who questioned what we were doing was the right thing. >> you can watch this and other programs online at booktv.org. >> coming up next on booktv, book notes. ..

>> >> and it was an attempt as a professor at the university of chicago i came back from the meeting piaster i had been and i told him that i had been called by hayek to try to bring together some believers in free and open in society to have them to have interchange with one another. he said reading of the veterans of the war's of the 20th century. [laughter] i thought that was wonderful and we were fostering is essentially the same set of ideas. "the road to serfdom" published 50 years ago, was

really an amazing event when it came out. it is hard to remember now what the attitude was 1944. the movement toward centralization, planning, it also started with a society late 19th century with george bernard shaw. and so on. but the war itself you have to have government control. but after the war you needed a rational plan and, organized society that was the atmosphere. those of us who did not

agree with 19th century liberalism works for quite a number of us. but for the rest of the world they were very isolated and his idea to bring them together to enable them to get encouragement from one another without having to look around who was trying to stab them in the back which was a set -- situation with their home country. >>c-span: i saw at the peace on "the new york times" your introduction. why did they do that? what got their attention? >> guest: i cannot answer that. ask the people at "the new york times." as a whole they have not been very favorable. quite the contrary but they have been changing.

two or three years ago they turned down many an op-ed piece from me. but a couple of years ago they did publish a piece about the situation of the fall of the berlin wall. my thesis was simple. everybody agrees as a result that socialism has been a failure. everybody agrees that capitalism has been a success within improvement of conditions of ordinary people all over any length of time. and yet every petty is extending socialism. after the fall of the berlin wall there was no summits in washington how to cut government. but that we have too expensive of the government

and everybody agrees. paillette but where rigo we have to extend socialism son is how you enable government to get more revenue for government to be more important which is exactly the opposite. socialism is the way to guide behavior in strict contrast to what we believe to be the facts. >>c-span: let me ask you about friedrich hayek. >> guest: he was an economist, born in vienna, started his professional career in vienna and in the mid or late twenties some people in

britain greatly impressed with the book he had written in the work he had done. at a relatively young age he became a professor at the school of economics. he spent thirties and most of the forties there. early in the 1950's he came to the university of chicago where he was professor for about 10 years then he went back to germany essentially she retired there. >>c-span: how long has he been dead? >> guest: about two years now. he lived to be 90 and published in enormous, list of books and articles. "the road to serfdom" that we are showing here was a manifesto and a call to arms

to prevent the accumulation of the totalitarian state -- totalitarian state it is dedicated and to the socialists of all parties. because the thesis of the book is that socialism paves the way to totalitarianism. and socialist russia at the time is not different from nazi, germany. indeed, it was national socialism. this was a manifesto with the unexpected defect. nobody was turned down both of britain and the united states to create a sensation that was a best seller.

it had of big argument with the reactionary against all the good things of the of world. to show the of class status. this was the very subtle analysis of why are how is well-meaning people only intent to improve their lot which have exactly the opposite effect. from my point of view the most interesting chapter is one labeled why the worst rise to the top. it is another example of a famous statement and now for

a moment -- how power corrupts. >>c-span: because he is quoted several times in the book. >> guest: board acted was a great defender of a free society. and why it rises to the top if you were given how are you are driven by that necessity to do things and many people would object to doing and toledo's who are willing to be safe differently will ever make it to the top. >>c-span: who was lord acton? >> guest: in english catholic who was a great historian. i had forgotten the title

but he wrote a history of liberty and also was very much involved with the dispute within the catholic church about the infallibility of the pope. what do they call it? it is not cyclical but like the vatican? that they declared the infallibility and he fought very hard against that. >>c-span: why is it so many conservatives that they will cite you but also hayek? >> guest: as i said in the

introduction i have gone around of the years asking about the shift of belief for government than socialism. what led them to the understanding? >> over and over the answer is "the road to serfdom." >>c-span: you wrote the introduction in 1971? >> guest: the 25th anniversary tuesday german edition. here is primarily the same is just as much now as then. the real trouble something is everybody is persuaded that socialism is a failure but yet in practice remove down the socialist road. in 1944 but 46 or 50 just

after the war if i remember a the numbers government spending in all levels. that does not allow for the fact with the aid for that act and so on so we are more have socialist today more than half of the total output of the country. and in a way determined by the government. regulation with writer sells to be a free society. but just consider the limitations of our freedom.

just because you want to be a lawyer you have to be approved and get a license. that is true for beauticians, plumbers, is in the york city for taxicabs and most big cities, there are enormous limitations of what we can do. consider the question of freedom space -- speech. during the '50s and '60s and '70s with a big problem of inflation the government made a big push about selling savings bonds. that really feel immelt that he paid for the savings bonds you would never get

back with purchasing power. you held it 25 years at the end u-turn didn't not only because of the purchasing power because of inflation but then you had to pay tax on the and come -- and come. at the same time leading bankers were joining in the advertisements to tell people to buy savings bonds. i would ask the bank presidents why they did that? it -- i said to buy them for years of? know is it a good investment? no. why do tell the public it is? >> because the treasury would not like if we did not. do you suppose i know from experience i've opposed to tenure at universities.

but how many academics, the only ones that were free to speak that way that have permanent tenure on the verge of retirement. from the point of view there are a service restrictions on what we can do or say. but does not count the loss of freedom that they take money away from hard working and productive people and give it to people who were out of work or on welfare. it does not include the property rights.nr said has led to tremendous invasions. you could have a drug

enforcement person come to your door and knock because some person said you're dealing with drugs. there are many. heartbreaking cases. whose property has been taken away and an able to regain it. i am a very old man i graduated from high school 1928. that is a long time. look at this situation we were much for -- poorer with physical goods. no washing machine or microwaves. we are enormously wealthy and a higher standard of living. on the other hand, we're

safer, more secure, a freer in 1928 than we are now. is pending tender 15% of the national in comes the of private sector the government controls over half of the national income and private enterprise controls the rest. where have all these good things come from? katy named these additions? it wasn't government that produced the microwave for the improved automobiles or computers but on the other hand, consider the problems. their social the major problems the underclass that

they're much less safe there we graduated in much less the earlier -- feeling of security and much less optimism of the future and all the problems produced by government the quality of schooling i got in public high-school in 1928 was almost certainly a great deal higher than you can get in any small number of schools. with the decline of scores of the s.a.t.. why? because education is the most socialized industry in the united states. 90 percent of the kids are public schools. 10% private and the

education is completely centralized and socialized system. and the benefits a small number and especially those associated with the american federation of teachers the national education association it does a lot of harm to people. >>c-span: what about your own beginning? where were you born? >> guest: i was born in brooklyn but i had sense enough to move out when i was 13 months. my parents moved to new jersey as small-scale businessmen who'd never had a income that would exceed the poverty standard but then they had a small textile factory that was the unsuccessful so they opened a small retail store that

was the source of their income. >>c-span: well as their source of influence for college? >> guest: very little except they encourage me. my father died before i graduated from school. but i was only one of the for that to go to college. >>c-span: state school? >> guest: at that time it was not. wreckers was established before the revolution by the dutch reformed church at the time i went it was predominantly entirely a private school. may subsequently was a converted to the naked state university. hold on. but i could go because of an action of the state.

the state of new jersey at that time offered a scholarship on a competitive basis with a series of exams. those who could demonstrate financial need received tuition or free tuition and because of that i could go to rutgers. the tragedy at the time was very valuable now has a similar program but the qualification for getting a scholarship is below average academic quality to raise the lesser qualified. and instead of the sizing

strengthening the opportunities but to shift to a state of victims with the emphasis on raising the people of. but it always comes from the top. with society as a whole. >>c-span: when did you first get into economics? >> guest: when i first went to wreckers. >>c-span: why did you pick it? >> guest: i know. i'd like mathematics. i was good at mathematics. i may say i worked my way through. as an innocent use the only

way i knew thieu's mathematics to earn the income was to work for insurance companies. that was mike initial objective. somehow i got into economics. but i don't know. i gradually did 1932 th÷e''i situation was different in the midst of the worst depression in thezú major problems for economic. but as a happened when i graduated in 32 always able to get to scholarships went from brown university in applied mathematics m-1 for applied economics in doozies ctc why i took it at that time. >>c-span: a couple of your buck somebody have you written? >> guest: i don't know. 15 if the best seller is undoubtedly free to choose

that was written by myself and by my wife. based on the tv program of the same title than part program shown in 1980 on pbs. in reverse of the usual procedure it was not based on the book but i insisted i would not talk to are written script for a the transcript of that tv program although the of best seller is the running from 1963 it was so out of favor so far outside the atmosphere at the time it was not reviewed at any

major paper magazine other than the economist of london. not the tribune, the times, "newsweek", none of that. but that is over 30 years. it sold half a million copies. >>c-span: the tie that you are wearing? >> guest: that is adam smith. >> guest: he comes up in all your books. >> guest: the founder of modern economics. he lived in the 18th century. his book the wealth of nation published 1776 the same year as a declaration of independence. >>c-span: when did you first read it. >> guest: in college as an undergraduate.

>>c-span: is he most important in your education? >> guest: he had a major influence on all of us but after all it comes from people who were living people. book's influence no doubt about it. but the person who is the most important in my education there are several. one is chairman of the federal reserve he was out wreckers and taught me as the undergraduate as my mentor for a large part of my professional career.

but then i went to the university near chicago. jacob, frank, henry simon hugh help to shape my views. >>c-span: when did you thank you had enough independence sought to write books like "free to choose"? >> guest: very late. up until that point prior to that favor scientific. fe's books give a misleading impression. these really do not have been a great interest. that is the best seller of the "free to choose" but no question the most influential book but as many copies as the monetary history of the united states

was schwartz. with the very large body of economic literature. >>c-span: where did you meet your wife? >> guest: the first course of economics of chicago 1932. we took the same course. and as it happened jake of a finder's ceded his students alphabetically to remember their names. so rowe's director sat next to milton friedman. in addition and she said she was the only girl in the class. [laughter] at the time. >>c-span: when did you decide to write books together how do you separate that responsibility? >> that is hard to answer.

we read very 19386 years after remit. then we had children. roasted a wonderful job to be an inspiration and take care of the house the she had a professional career before that and had written something san worked in church organizations before that. but not until the kids were grown and off to college there she could spend the time working with me. so this is based on a series of lectures she looked at those and reworked them into the book. >>c-span: janet and david? >> guest: my children. >>c-span: you dedicated to them. >> guest: janet is that

davis california her husband , she is a lawyer but her husband is a computer specialist who teaches at the davis branch of the university. my son david has a checkered career in the sense he guided degree, a ph.d. in physics but became an economist never took a course except over the dinner table. he is at the university of >>c-span: when do to win the nobel prize? >> guest: 1976.

for monetary history of the united states. with the theory of the consumption function. but this theory is in my mind the best thing i ever did. monetary history is no doubt the most influential and "free to choose" so they're not similarly characterized. >>c-span: i will take it another step. tell the pencil story. >> guest: i am delighted. >>c-span: why do you use this? >> that did not originate with me i got it from the head of the foundation of economic education but it is used to tell how the market works and it is used to tell how things, how people can

work together without knowing one another or of being the same relations. the story starts like this that leonard reid and i held up a pencil. and we said nobody knows how to make a pencil that a single person in the world knows how to make a pencil. you have to get would for the outside. can you have to have blogging, somebody ought to manufacture the saws. no single person knows how to do all that. what is called lead is not letting it is graphite and comes from the minds of latin america and order to make a pencil you have to get the lead. the rubber at the tip is

is, nowadays it is not even natural rubber but at the time it was. it comes from malaysia although the of rubber tree is not native to malaysia but was imported into malaysia by english biologist or botanists i mean. so in order to know how to make a pencil you have to do all of these things. there are thousands who have cooperated together to make a pencil. somehow the people in south america through dugout the graphite, cooperated with the people in malaysia who tapped the rubber trees trees, cooperated with the people in oregon who cut down the trees, these thousands of people and don't know one another, speak different languages, come from different religions and may

hate one another but what enabled them to cooperate? the existence of a market. in the answer is the people in latin america were allowed to take up the graphite because somebody was willing to pay them. they do not have to know who or what it would be used for but that somebody would pay them. going back to hayek one of the most importer'' -- important articles he wrote not in the book was about the way that prices are a means of an information mechanism. the role of prices to transmit information. if there is an increase in the demand for graphite, how

do people find out about that? >> because the people who want more graphite to offer a higher price. the people in latin america don't have to know anything about why. who is willing to pay the higher price? the price transmits the information that graphite is more scarce and in demand. kodak to the pencil what brought all these people together was an enormous complex structure of prices the price of rubber, the wages paid and so on. a marvelous example of how you can get a complex structure which there was nobody who sat in the central office to send in

order to malaysia to produce another bowl of rubber or -- it was a market that coordinated it all without having to know all the people involved. >>c-span: how many times have used told that story? [laughter] >> guest: not that many times. i did on the tv programnéwó12ru an end in the book but i think this is the third time >>c-span: you were living in san francisco earlier. what brought you here? >> guest: at the age of 65 at that time living in chicago. i decided i graded all the papers i would grade. my wife lived in portland oregon and was in love with san francisco and wanted, tried to move us out here many times during our

life together but never succeeded until i decided i would retire from active teaching. fortunately hoover institution stanford university offered me the opportunity to be fellow at hoover so i could continue researching and writing without teaching. >>c-span: peter robinson said he got his mba from stanford and never once did anybody bring up adam smith or milton friedman. >> guest: i believe that. because although it is not more tolerance for those ideas but the general academic community is socialist in the sense he speaks of the socialist

>>c-span: is said earlier you are an old man. do you feel old? >> guest: physically at the moment but not intellectually. i recently had an operation on my back that had side effects off seven very slow to recover. >>c-span: how old are you now? >> guest: 82. >>c-span: do you think differently because you are in older person? >> guest: no. >>c-span: do have things you want to accomplish? >> guest: my wife and daughter are trying to write

our memoirs? >>c-span: is the process hard? >> guest: yes. when you start to dig into your past to find you have forgotten so much. there is some much to dig out. >>c-span: what is the purpose of the memoir? >> guest: it is hard to answer. we have ben very fortunate. we're too lucky people. we had a great deal of activity we were at the center we spent years with the new deal in washington and involve lazore to research and that was associated with and people have forgotten that.

we want to tell about the world that enabled us that any standard today would be below the poverty level but they were not for. but they were not pork but unfortunately that the world is not moving in a way that is that the case. we think we have a story that is interesting to tell to the public. >>c-span: how do you go about it? >> guest: writing. >>c-span: separately or together? >> guest: we're into word processing mostly. but its lead to right parts and we share i don't think

collaboration is difficult. >>c-span: how far away are you from completing it? >> guest: halfway through. >>c-span: then what size will it be when finished? >> guest: i don't know. at the moment it is about this big but it depends. we are through the 1950's. where are imbalances of society today? do book's influence? newspapers? television? >> guest: television is a tremendous influence. but books also have an influence. that is a sophisticated question at all have an easy answer. or anything experience plays the enormous role like the

collapse of the berlin wall was the most influential action of the last 100 years because because the general attitude had been it is a future of government. i believe the collapse of the berlin wall the contrast between east and west germany i believe that is a lesson more recently with the experience of east asia asia, hong kong, singapore so that today people may not behave in accordance with their knowledge but a buddy knows the way to develop and

improve people's surprise the markets, free enterprise and small government. we're not practicing what we should be preaching. i have been saying the former communist states are trying as hard as they can to go to where we were 50 years ago but we're trying as hard as we can to go where they were 10 years ago. because of the inertia and drive for power. it is very hard to turn things around. but once you start doing something it is extremely difficult to turn that around. howell is a school system worse today than 50 years ago?

but unsuccessful experiments in government, let me put it this way if the experiment a private enterprise is unsuccessful they shouted down budding government it is always expanded. >>c-span: what does the average do that you like to do? >> guest: and force law and order. >>c-span: what grade do you get to the american assessment -- a system of government? >> 1928 or 1994? >>c-span: is the great system fundamentally but not

working the last 30 years because we have then departed from the fundamental principles the founders of our country believed in individual freedom. in letting people be alone to do whatever they wanted to do. but never government is increasingly departing from those principles. there is a provision in the constitution that congress shall not interfere with interstate commerce. that had meaning at one time but now not at all. our courts have ruledqqeeevc anything you can think of is interstate commerce so the government has extensive control that has no business. >>c-span: what about the federal reserve board?

>> guest: i have long been in favor to abolish it. new institution that has such a high public standing with such a poor record of performance. >>c-span: what about arthur burns? he did not like that very much but i do not hesitate to say to him. one it was started in 1914 and presided over a doubling of prices over world war i. it produced a major collapse in 1921, it had a good period 1922 sir 28. then it undertook actions which led to a recession 1929 and 30 and converted

that into the great depression. the major villain in my opinion was the federal reserve system the doubling of prices over will work to one but on the whole has a pretty poor record doing more harm than good. >>c-span: what do you say to the people that it just will come tumbling down? with. >> the debt is not the problem. it is the debt that corresponds what comes tumbling down depends on what we do if we expand the role of government can let

it grow it will come tumbling down. but that will not happen. the american people the attitudes of the american people have changed. when they become aware of the fact that government is too big, too intrusive and too expensive i have a great deal of confidence in the american people that that will not have been. >>c-span: if you were sitting with experts in a room and they said where are the problems because we read it is just a matter of time. >> guest: that is wrong. fundamentally the period i talked about 1928 through now, we have been starving these successful part of our

society and seating the failure. government controls over 50 percent of the of put of the country but thank god it is not efficient. most of that is wasted. >>c-span: another guest if we put to a view in the room together who is the happiest? >> guest: he would be much happier than me because he is a socialist. >>c-span: why do you think he is happier or his side has been more successful? >> guest: this story they tell is very simple. easy to sell. if there is something bad, it must be an evil person. if you want something done you have to have government stepped in. the story the high-tech and

i want to tell is more sophisticated and complicated that somehow there exist a system without any individual trying to control its a system which people to promote their own interest will also promote the well-being of the country adams smith invisible hand. that is a very sophisticated story. it is 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 reach farmers this subsidy is a great deal.

too much larger number of consumers it costs very little and consequently those who feed at the trough of government tend to be politically much more powerful than those provided with the wherewithal. >>c-span: during your lifetime who were the leaders that has been the most loyal to their beliefs with the best job? >> certainly ronald reagan. >>c-span: what you say to david's thesis? have you read his book? >> guest: i agree. >>c-span: conservatives? >> guest: i am not a conservative and never have been. hayek has never been a conservative. the book that follows this is the constitution of liberty. he has an appendix entitled why i am not a conservative.

we are radicals we want to get to the route we liberals in the true meaning of the term. and to be concerned with freedom we are not liberals with the current distorted sense of the term that people are liberal with other people's money. >>c-span: you write about thomas jefferson. >> guest: i certainly would put him high on the list. he was a great man. no question. a believer of freedom. >>c-span: but today? >> guest: he was not a conservative. >>c-span: a liberal? >> guest: yes. in my sense. not in the corrupted sense of today. >>c-span: what is confusing as you watch people today with the jefferson jackson dinner and it is embraced by both sides.

what about abraham lincoln? >> guest: he is more difficult to characterize because his role in our history had to do with the civil war. that is not something to be categorized. >>c-span: is he a democrat as of today? >> no. a libertarian. >>c-span: the number of the party? >> guest: not necessarily i am philosophy but but a republican with the capital or and libertarian with the small l. >>c-span: you were close to goldwater. >> guest: he was a libertarian. in philosophy. not party. >>c-span: bill clinton? >> guest: he is a socialist.

as somebody who believes the way to achieve is to have government do it to. in to say earlier in the discussion in to take care of the bottom up. but the progress of society comes from the bottom. >>c-span: how do take care somebody in the lower third? >> guest: in my book i call the negative income tax to get rid of all the welfare programs but replace it by a minimum income. >>c-span: you also said that will not happen. >> guest: we're learning that.

>>c-span: what will that do? >> guest: where we are wrong is with this special welfare programs and what i argue we should replace the whole ragbag of programs with a single negative tax. >> what about the theory that proves to be wrong? >> during world war ii i was the keynesian as i believed the way to control inflation was to control government spending. i paid very little attention to money only after rolled were to only then did i come to different conclusion.

he was a great man but his theory was wrong. >> and basically stating? >> the fundamentalreç elementç is spending. >> and that government must play a of major role of society. >> he was a liberal but also a believer also the elitist but there was the group of public spirited intellectuals who should be given charge of society. >>c-span: people like that milton friedman 25 years from now, what did he want

them to remember as a writer, teacher, philosopher writer, teacher, philosopher , economist? >> guest: as the economists. >>c-span: what the most? >> guest: there are quite a number. i mention this area of the consumption function that is a very technical book yet i believe has a good deal of influence within this community. but i think people 25 years from now will have to answer it. not meet. >>c-span: milton friedman has been our guest and wrote the introduction of the 50th anniversary edition of f.a. hayek book "the road to serfdom" and he has a few books of his own. think you for joining us.

>> guest: very nice to be here.

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so i do a lot of research and then i'm also a social entrepreneur, so i direct the nonprofit in the mountains called page, partners for appalachian education. i help them get access, so i have a couple different hats that i wear. social worker and entrepreneur. >> host: is that a new term? >> guest: i think it was claimed by people like nicholas kristof. it's a very widely used term. for people like me who basically direct nonprofits and do different things in the nonprofit sector. >> host: how did you get involved with appalachian girls in middle school in western north carolina? >> guest: that is a long story that i writeu