chicago, and I think even today their economics program is closely associated with his dedication to free-markets.

Capitalism and Freedom is a small book consisting of several essays about different governmental and public policy issues. The essays can be read separately and out of order, or you can approach the book as one complete whole. I have seen essays from the book republished as individual works. The essays examine some of the problems and inefficiencies of private and public entities, and then propose market-based solutions. For example, Friedman advocates removing barriers to entry such as professional licenses. He argues that these licenses act only to give those in the field higher salaries to the detriment of the consumer. These professionals insist on laws requiring a license by telling lawmakers it would be dangerous to the consumer to allow untrained and inexperienced outsiders into their field. What these professionals really want to do is keep their services in high demand so the consumer is limited in their ability to shop around for a good price. Friedman claims that by eliminating these licenses, there will be differentiation in salaries that will allow the consumer to get what they pay for.

So what would happen if we completely dismantled the law license requirements? No more standardized law schools, no more state licensing requirements, and no more bar exam. Would this really be so bad? Attorneys will tell you that lives will be damaged as untrained charlatans with no legal credentials dupe unsuspecting clients into their office. This would probably be true at the very beginning. Eventually, word of mouth and trial and error would separate the good from the bad. The cream would rise to the top, and the fakers would be pushed out of the business. All of the sudden, people would judge attorneys by their merit not by their degree. Law schools would still exist because they would produce good lawyers, not because it is the only way to get a law license. Legal geniuses could skip that step and go right into practice. Isn't it somewhat patronizing that government assumes no one would be able to figure this out? Lawmakers, trying to protect the consumer, actually may do more harm than good. The best part of a merit-based system is that the consumer could pick the level of attorney that they need. For smaller needs you would have the option of hiring a less experienced and lower paid attorney.

There already is price differentiation among attorneys. Most of us would select an attorney based on merit as it is. The point is that attorney fees would fall on average because law licensed individuals would no longer have a stranglehold on the legal services market. The same logic would apply to plumbers, taxi drivers, real estate agents, and the medical field. Friedman specifically attacks medical licenses and the American Medical Association in his book. The point is that a free market system should allow for free exchange between individuals. Whenever two individuals would like to exchange in a voluntary transaction, government should not interfere (assuming both sides have good information). Most things that restrain free exchange end up being detrimental to society as a whole. Free markets go hand in hand with personal freedom and liberty. These thoughts came out of the current financial situation, but I'll have to take that up later.