what is your opinion of investigative reporting and the subject going forward is going to become prayer and rarer. >> a couple questions there. let me start with wikileaks. if you divorce wikileaks, i can more easily talk about it. he is very anti-american and so, let's put that aside for a minute. ..

use of technology is stringing along at its own course and is creating a flood of leaks, sometimes of classified information. i will just give you one example. i visited a company called subversive for the conclusion of the book is and traverse a has clients, big corporations, big law firms, big medical companies who believe for some reason their proprietary information is out there on the web, maybe someone brought some work home and it got out there. so they are hired to go look for it and retrieve it and as they do that they have stumbled upon reams and reams of classified information, including one example of the blueprints for marine one, the helicopter that the president flies in. they always tell the government will what they called the dolphins in the tuna net. it's out there because kids, your sons and daughters, have

downloaded filesharing software, which means software where they can share music with their friends. when you download that, it's like opening the front door of your house. anyone can come into your computer if you are hooked up on a network and go into any file on your computer and take it and there are people with nothing better to do apparently, who spend their entire day looking around computers for sensitive information and the types of classified information out there is astonishing. and the government knows this, and they also know that they cannot plug those leaks. it is a generational thing. the people in charge of agencies are of a generation where yeah they can learn how to use the new technology, but they don't feel it in their bones like younger people do. and this has resulted -- and that is really why wikileaks

wikileaks happened. the state department wasn't looking -- it wasn't doing a simple thing. it was in seeing who could come onto its server and pull out stuff. a don't give you lots of excuses for why was doing it but i think it was because they didn't understand how it works. sewed the march of technology is undermining the governments efforts to keep secrets. you might say, well this balances out but not really, because the government is still acting that it can keep secrets it is really undermining his own efforts to keep it safe because it done than -- doesn't understand so much is leaking out including into the hands of people who shouldn't have it. >> i came in on the tail end of your conversations have you covered this in the beginning, please let me know. >> where were you? >> you don't really want to know. it's a secret. [laughter] [applause]

you make a very compelling case for government waste and ineptitude, and can you imagine, i realized the government bureaucracy is self-perpetuating but could you imagine today when there could be a national conversation on this issue going around to people? you are not sensing a critical mass of people in the intelligence community for example who may be against the way the policy is working but can you imagine the day when this could become a mainstream political issue where we actually look at the policy and say is there a more effective and efficient means to a competent safety of our nation? >> well, i'm monogamous. yes, i can. that is one reason i wrote the book. you just turn your back and let it keep going like this? i think the budget crisis is going to be one of those moments where potentially we are going to have that conversation. i think the conversation though does have to start with the detail of the threat, because

when the threat is laid out there, i think the only time when people can have a sense of what is right, what is the right way to respond to it or how big is it and how should we respond to it and is it going to be safe to cut back in certain areas? but i also think in conversation like that will inevitably point back to ourselves and to say, are we going to hold the governments to zero tolerance? are they going to be responsible for every nut ball who has some explosives? timothy j. types, people who throughout our history have done crazy things, terrible things. are we going to hold them responsible for every single individual? we don't know that -- don't do that for drugs. we have passed laws for all sorts of things but for some reason on terrorism, you know we aren't as sophisticated yet. and i think you know, including

the media. we make a big deal out of everything, and i think an honest conversation has to include our own understanding of what the government can do and can't do. so i would say writing this book was the first -- to try to get that out there in the budget crisis would push that along as well. thank you. >> if you have more questions or you want to continue the conversation with dana, she is going to be in the tent signing books. [applause] [inaudible conversations]

>> of course i was dana priest of "the washington post" talking about her new book, top-secret america. and that will conclude our coverage today from austin. now we will be live again tomorrow, all day long. you can go to booktv.org and get the complete schedule, but just to let you know there will be panels on mexican drug cartels, the arab spring and gun rights. that is part of our coverage, the 16th annual texas book festival. we will see you tomorrow. everything re-airs tonight at midnight. >> now on booktv, encore booknotes. milton friedman sat down in 1994 to discuss f.a. hayek's "the road to serfdom." mr. friedman who wrote the introduction to the 50th anniversary edition of the book describes its impact on the ever-changing political and social --duio

c-span: dr. milton friedman, why did you choose or why did they ask you to write the introduction to the f. a. hayeko "road to freedom" 50th anniversary...ed >> guest: "road to serfdom". c-span: yes, that's your title on your book. why did you do it? >> guest: the reason they askede me was very clear, because hayek and i had been associated for a very long time, in particular in an organization called the montbelleron society that he founded. the charter meeting was in 1947 in switzerland. hans morgenthau, who was a professor at the university of chicago when i was there, a political scientist, when i cam back from the meeting, he asked me where i had been, and i told him that i had been to a meeting that had been called by hayek tt try to bring together the b believers in a free, openh n

society and enable them to have some interchange, one with another. he said, "oh, a meeting of the veterans of the wars of the 19th century!" i thought that was a wonderful description of the montbelleron the 19oughs vetes well, hayek and i workedt tdes together in the montbelleron society and we were fosteringget atsentially the same set ofhe ideas. set of ideas. his book, "road to serfdom," that was publiced 50 years ago, was really an amazing event when it came out. it is very hard to remember now what the attitude was in 1944, 1945. and throughout the western world, the movement was towards centralization, planning, government patrol. that movement started before world war ii. it started with the fagian society in the late 19th century, george bernard shaw, the webbs, and so son.

the fact in war you have to have an amount of government control. it strengthened the idea that after the war, what you needed was to have a rational planned, organized, centralized society, and you had to get rid of the wastes of competition. that was the atmosphere. there was those of us who didn't agree, who believeed in what we would call a liberal society, a free society, a 19th century liberalism there were quite a number of us in the united states and in britain. in the rest of the world, there were very isolated indeed. and hayek's idea was to bring them together and enable them to get comfort and encouragement from one another without having to look around to see who was trying to stab them in the back. and that was the situation in their home countries. host: i first saw this, "the new york times" put on the

piece page, your introduction to this edition. do you know why they did that? what got their attention? guest:, well, i can't answer that you have to ask the people they "new york times." on the whole they have not been very favorable to these ideas, quite the contrary. but they have been changing. and about oh, two or three years ago they publiced -- they turned down many an opp ed piece from me. a couple of years ago they publiced a piece from me about the situation after the fall of the berlin wall, in which my thesis was a simple one. everybody grease, as a result of the experience in the west that associationism is a failure. everybody grease that capitalism has been a succeed. that wherever you have had an improvement in the conditions

of the ordinary people over any lengthy time, it has been in the capitalist society. yet, everybody is extended socialism. after the fall of the berlin walls there were no summits about how we cut down government. the lesson from the wall of the berlin wall is that we have too extensive a government and we ought to cut it down. and everybody degrees. but yet, wherever you -- everybody grease. wherever you go you have to extend socialism. it is the summit was how government can get more revenue in order for them to be more important, which is exactly the opposite. so socialism is the way of -- it guides our behavior in strict contrast to what we believe to be the facts of the world. host: let me ask you this.

a while back, hayek, who was he? guest: he was an economist important in vienna. he started his profentional with a rear in vienna in the mid 1920's. the late 1920's. and people in britain at the london school of economics were impressed with the book he had written and with the work that he had done, and they invited him to come to the london school. and at a relatively young age he was a professionor at the london school of economics. he spent the 1930's and most of the 1940's there. early in the 1950's, he left london and came to the university of chicago where he was a professor for about 10 years. and then he went back to germany, indeed. he essentially retired in grm

knee. host: how long has he been dead? guest: he has been dead about two years now. he lived to be 90. and he has published an enormous, there is an enormous list of books and articles and son on that he has public. the "road to serfdom," the one we are shoring here, was sort of a man festio and a call to arms to prevent the accumulation of a totalitarian state. to point out, one of the interesting things about the book, is whom it is dedicated to. it is dedicated to the socialists of all parties. because the thesis of the book is that socialism is paving the way toward totalitarianism. and that socialist russia at the time, is not different from nazi germany. and indeed, it was national

socialism. that is where in addition zi comes from. this is kind of a manfestio and had an unexpected effect. it was turned by several publishers in the united states before the university of chicago published it. both the britain and the united states it created a sensation. it was a best-seller. the reader die guest publiced a condensation tv and distributed 600,000 copies. it was -- you had a big argument raging about people who were damning it as reaction err against all of the good things of the world. and people who were praising it and showing what the real status was. it's a book well worth read buying anybody. it has a very subpoenale analysis of why -- how it is that well-meaning people who intend to only improve the lot

of their fellows favor courses of action that have exactly the opposite effect. i think in my -- from my point of view the most interesting chapter in the book is one labeled why the worst rise to the top. it shows -- it is in the way, another example of the famous statement of lord acton that -- power corrupts. host: the reason i ask, he was coated several times in the book. guest: he was a great defender of the free society. the way the worst rise to the top, is if you are given power and you have to exercise it you are driven by the necessary to it do things, and many people would really object to doing

those things. only those willing to behave in a public capacity, differently than they behave in their private capacity, will every make it to the top. host: who is lord acton? guest: an english catholic who was a great historian. i forgot the title of his -- he was a professor at oxford. he wrote a history of liberty, which was very famous and very important. he also was very much involved, this has nothing to do with this, in the dispute in the catholic church about the infal built of the pope. there was -- what do they call it when they call one of these -- host: cyclical? guest: a meeting that establish as policy. host: like vatican two. guest: one of those at the end of the 19th century they

declared the doctrine of the falability of the pope. he fought against that he did not believe that you should declare any man to be that way. host: why is it so many conservatives today, authors and we have had them on the show, cite you, but also cite hayek? guest: as i said in the introduction, over the years i asked people, who had shifted from a belief in central government and social and i what today goes by the name of liberalism what led them to shift? what led them to an understanding that was the wrong road? and over and over again, the answer has been the "road to serfdom." host: you wrote an introduction in 1971? guest: i wrote an introduce 25 years ago, the 25th anniversary. and my introduction here is primarily the same one. now as

it was then. the really troublesome thing is what i mentioned earlier. everybody is persuaded that socialism is is a failure. and yet, in practice we keep moving down the socialist road. when hyatt's book was published in 1944, let's take, not 1944, but take 1946, or 1950, just after the end of the war, government was much smaller in the united states than it is today. if i remember the numbers, government spending at all levels, federal, state and lofle was about -- local was about 25% of the national income. today it's about 45%. and that doesn't allow for the effect, not of spending, but of regulations. the clean air act, the aid to disabilities act and so on. so that in fact, we're more than half socialist today. that is, more than half of the total output of the country is

being distributed in a way that is determined by the government. that's a regulations which determine, we pride ourselves on being a free society and having a great deal of liberty. we do, compared to many countries of the world. but just consider the limitations on our freedom. you can't choose what profession to go to. you can't become a lawyer just because you can't to become a lawyer. you have to get approval from the government, you have to get a license. it's true for beauticians, it's true for columners, it's true in new york city, for taxi cabs and most big cities. there are enormous limitations on what we can do. and this goes much beyond the direct economics here. consider the question of freedom of speech. during the 1950's, 1960's and so

on, 1970's, when there was a big problem of inflation, the government was making a big push about selling savings bonds. they were a gyp. that was -- it was really a, the amount you paid for the savings bond, you would never get back in purchasing power. you held a savings bond for 25 years, at the end of the time, when you turned it in, and including, not only was the purchasing power because of inflation, less than it had been. but to add insult to injury, you had to pay a tax on the so-called income from it. and at the same time, leading bankers would join in advertisements in the newspapers, telling everybody to buy savings bonds. and i went around and asked bank presidents that i knew, why they did that. i asked them first, do you buy

savings bonds for yourself? oh, no. is it a good investment? no. why do you tell the public it is? because the treasury wouldn't like it if we didn't. they're not free to speak. do you suppose -- well, i know from experience i happen to be opposed to 10-year -- tenure in universities. how many academics -- the only academics who are free to speak that way, are people that have permanent tenure and are on the verge of retirement. if you look at it from that point of view, there are enormous restrictions on what we can do and say. all imposed by the government. and that doesn't count the loss of freedom. from the fact that they take money away, from hard-working productive people who are producing this national income. and give it to people who are out of work, who are on welfare,

or in prison for that matter. it doesn't include the corruption in our personal property rights. it arises through the attempt to prohibit drugs. which has led to tremendous invasions on our liberty. you can have a drug enforcement person come to your door and knock on you because some unknown person has said you're dealing with drugs. and there are many, absolutely heart-breaking cases of innocent people whose rights have been violated in this way. whose property han taken away. and who has been unable to regain it. i was -- i'm a very old man. and i was graduated from high school in 1928, that's a long time ago. now, if you look at the situation in 1928, we were much

poorer in terms of physical goods. we didn't have a microwave, we didn't have a wash machine, you can go down the line. there's no question that we're enormously wealthier today in that sense. and enormously, had a higher standard of living from that point of view. on the other hand, we were safer, more secure, freer in 1928 than we are now. as of that time, government was spending something like 10 to 15% of the national income. the private sector, 85 to 90. today, government controls over half the national income. and private enterprise controls only the rest. where have all of these good things come from? can you name any of those additions to our well-being that have come from government?

it wasn't government that -- that produced the microwave. it wasn't government that produced the improved automobiles. it wasn't government that produced computers and the led to the formation of, information age. on the other hand, consider our problems. our major problems are not economic. our major problems are social. our major problems are -- welfare, the underclass in the center cities. the development of crime so that today we're much less safe than we were when i graduated high school. we have much less feeling of security. much less optimism about what the future is going to be like. and all of the problems have been produced by government. consider the schools. the quality of schooling i got in the public high school, in 19 28, was almost surely a great

deal higher than you can get in any but a small number of schools now. you have the dropouts. you have the -- decline in scores on s.a.t. and the like. why? because education the most socialized industry in the united states. 90% of our kids are in public schools. 10% in private. and education is a completely centralized, socialized system. and it behaves just the way every other socialized system does. it produce as low-quality output. benefits a small number of people. currently, mostly those who are associated with the national education association, the american federation of teachers. and it does a great deal of harm for a lot of people. >> i'd like to ask you about your own beginning. where were you born? >> i was born in brooklyn. but i had sense enough to move out when i was 13 months old.

>> what did your parents do then? >> my parents moved to new jersey. and they were small-scale businessmen. who never had an income by today's standard would have exceeded the poverty standard. and they moved to new jersey where they at first had a small textile factory. and that wasn't very successful. so they opened a small retail store. and this was the source of their income. >> what influence did they have on what you decided to do for college? >> very little. except for the fact that they encouraged me to want to go to college. now, as it happened, my father died before i had graduated from high school. i had three sisters, and myself. i was the youngest. and i was the only one of the four who went to college. >> where did you go? >> rutgers university. >> state school? >> no, at that time it was not. rutgers is a very old institution that was established before the revolution.

by the dutch reformed church. and at the time i went to it, it was predominantly, it was entirely a private school. only subsequently was it converted into a multistate, one of the megastate universities. however, i was able to go to it, because of an action of the state. the state of new jersey at that time offered a scholarships on a competitive base base, basis, in a series of examines. and the people who competed in the exams and who could demonstrate financial he'd, received free tuition at rutgers. and it was because of that that i was able to go to rutgers. now, the tragedy, at the time that was a very valuable thing. the tragedy is that rutgers has, the state of new jersey in their new incarnation now has a similar program.

but the qualification for getting a scholarship is below-average academic quality. it's a program to raise the, the lesser-qualified. so we've gone and they've gone, it typifies what's happened in our society. instead of emphasizing strengthening the tubtsetuents open to the able, we've tended increasingly to shift into a -- opportunities open to the able, we've tended increase lig to shift to a state of the victims, in which the emphasis is on raising the people at the bottom. now, no social progress has ever come from the bottom up. it's always come from the top, small number. pulling up, the society as a whole. >> when did you first get into economics? >> i went to rutgers. and i did a joint major at the

time in economics and mathematics. >> why did you pick it, do you remember? >> no. i liked mathematics. and i was good at mathematics. and i wanted to be able to earn an income. i may say, i -- worked my way through school of course, i earned my own income. and i wanted to be able to earn income. and as an innocent youth, the only thing i knew, only way i knew that you could use mathematics to earn an income was an actuarial work for insurance companies. how i got into economics, i don't know. but somehow or otherdy get into economics. by i time i graduated in 1932, the situation was very different. we in in the midst of the worst depression we've ever had. the major problems of the country were economic. and it's natural that i would have been interested. as it happened, i was very lucky. when i graduated in 1932, i was able to get the offer of two scholarships, tuition

scholarships. one from brown university in applied mathematics. and one from the university of chicago in economics. and it's easy to know why i took the economics at that time. >> i got a couple of your books, how many have you written, by the way? >> oh, i don't know. 15. >> the bestseller? >> the bestseller is undoubtedly that one, "free to choose." which was written by myself and my wife. it was based on the tv program of the same title. it was a 10-part tv program that was shown in 1980. on pbs. and in reverse of the usual procedure, the tv program wasn't based on the book, the book was based on the tv program. because i insisted that i was not going to talk to a written script for the tv program. but i was just going to talk. and from the transcript of the

tv program, we developed the book. and it's undoubtedly the bestseller. although the other one you have there, "capitalism and freedom," this is a very interesting contrast. that book was published in 1963. at the time it was published, it was so out of favor, so much outside the atmosphere, intellectual atmosphere at the time, that it was not reviewed in any major paper or magazine. other than the economist of london. it was not reviewed by "the new york times," by the "herald tribune" "time," "newsweek," none of them reviewed it. and yet, over the subsequent 30 years, it sold something like half a million copies. >> the tie you have on -- >> that's adam smith tie. >> adam smith comes up in all your books. >> adam smith was a founder of

modern economics. >> when did he live? >> in the 18th century. a book, adam smith's great books, the wealth of nations, was published in 1976, the same year as the declaration of independence. >> when did you first read it? >> in college, as an undergraduate. >> and -- is he the guy that's most important in your education? >> well, that's very hard to say. he certainly played, had a major influence on all of us. but after all, i think the influence, when you get an education comes from people who are living people, not from books. books influence you. there's no doubt about it. they make a great difference. but the person who is probably most important in my education,

there are several. one is arthur burns, who was subsequently chairman of the federal reserve system and so on. he was, he was my -- he was at rutgers and he taught me as a an undergraduate. and he was really, was my mentor for a large part of my professional career. i owe a great deal to arthur. but then i went to the university of chicago, and there was a group of teachers at the university of chicago, jacob viner, frank knight, henry simons who played a major influence in shaping my views and attitudes. >> when did you think you had enough independent thoughts to start writing books like "free to choose." and "capitalism?" >> that was very late. prior to that, my writings were scientific. these books give a misleading impression of my publications. most of my publications are

technical, scientific, economic publications. which really don't have any great interest to the public at large. that's the bestseller, "free to choose." but there's no question that the most influential book i've written is not "free to choose" but a book that's sold probably 5% as many copies. namely a monetary history of the united states, which i wrote jointly with anna schwartz. and so, it wasn't -- i really had, a, a fairly large body of technical economic literature, before i started writing on public policy. >> where did you meet your wife? >> in the first course in economics at the university of chicago, in 1932. we took the same course. it was jake viner's economic theory. and as it happened, jacob viner

seated his students of a if a betically, in order to be able to remember their names. so rose director, which was her name, sat next to milton friedman. in addition, as rose always says she was the only girl in the class. >> at the time? >> at the time. >> and when did you decide to write books together? and how did you separate the responsibility? >> well, that's very hard to answer. we were married in 1938, six years ago we -- after we first met. and we had children. and rose did a wonderful job in really, taking care of the house, raising children and being an inspiration to me. but she wasn't in a position -- she had a professional career before that. she had -- written some things and worked in research organizations before that. but it wasn't until the kids were grown up and off to college

that she was able, really, to spend the time working with me. so we, she -- the capitalism and freedom was based on a series of lectures that i had given at a kind of summer school. and she took the lectures and reworked them into the book. so really, she should have been a joint author on that as well. >> janet and david? >> they're my children. >> you dedicated "capitalism" book? >> yes. >> where are they? >> janet is in davis, california, her husband, she's a lawyer. but her husband is a computer specialist, who teaches at the davis branch of the university of california. my son, david, is now well he's had a checkered career. in the sense that he, he got a degree in physics, a p.h.d. in physics, but he's become an economyist. he never took a course in

economics, exet over the dinner table. >> where is he? >> he's at the university of chicago, in the law school. where he does research in economics and law and economics. >> when did you winned nobel prize and for what? >> i won the nobel prize in 1976. and i won it for -- none of those things. but for monetary history in the united states. and an earlier book of mine, called the theory of the consumption function. which, i missed that. these are funny things. the theory of the consumption function, is in my mind, the best thing you i ever did. as a piece of science. monetary history sun doubt lid the most influential. and "free to choose" is the best-selling. so they're not similarly characterized. >> i'm going to take even a step lower. i want you to tell a little bit about the pencil story. >> oh, sure, i'd be delighted

to. >> why do you use this, as a matter of fact you've got your picture on the front of the book. >> that didn't originate with me, i got it from leonard reed, who was the head of the foundation for economic education. but it's used to tell how the market works. and it's used to tell how things can get, how people can work together without knowing one another, without being of the same religion or anything. and the story starts like this. leonard reed and i held up a lead pencil, so-called. one of these yellow pencils. and he said, nobody knows how to make a pencil. there's not a single person in the world who knowings how to make a pencil. in order to make a pencil, you have to get wood. for the outside, north to get wood, you have to have, you have to have logging. you have to have somebody who

can manufacture saws. no single person knows how to do all that. what's called lead inside isn't lead, it's graphite, it comes from some mines in latin america. in order to know, be able to make a pencil, you'd have to be able to get the lead. the rubber at the tip isn't really, it comes from, no a days it isn't even natural rubber. at the time i was talking, it was natural rubber. it comes from malaysia, although the rubber tree is not native to malaysia, but was imported into malaysia, by some english, biologists. bostonnists, i mean. -- bostonnists, i mean. so in order to make a pencil, you would have to know how to do all of these things, so there are probably thousands of people

who have cooperated together to make this pencil. somehow the people in south america, who dug out the graphite cooperated with the people in malaysia, who tapped the rubber trees. cooperated with maybe the people in oregon, who cut down the trees. these thousands of people don't know one another. they speak different languages. they come from different religions. they might hate one another if they saw them. what is it that enabled thome cooperate together? the answer is the existence of the market. the answer is, the people in latin america were led to dig out the graphite, because somebody was willing to pay them. they didn't know, have to know who was paying them. they didn't have to know what it was going to be used for. all they knew was that somebody was going to pay them. and indeed, going back to hyack, one of the most important articles he ever wrote, one of

the most important articles he ever wrote, was the way in which prices are a means of, are an information mechanism. the role of prices in transmitting information. let's suppose there's a great increase in the demand for graphite. how do people find out about that. because the people who want more graphite offer a higher price for it. the price of graphite tends to go up. the people in latin america don't have to know anything about why the demand went up. who is it who is going to pay the higher price. the price itself transmits the information that graphite is scarcer than it was and more in demand. and if you go back to the pencil thing, what brought all of these people together was an enormous complex structure of prices. the price of graphite, the price of lumber, the price of rubber.

the wages paid to the laborer who did this, and so on. the marvelous example of how you can get a complex structure of cooperation and coordination, which no individual planned. there was nobody who sat in the central office and sent an order out to -- russia, out to malaysia, produce one more thimble of rubber. or sent a signal. it was a market that coordinated all this without anybody having to know all of the people involved. >> how many times have you told that pencil story? >> well, i really haven't told it that many times. we told, i told it in the book. but i think this is the third time. >> you're living in san francisco, where we are.

>> yes. >> what brought you here? >> well, when i reached the age of 65, i was at that time living in chicago and teaching in chicago. i decided i had graded all the exam papers i was going to grade. my wife grew up in portland, oregon. and she was in love with san francisco. and she has wanted to come -- tried to move us out here many times during our life together. but she never succeeded until i decided i was going to retire from active teaching. and fortunately, the hoover institution at stanford university offered me the opportunity to be fellow at hoover. so i could continue my research and writing without doing any teaching. >> robinson has book did the notes that people will see it another time, said he got an m.b.a. from stanford and never once, did anybody bring up adam smith or milton friedman. >> i can believe that.

>> and why would that be? >> because you still have, although it's not the same as it was in 1963, there's more tolerance for the kind of ideas i'm in favor of. >> the general academic community is very much socialist in the sense in which hyack speaks of the socialists. the general academic community, now a days it's labeled political correctness. and the ideas of adam smith, the ideas of milton friedman are not very congenial to those who believe that the way in which you have things done is by having government come in and do them. >> you said earlier you're an old man. >> yeah. >> you feel like an old man? >> physically at the moment i do, but not intellectually. >> why physically? >> i recently had an operation on my back, which had some side

effects, from which i've been slow if recovering. >> how old are you? >> 82 years old. >> do you do things other than this operation? do you think differently? >> before i -- >> do you think differently because you're an older person? >> no. >> do you have things you want to accomplish? >> absolutely. my wife and i are in the process of trying to write our memoirs. >> and what in that process are you finding? is it hard? >> yes. because when you start digging back into your past, you find that you've forgotten so much. and there's so much to dig out. >> what's the purpose of the memoir? >> well, that's hard to answer. it's the purpose of the memoirs is, we had been very fortunate people. in fact, our tentative title for it is "two lucky people." we've been very fortunate in our life. we've had a great deal of

activity. we've spanned a long time. we've been able to be at the center for example, we spent years with the new deal in washington. i was involved in war-time research during the war. we've -- lived through and been associated with a lot that has gone on. and we believe that people have forgotten that story. we're not mostly interested in telling about ourselves. but we want to tell about the world in which we grew up and the world which enabled us, both of whom came from families which by any standard of today, would have been regarded as below the poverty level. but neither her family or mine ever thought of themselves as poor. they weren't poor. they didn't have is a very high level of income, but they weren't poor. and unfortunately, the world is moving in a way in which that is no longer likely to be the case. and we think maybe we have a story to tell.

that will be of interest to the public people at large. >> how are you going about it? >> by writing it. >> separately? together in do you dictate? >> no, no, in a word processor, mostly. sometimes by hand. but mostly in a word processor. but the way we've always done it. we each write parts of it and we share and so on. it's -- it's -- i don't believe the problem of collaboration is a very difficult one. >> how far away are you from completing it? >> well we're about halfway through. >> and then -- what size will it be when it's finished? >> i don't know. at the moment it's about this big. but how big it will be, i don't know. we're up into the 1950's. >> as you look around today, and watch the world move, where are the influences in the society today? >> where are the --? >> influences.

to books influence? newspapers? television? >> i would say the television is a tremendous influence. but i think books also have an ininfluence. it's not easy to answer that question, uh that's a very sophisticate and subtle question. and i don't have an easy answer to it i think experience plays an enormous role. the collapse of the berlin wall, for example, was undoubtedly the most influential action of the last 100 years. because it -- put finis to an attitude. the general attitude had been, that the future was the future of government. that the way in which you got good things done was by having government do it. i believe the collapse of the berlin wall and the exposure of what was happening in russia, the contrast between east germany and west germany, i

believe that that has been made a lesson and more recently, the experience of eastern asia, of hong kong, of singapore. so that today, people may not behave in accordens with their knowledge. but everybody knows that the way to develop and to improve the lot of people, is through private markets, free enterprise, and small government. we're not practicing what we should be preaching. i've been saying that the former communist states are trying as hard as they can to go to where we were 50 years ago. whereas, we're trying as hard as we can to go where they were 10 years ago. >> why? >> because of the inertia and the drive for power. it's very hard to turn things around. the big problem with government,

as hyack points out, is that once you start doing something, you establish vested interest. and that's extremely difficult to stop and turn that around. look at our school system. how is it our school system is worse today than it was 50 years ago? look at the welfare state. we've spent trillions of dollars without any success. but unsuccessful experiments in government -- let me put it, i've said, if an experiment in private enterprise is unsuccessful, people lose money and they have to close it down. if an experiment in government is unsuccessful, it's always expanded. >> what is it that government does, that you like? >> i would like government to enforce law and order. i would like government to provide the rules effectively. that guide our life.

that determine what's proper and to do other than that. >> what kind of a grade do you give to the american system of government today? how is it working? >> as it was in 1928 or as it is in 1994? >> well, if you -- >> it's a great system, the fundamental system is great. but it hasn't been working in the last 30 years. >> why not? >> because we've been departing from its fundamental principles. the founders of our, the founders of our country believed in individual freedom. believe in leaving people be. letting them be alone, to do their, whatever they wanted to do. but our government has been increasingly departing from those constitutional principles. you know, there's a provision in the constitution that congress shall not interfere with

interstate commerce. that provision had some meaning at one time. but it had no meaning now at all. our courts have ruled that anything you can think of is interstate commerce. and so the government exercises extensive control over things that it has no business interfering with. >> what do you think of the federal reserve board today in >> i've long been in favor of abolishing it. i think it -- there is no institution in the united states that has such a high public standing, and such a poor record of performance. >> what does dr. burns think of that? >> he didn't like that very much. but needless to say, i didn't hesitate to say it to him. look, the federal reserve board was, federal reserve system was established in 1914, it started operation in 1914. it presided over a doubling of prices during world war i.

it produced a major collapse in 1921. it had a good period from about 1922, to about 1928. then it it undertook actions which led to a recession in 1929 and 1930. and it converted that recession by its actions into the great depression. the major villain in the great depression was, in my opinion, unquestionabley, the federal reserve system. since that time, we've largely presided over a doubling of prices since world war ii. it, financed the inflation of the 1970's. on the whole, it has a very poor record. it's done far more harm than good. >> what do you say to the people that say, and write that it's

just a matter of time until it all comes tumbling down. meaning the tremendous debt we have in this country will catch up with us? >> the debt is not the problem. the debt is not the problem. you've got to compare debt with the assets which correspond to it. you need not -- whether or not it comes tumbling down will depend on what we do. if we continue to expand the role of government, if we let government grow beyond limit, it will come tumbling down. but that isn't going to happen. the american people, the attitudes of the american people have changed. and they've become aware of the fact that government is too big, too intrusive, too extensive. and i have a great devil confidence in the american people. that they're going to see to it that doesn't happen. >> but if you were sitting around with experts in a room and they said, let's look at the future, where are we going to -- where are the problems and you

know, because we -- listen every day on the radio and read in the newspapers that it's just a matter of time. >> i think that's wrong. fundamentally, the american -- what's been happening? is that in the period i talked about, from 1928 to now, we have been starving the successful part of our society, namely the free private enterprise system. and we've been feeding the failure. government is controls over 50% of the output of the country. but thank god government is not efficient. most of that is wasted. >> another one of our "booknotes" guests in the series is john kepth gal brapet. you put the two of them in a room together, which one is the happiest with what's happened over the last 50 years? >> well, ken would be much happier.

>> why would he be? >> because he's a socialist. >> why do you think he's happier and why do you think his side has been more successful? >> because the story they tell is a very simple story. easy to sell. if there's something bad, it must be an evil person who has done it. if you want something done, you've got to do it you've got to have government step in and do it. the story hyack and i want to tell is a much more sophisticated and complicated story. that somehow or other there exists this subtle system in which without any individual trying to control it, there is a system under which people, in seeking to promote their own interests, will also promote the well-being of the country. adam smith's invisible hand. now that's a very sophisticated story. it's hard to understand how you can get a complex, interrelated

system without anybody controlling it. moreover, the benefits from government tend to be concentrated. the costs tend to be disbursed. to each farmer the subsidy he gets from the government means a great deal. to each of any of a much larger consumer, it costs very little. and consequently, those who feed at the trough of government tend to be politically much more powerful than those who provide it with the wherewithall. >> during your lifetime, who are the leaders you think have been the most loyal to their beliefs and have done the best job? >> i would certainly put ronald reagan high on that list. >> what do you say to david fr