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The New-Old Threat to Economic Freedom

With politicians proposing policies that would vastly expand the size of the government and its involvement in the economy, it is clear that too many Americans have forgotten the lessons of the twentieth century. As Friedrich Hayek and Milton Friedman pointed out long ago, deviating from market principles is a recipe for disaster.

STANFORD – In our new book, Choose Economic Freedom, George P. Shultz and I point to clear historical evidence – and words of wisdom from Nobel laureate economist Milton Friedman – to show why good economics leads to good policy and good outcomes, while bad economics leads to bad policy and bad outcomes. But we also recognize that achieving economic freedom is difficult: one always must watch for new obstacles. 

Many such obstacles are simply arguments rejecting the ideas that underpin economic freedom – the rule of law, predictable policies, reliance on markets, attention to incentives, and limitations on government. If an idea appears not to work, it must be replaced. Thus, it is argued that the rule of law should be replaced by arbitrary government actions, that policy predictability is overrated, that administrative decrees can replace market prices, that incentives don’t really matter, and that government does not need to be restrained.

These obstacles were common in the 1950s and 1960s, when socialism was creeping up everywhere. Many tried to stop the trend, and many were successful. But the same obstacles are now reappearing. For example, there are renewed calls for such things as occupational licensing, restrictions on wage and price setting, or government interventions in both domestic and international trade and finance.

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