Agri Econ 1: Food Prices and Government

My two articles last month and today...
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MARCH 19, 2008

Lent and food prices

Lent is among those big “retreat days” for Filipinos due to the 4-days weekend. Many of those living and working in Metro Manila and other big cities retreat “back to the provinces or far away municipalities” and enjoy less stressful life where the air is cleaner and food prices are cheaper. But not this year’s Lent, it seems.

Recently, food prices in both global and domestic markets have been rising rather steeply. In 2007 for instance, world food prices have risen by almost 40 percent. And just this year, Philippine rice imports value have increased from $474 per ton in January to $708 per ton this month, an increase of 49.4 percent in just 2 months! And mind you, these are rice imported from our neighbors in the region, mainly from Thailand and Vietnam.

The volume of rice importation has also been increasing recently too. In other years, average importation was around 1 million MT a year. In 2007, rice import was 1.8 million MT, and this year, projected imports will be 2 million MT.

A country imports rice or chicken or shoes or any other commodity to plug the gap between a low domestic supply and high domestic demand. The higher the gap between the two, the higher will be the inflationary pressure of the undersupplied commodity. Hence, the need to import the projected gap in order to stabilize the price.

So food prices are the result of the supply-demand dynamics. As demand increases, supply must increase by similar rate, at least. If the increase in supply is larger than the increase in demand, then that country will experience price decline (or “deflation”) of that commodity, or it must export the surplus supply to stabilize domestic price, say to its previous year’s level.

Domestic demand, say of rice, is affected by many factors like change in appetite and preference, change in income, but the biggest factor is population growth. The Philippines’ population on average increases by 1.8 million people a year, net of death and migration. If each person is consuming 0.2 kilos of rice a day (roughly 4 cups equivalent), then consumption in one year is around 73 kilos per person. With 1.8 million new people a year, that’s 131.4 million kilos or 131,400 MT a year increase over the previous year’s total demand.

Domestic supply, say of rice, is also affected by many factors, like total hectarage devoted to riceland, irrigation, occurrence of very strong typhoons, price of fertilizers and other inputs, adoption of more high-yielding varieties, and so on. But the biggest factor is profitability of the farmers to continue producing rice, or stop planting and convert his riceland into a cattle pasture area and become a tricycle driver or construction worker in the cities. Hence, the bigger the projected profitability of producing rice, or corn, chicken, tilapia, pork, beef, etc., the bigger will be the incentive to expand production. Which stabilizes price, and consumers will not complain of steep hike in food prices.

Very often, food producers are faced with some non-natural obstacles if not enemies, that reduce their incentives to expand food production. The natural obstacles are of course those strong typhoons or prolonged drought or pest attack, other natural calamities that can wipe out potential harvests. Non-natural obstacles are man-made. These are the thieves and robbers, lazy neighbors and friends who always ask for free food, cartelized traders and wholesalers who depress farm prices, and the government food bureaucracy.

Smart food producers and traders can find ways to control or lessen the damage caused by robbers, lazy neighbors, and cartelized wholesalers. But confronting the food bureaucrats in government is difficult. Examples are bureaucrats from the Agriculture and Trade Departments who are quick to declare “price control” of those commodities whose prices have drastically increased because supply has suddenly dropped due to natural obstacles perhaps, or demand has suddenly shot up due to special events like a big fiesta or change in taste and preference.

Another group of food bureaucrats are those from the Agrarian Reform department. Some of their guys are on the prowl watching who are the dynamic and successful food producers with medium- or large-size agricultural lands, perceived to have “weak” political connection, and come up to them and tell them that their land will soon be for distribution to their farm workers. It has been noted by many local economists and agri-business observers that the endless, no-timetable agrarian reform, is among the biggest hindrances and disincentives for agricultural investment and efficient corporate agri-business endeavors.

Of course the silent but big hindrance to more food production, even if they are not directly engaged in the disincentive business, is the thick layer of bureaucracy in the food and non-food agencies. Taxes and fees have to be high and plentiful, partly to finance the salaries and perks of hundreds of thousands of government people working in air-conditioned offices. It is said for instance, that there are some 13,000 reasons why agrarian reform should continue forever – the 13,000 employees and officials of the Department of Agrarian Reform.

So, for long-term solution to steep food price hikes, the volume of food bureaucrats will have to be reduced; and the various taxes and regulatory fees that finance their salaries and offices need to be reduced. Then more people will be encouraged to become actual food producers, traders, processors and other food entrepreneurs, and not just food bureaucrats extracting rents and blood from those who actually produce food.

The political and economic Lent will be expected from the political and food bureaucracy. Then people and average food consumers will not experience the daily Lent of high food prices.

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APRIL 13, 2008

Rice shortage due to government intervention

First of all, while many people who try to analyze the current food price hikes phenomenon call this as "rice or food crisis", I do not believe that it is already in a crisis situation. A "crisis" situation is where you have a 50-50 chance of either surviving or dying in a particular condition, say a patient in an intensive care unit (ICU). I'd go along with a few who simply call this a "rice shortage" problem that can be solved by more rice supply, both in the short- and long-term.

Most of the literatures that come out recently analyzing the problem in the Philippines and abroad blame the government for "not doing enough" -- ie, not intervening enough -- in earlier years. They mean the government did not: build more dams and irrigation canals, more warehouses and other post-harvest facilities; did not undertake more research and extension work; did not produce more subsidized fertilizers and hand tractors; did not provide more agri credit; did not reforest enough watershed areas; etc.

The list can be endless, depending on how statist the person who is talking of writing. That is, the more statist and socialist-oriented a person is, he's likely to say that government should "provide everything" for agriculture and the farmers. Of course they won't say that they also advocate that the government should also "take everything" from the people to finance those "provide and subsidize everything" projects.

I am of the opinion that government should not provide everything and take everything; not even provide many things and take away many taxes and fees. The reason why rice -- and other food crops' -- supply has not kept up with demand is precisely because of too many government intervention. People respond to incentives and shy way from disincentives. If there is not much profit from producing rice, then there will be less people who will produce rice, and there may be less land that will be devoted to planting rice.

When governments say they are increasing the budget for agriculture, the first thing that they increase is the number of personnel, consultants, and officials in their respective Ministry or Department of Agriculture, plus those in related agencies like Ministry or Department of Agrarian Reform, state agricultural colleges, etc. And those plenty of personnel will require more salaries, more bonuses, more offices, more trainings, more travels, more cars, and later on, more pension and retirement funds. Then some local governments follow suit, and expand their own local agriculture bureaucracies, financed from their local taxes and fees.

I think one of the important moves if societies are to improve their agricultural and food production capacities, is to abolish those Agriculture Ministries or Departments, and cut the taxes that the state collect from the private sector that finance those expensive bureaucracies. Since rational people would not want to be jobless for long and die hungry, many of those currently in government agricultural and related bureaucracies will likely become farmers themselves or become traders and/or processors of raw agricultural products. And this expands rice and food supply. When supply grows faster than demand, then the price will go down, and people will have lots of food at cheap and affordable prices, and there will be less hunger and malnutrition in society.

But when government Agriculture Ministries or Departments are abolished, who will build the dams and irrigation canals? The warehouses and post-harvest facilities? Who will do more rice and agri crops R&D? Who will provide cheap credit, and so on?

Good question, and the quick answer is -- the productive people themselves. For one, many of those infrastructure and facilities are currently being provided by the private sector, and they are being operated despite zero taxes financing, at least in the Philippines.

When people know that there is an agency whose job is to provide lots of subsidies to them and they won't go to prison if they cannot pay back those subsidized credit, subsidized fertilizers, seeds and hand tractors, then they will get and abuse those government services without necessarily raising their farm output. For instance selling a few bags of fertilizers and seeds to other people and use the proceeds to drink and party.

Okay, abolition of those monster Ministry or Department of Agriculture is unpalatable and unacceptable due to big political risks. Then the next move will be drastic reduction of those bureaucracies, including privatization of some of their attached agencies and bureaus. In the Philippines for instance, the privatization of the government grains trading monopoly, National Food Authority (NFA) has long been proposed and discussed. The cost to taxpayers, as well as price distortion due to its trading monopoly function -- for many years, it is the grains importation monopoly; and in some municipalities, it is the single biggest buyer of farmers' palay (unmilled rice) output.

Rice shortage that result in high rice prices will naturally create incentives for farmers of other crops to shift back to producing rice. And other investors, including micro- and small businessmen, will flock to a sector (like rice) that experience high prices and high profitability, and leave those sectors that experience low income, if not losses.

Market failure, as some statists call this, always invite and create market solutions. The "failure" or displacement is temporary, the same way that high profitability in one sector is also temporary once entry of other players and competitors is not hindered -- a contestable market situation.

It is government failure that needs to be corrected by going back to the market, and not by "more government" intervention.

Price hikes and Congressional investigations

In many countries around the world, oil companies are either being investigated by their parliament or congress, or simply ridiculed by the public. The typical sentiment is that these companies are more of villains who benefit from the misery of the public due to high oil prices. Hence, they deserve congressional investigations and harassment.

But gold prices were almost on their historic heights; were there Congressional investigations for big gold miners and traders?

Rice prices — and wheat, corn, other food items — are also on their all-time high, were there congressional investigations for big rice, corn, etc. producers and traders?

There are 2 industries which are the subject of envy always of politicians and the public: petroleum and pharmaceuticals. People can invest in gold, copper, paladium, other minerals and if they make big money, the public and congress won’t crucify them. The same with people who invest in rice production, coffee, etc. Or in hotels and automotive and telecomms, etc. But people who invested in petroleum and innovator pharmaceuticals, they’re considered a bunch of greedy witches. Talk of double standards.

Free Trade 7: Class War, Eco-protectionism and Climate

Two weeks ago, Dr. John Rutledge posted in his blog (www.rutledgeblog.com) a paper, "Protectionism and the Philippine class war", in reaction to an oped by the Manila Times, "Poverty in the middle of plenty".

I have met John last May in Honolulu during the "Pacific Rim Conference" and he was our dinner guest speaker in the first day of the 2-days conference.

John wrote,

"There are important parallels with the (Philippines and) current US situation.

1) Class war leads to punitive, growth-destroying tax, trade and regulatory policies.

2) Class-war driven tax policies can drive offshore exactly the valuable resources needed to crete jobs and improve family incomes.

3) Protectionism is extremely destructive for growth and incomes. It can permanently mire an economy in poverty.

4) Once started, protectionism is hard to stop because it creates vested and well-funded political interests that want it to continue forever...."

I commented in his blog not to believe the Manila Times oped. There is no "class war" in the Philippines (and many other developing economies) because there are many "classes" or "enclaves" that were not prominent just 2 decades ago.

Entertainers, showbiz personalities, professional basketball players, boxers, IT professionals, advertisers, academics and consultants, traders, media broadcasters and columnists, travel agents, physicians, lawyers, engineers, accountants, top government bureaucrats, politicians, dozen-plus other categories, are making it big and very rich in the Philippines. They are neither "exploiting capitalists" and "exploited workers" in the old Marxist dichotomy of "class war", or "feudal lords" and "exploited peasants" in the old Maoist dichotomy of "class war".

Recently, many people here are getting rich not by becoming overseas workers, or by becoming investors in business process outsourcing (bpo), but by catering to millions of foreign tourists, especially the Koreans, Chinese, Japanese, Taiwanese, Americans, Europeans, coming here to enjoy the white sand beaches, or wonderful golf courses, or for cosmetics and beautification surgery, or simply to learn English language cheaper.

It is true that economic and trade protectionism causes economic stagnation. While free trade gives consumers lots of choices, protectionism limits choice to a few domestic producers that were blessed by the state to be the sole providers of the things and services needed by the people.
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On Eco-Protectionism

There is a proposal made by some groups and politicians in rich countries, that trade protectionism by rich and industrialized countries can be justified because these countries are consuming goods by “carbon-surplus” developing countries. While rich countries focus on emission cuts, many developing countries expand their gas emission as they export and industrialize more, which worsens global warming goes their argument. Thus, to correct and mitigate this problem, exports by developing countries (mainly China, India, Brazil, others) will soon be slapped with a “carbon tax” on top of existing import duties and related taxes by rich countries.

This will be one of the big rackets resulting from climate change alarmism – the idea that with climate change being mostly man-made, then men should be so alarmed and cut their gas emission and possibly, cut their production and consumption, which can possibly cut economic growth and job creation.

So in the case of eco-protectionism, otherwise cheap imports from developing countries should be made expensive to consumers of rich countries in order to discourage high consumption of goods produced by poorer countries, and hopefully reduce gas emission there.

The argument looks cute and appealing, but it does not make much sense for a number of reasons.

First, a portion of the pollution created in poor and exporting countries are the pollution and gas emission that should have taken place in rich countries if those imported commodities are produced there. This process of “outsourcing” production and emission in poor countries should be recognized by the consumers and policy-makers of rich countries.

Take exports powerhouse China. Most of its exports are energy-intensive, and it makes many of the highly polluting manufactured products that used to be made in the US, Europe and Japan. The smoke-stack power plants and industries were exported to China and other developing countries and the products made from those polluting industrial plants are imported into rich countries.

Second, reducing importation of rich countries from poor countries – through imposition of “carbon tax” on top of regular import tax – even if such trade protectionism is limited to so-called “energy-intensive, low value-added” products, will slow down but not stop, further economic growth and industrialization of developing countries. When countries are poor, people there tend to use dirtier technologies, like buying 2nd- or 3rd-hand vehicle engines and assemble their own rickety vehicles that are less fuel efficient and consume more petroleum products per kilometer of distance traveled. Which again, worsens pollution and global warming.

Third, creating artificial scarcity of certain commodities in rich countries because of reduced importation from poor countries which do not have carbon emission constraints, will further widen the gap between rich country price and poor country price of the same or similar goods. Two results will happen and they are both environmentally bad.

One, lower imports by rich countries as a result of such artificial scarcity will lead to higher inflation there, which will adversely affect the income of individuals and profitability of companies there, which ultimately will reduce their capacity to invest in more environment-friendly but expensive technologies and production processes.

And two, lower exports by poor countries as a result of eco-protectionism will slow down if not depress their national income, which will adversely affect their capacity to import products from rich countries, especially more fuel-efficient cars, less energy-intensive machineries and less-polluting production technologies.

Meanwhile, where will the additional revenues from carbon tax go? Most likely to pay for the salaries and perks of additional bureaucrats at the Finance and Environment Ministries of rich countries, who will be hired to compute how much new gas emissions were created by developing country so and so and how much will be the "countervailing" carbon tax to be imposed for their exports.

Free trade has only one unique and very important merit: to give consumers more choices. And more choice means more freedom. Hijacking free trade to advance certain environmental advocacies, even labor or human (and animal) rights advocacies, is wrong. Penalizing producers in poor countries with trade restrictions and protectionism because they are allegedly using less environment-friendly and/or more energy-intensive technologies will immediately reduce the range of choices for ordinary consumers in rich countries. But worse than this, such trade protectionism will restrict economic growth of those countries, which will limit their capacity to invest in more energy-efficient and environment-friendly technologies and production processes.

In short, eco-protectionism as a result of climate change alarmism will only succeed in making the planet dirtier, while pushing more people to poverty and economic stagnation.
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See also:
Free Trade 1: Estonia's Free Market, Globalization, May 09, 2006
Free Trade 2: Unilateral Trade Liberalization, May 17, 2006
Free Trade 3: Protectionism Perpetuate Poverty, September 05, 2006
Free Trade 4: FTA in APEC, July 09, 2007
Free Trade 5: Business, Rock Music and Cycling Globalization, July 17, 2007
Free Trade 6: Counterfeit Drugs Worldwide, December 21, 2007

AIDS alarmism in Asia

The UN has a new report, "Redefining Aids in Asia: Crafting an Effective Response", and it made some scary predictions: 500,000 people could die each year people due to AIDS-related illnesses by 2020.

It added that the number of infected people can possibly double to 10 million by 2020 if no preventive work is done. The chairman of the Commission on AIDS in Asia, Dr Chakravarthi Rangarajan says the cost could be up to $2 billion annually until 2020.
Wow, this could be another AIDS alarmism with implicit target to extract more tax (especially foreign aid) money for UNAIDS and its allied organizations.

In mid-2005, UNAIDS posted a warning about “quantum worsening” of AIDS pandemic’s trajectory. But in its late 2007 update report, it admitted that global HIV incidence (new infections) peaked by the late 1990s and has been decreasing since.

Have a more realistic figures and spare our pockets please, UNAIDS guys!

Free Trade 6: Unilateral Free Traders HK, Georgia, Who Else?

A friend and also a board member of Lion Rock Institute (LRI, www.lionrockinstitute.org) in HK, Mr. Dan Ryan, wrote a paper, "How to Make Hong Kong Uncompetitive". LRI is HK's first and independent free market think tank.

Mr. Ryan is protesting the HK government's decision to put up an Anti-trust or Competition regulatory body. He argues that HK's low tariffs, low taxes, little or no barriers to entry of firms, are what makes the economy free and competitive, that there is no need for a government agency to ensure competition.

He also observed that some big law firms in the US and Europe are positioning to get into HK in anticipation of law suits and legal cases that the planned Anti-trust body will hear. And a number of HK academics are gearing to be appointed as officials of the planned body.

Mr. Ryan is right, definitely. Competition or anti-trust regulatory body is first and foremost, a bureaucracy. Creating a new bureaucracy immediately creates 2 costs automatically: (1) taxes and fees to establish and sustain that bureaucracy, and (2) compliance costs to those regulated (hiring of lawyers, auditors, PR guys, etc.) that will help represent them in arguing with competition bureaucrats.

It's also true that academics -- them with PhDs included -- are among those who salivate to be appointed as government regulators, and enjoy the perks and popularity of being "public servants" while screwing the public with taxes, fees and regulations that somehow limit competition.

I urged LRI to continue this kind of public education. Many free marketers around the world are looking at HK as one of the models of a free market economy for our respective countries. If HK degenerates to become a bureaucratic country, we'll have less "models" in our fight.

People are also watching HK whether the force of socialist government of China will ultimately pull HK towards big and interventionist government philosophy, or HK will retain its Copperwhite legacy and free market tradition.

I believe that HK's unilateral trade liberalization is a good model, not those high profile, highly bureaucratic trade negotiations in the WTO. If a government really wants to give its people the freedom of having more choices for their consumption and production needs, then just liberalize international trade,
unilaterally, no ifs and conditionalities that other countries should also open up their markets to you. After all, people trade with each other; countries and governments don't.

I'm still looking around what other economies have unilateral trade liberalization policy aside from HK. The other 3 are Singapore, Dubai and Georgia. The latter has enacted a zero tariff on imports just a few years ago. I'm not sure Brunei, Estonia and Chile could be among the unilateralist free traders.
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See also:
Free Trade 1: Estonia's Free Market, Globalization, May 09, 2006
Free Trade 2: Unilateral Trade Liberalization, May 17, 2006
Free Trade 3: Protectionism Perpetuate Poverty, September 05, 2006
Free Trade 4: FTA in APEC, July 09, 2007
Free Trade 5: Business, Rock Music and Cycling Globalization, July 17, 2007

9 outstanding free market institutes

The Atlas Economic Research Foundation (www.atlasusa.org) will give 9 winning institutes (from 180 applicants) up to $100,000 grant each for the next 3 years, courtesy of the Dorian & Antony Fisher Venture Grants.

The winners are:

Alternate Solutions Institute (Lahore, Pakistan)
Bluegrass Institute for Public Policy Solutions (Kentucky, USA)
Canadian Constitution Foundation (Calgary, Canada)
Cathay Institute for Public Affairs (Beijing, China)
Fundación Ecuador Libre (Guayaquil, Ecuador)
Fundación F. A. von Hayek (Buenos Aires, Argentina)
IMANI: Center for Policy and Education (Accra, Ghana)
Istituto Bruno Leoni (Turin, Italy)
New Economic School-Georgia (Tbilisi, Georgia)

I know and have personally met the Presidents or Executive Directors of 5 of those winning think tanks: Khalil Ahmad of ASI Pakistan, Chris Derry of BIPPS USA, Feng Xingyuan of CIPA China, Franklin Cudjoe of IMANI Ghana, and Paata Sheshelidze of NES Georgia.

Congrats to all of you guys! You're doing well, and you deserve that prize!

I also congratulate Atlas' panel of judges because I sincerely believe that all the winners deserve the award.

I kidded Jo Kwong, Atlas VP for Institute Relations, that our group Minimal Government, did not pursue hard this award because we were waiting for a $1M prize that Atlas may give away soon! :-)

The free market movement around the world is still small. The number of statist institutes and think tanks in our respective countries should easily outnumber us by 10 to 1, or more. The free market-oriented think tanks should support each other; otherwisem, the statists, the lovers of more government, more taxes, more regulations, will trample us further in the public policy debates.

WHO and property rights confiscation

The perception that there is widespread “market failure” in public health care has prompted many government health ministers and bureaucrats, upon the prodding of health activists, some policy writers and media people around the world to advocate more government intervention as “government solution to market failure.” And the World Health Organization (WHO), through its InterGovernment Working Group on Public Health, Innovation and intellectual Property (IGWG), will be one of the the chief instruments of such bigger involvement by governments.

In late April this year, government health officials, health activists and lobbyists for more government involvement in health care – and more taxes and bureaucracies for such additional intervention – from many countries will head to Geneva, Switzerland, to attend the continuation of the second session of the IGWG.

Among the planned additional interventions that will be discussed by the attendees, are for WHO member-governments to encourage: (1) entry of cheap drugs via parallel importation and/or copying without bio-equivalence testing; (2) local production through huge subsidies to chosen players; (3) issuance of compulsory licenses (CL); and (4) price controls.

The reason for the above respective measures are as follows: One, there is the persistent pressure to deliver “cheap at all cost” drugs even without strict bio-equivalence testing that will ensure equivalent efficacy and safety of medicines. Two, big multinational pharmaceutical companies do not prioritize in their R&D and production drugs for many poor country diseases. Three, compulsory licensing is allowed even in WTO’s trade-related aspect of intellectual property rights (TRIPS). And four, price controls will allow more sick people to have access to otherwise expensive but effective drugs.

A longer discussion of these old and new government interventions and related issues are tackled by the new paper, “Increasing access to medicines: Civil society commentary on the IGWG draft Plan of Action”. It is a report jointly sponsored by 24 independent think tanks and institutes from 21 countries, including Minimal Government Thinkers. (If interested to see the document, send the author a private mail)

Due to space constraints, we will briefly discuss only the “copy” drugs and CL. The IGWG’s draft Action Plan conflates “copy” drugs with generics drugs. The latter are required to pass “bio-equivalence” testing for a reference drug or product. If drugs do not go through this testing by a rigorous and scientifically-capable drug regulatory body, then these are just “copy” and very often, substandard drugs. Most counterfeit, unsafe – and cheap – drugs fall in this latter category and they can be dangerous if not fatal, to patients.

When a patient takes substandard or fake drugs, treatment failure happens. The patient either feels no improvement after taking the medicine, or develops resistance to genuine drugs while the disease may be mutating inside the body of the patient. So a hunt for “cheap at all cost” drugs can backfire.

On CL, assume there are 100 different medicines to cure AIDS patients. About 1/4 of them can cure an average patient in 7 to 10 years; another 1/4 can eradicate the disease in 5 to 6 years; another 1/4 can do the job in 3 to 4 years; and another 1/4 can control the disease in 1 to 2 years. But among the "top 25" medicines, about half are effective but have some adverse side-effects or cause allergies to people who have other diseases (diabetic, have hypertension, etc.) and the other half are plain effective.

Which of those medicines will be issued compulsory license (CL) by governments? The bottom 3/4, even if they are cheap, readily available and can also fight the disease? Not a bit. It's those in the top 10 or 15 most effective medicines, which are also among the most expensive.

And this tells us one thing: the selective application of CL is driven by envy, by the simple desire for quick-fix solution through more unproductive government intervention.

Huge investments by innovator companies do not matter. What matters is to spot who among those innovator companies have the most effective medicines, then disrespect their patent and intellectual property rights, copy the effective medicines for use by a government corporation or crony generics manufacturing company which spent very small, if ever, in expensive R&D. And the state that issued the CL is now a "hero" while the innovator companies that invented the effective drugs and resisting the CL are now the "villains".

Instead of interfering with the market for medical treatments, governments should step aside. Scrapping taxes on medicines would be a good start. In the Philippines for instance, medicines are slapped with an import tax of 5 percent and a value-added tax of 12 percent.

Geneva next month will be crowded with many technocrats and bureaucrats who have little appreciation for respect for private property, and they won’t hesitate to further incite national governments to extend their intervention and adapt confiscatory policies that disrespect the property rights of innovators and freedom to choose of patients.

Patent busting and price controls might bring cheaper drugs in the short term, but they threaten the well-being of poor patients and stifles medical innovation over the long haul. Governments can achieve “cheaper medicines” by simply getting out of the way and allowing more competition among innovator companies to reach out to the patients and their physicians.

Friedman and the market

Dr. Andrei Shleifer of Harvard U. recently wrote a paper titled "The age of Milton Friedman". In that paper, he wrote, "In the Age of Milton Friedman, the world economy expanded greatly, the quality of life improved sharply for billions of people, and dire poverty was substantially scaled back. All this while the world embraced free market reforms."

"Amen" to this paper by Shleifer. Free market + less government regulation and taxation of business, but more government protection of private property rights, are indeed among the most important policies not only for rapid economic growth but also for respect of individual freedom. In fact, protection of the citizens' right to life, right to dignity, and right to private property, is the single most important function of government. All other functions are either minor or unnecessary.

Friedman was a believer of individual freedom more than forced equality. Because forcing equality among people would mean pulling down, if not killing, creativity and innovation, and encouraging laziness and personal irresponsibility.