What was the significance of FDR's Brain Trust?
This group devised measures to implement that became New Deal policies. Members were primarily academics from universities.
What is meant by the term 'New Deal' under FDR?
Policies enacted under FDR that created active intervention from a strong central government.
What does the phrase 'cradle to grave' mean?
Individuals are dependent on government support for their entire lives.
Friedman discusses 4 spending categories. What are they?
1.) Spending on yourself
2.) Spending your money on someone else
3.) Spending someone else's money on you
4.) Spending someone else's money on someone else
Which of Friedman's 4 spending categories results in the most efficient and wise allocation of scarce resources?
Spending your money on yourself. You best know your needs and resources, and you can allocate them best.
What is the fundamental fallacy of the welfare state?
Bureaucrats spending someone else's money on other people leads to waste and corruption.
The modern welfare state can be traced back to which influences?
What two contradictory phenomena occurred as a result of New Deal programs?
Widespread dissatisfaction with the explosion of welfare activities contrasted with continued pressure for further expansion (p. 96)
What is the most important component of Social Security?
Old age and survivors' benefits. These account for 2/3 of total expenditures and 3/4 of the recipients.
What measures does Friedman propose to 'wind down' Social Security?
1.) Repeal the payroll tax
2.) Continue to pay existing beneficiaries
3.) Give workers who already earned coverage what they are entitled to
4.) Give workers who have not yet earned coverage a capital sum
5.) Terminate any further accumulation of benefits
What is Process Philosophy in its most basic essence?
Process Philosophy sees reality as an evolving entity based on change rather than on absolutes.
How does Process Philosophy relate to the expansive jurisdiction of the national government?
Process Philosophy leaked into government policy and began to see legislation as a way to enact change and propel reality forward.
What is the Madisonian interpretation of Article 1 Section 8 Clause 1?
Madisonian interpretation is that the grand objects should be achieved through the enumerated powers.
What causes inflation?
Monetary policy causes inflation.
How does inflation impact prices and the value of money?
Inflation raises prices while simultaneously lowering the values of money.
Why do inflationary policies distort price signals?
Producers think demand has gone up so they produce more at the same price but then realize that the price of the things they buy has gone up as well
Explain: "Inflation is a monetary phenomenon arising from a rapid increase in the quantity of money than in output
Inflation occurs when money is injected into the economy at a rate higher than the economy's output (reflected in GDP)
Explain: "In today's world, government determines the quantity of money
As a producer of money, government is often responsible for inserting money into and out of the economy.
Explain: "There is only one cure for inflation: a slower rate of increase in the quantity of money
This would allow the price system to stabilize and not be disrupted by the increase while allowing for an elastic economy.
Explain: "It takes time for inflation to develop; it takes time for inflation to be cured
A slow decrease in inflation rates allows the price system to stabilize and avoid a major disruption of the economy
Explain: "Unpleasant side effects of the cure for inflation are unavoidable
It's the economy, stupid.
What is meant by 'Debauched' currency?
Money whose purchasing power has been reduced via inflation.
What is hyperinflation?
Inflation of 50% or more. At this point paper currency is in danger of ceasing to function as the medium of exchange.
What is the nature of money?
A contrived medium of exchange for goods and services
What are some characteristics of money?
Money should be:
5.) Serve as a store of value
What is deflation?
Result of a contraction of the money supply
Why is it economically unsound to confuse money with wealth?
Wealth consists in products, faculties, and services, while money is an instrument of commerce
Why do governments adopt pro-inflationary monetary policies?
Inflation benefits debtors, and governments are excellent debtors.
What is the cure for inflation?
A reduction in the rate of monetary growth
What intellectual changes did FDR's Brain Trust represent?
They represented a shift away from personal responsibility and a limited government to social responsibility and a powerful government. They believed it was the function of government to protect and control the economy in the 'general interest'
Name the three categories of New Deal legislation
Social Reform Legislation
What does Friedman mean by "Equality of Opportunity?
No one should be prevented by arbitrary obstacles from using his capacities to pursue his own objects
What does Friedman's position relative to equality of outcome stress?
If what people receive is determined by fairness or equality, who decides what is fair and equal?
Who typically favors equality of outcome?
A small minority of academics
What are the consequences of egalitarian politics?
It often leads to redistribution of wealth, but not the equitable one sought after. It rewards and incentivizes those who can evade the heavy taxes and regulations while depressing productivity and efficiency.
What is the relationship between capitalism and equality?
Wherever the free market has been permitted to operate in accordance with the equality of opportunity, the gap between rich and poor is substantially lessened.
What are Friedman's arguments in support of a voucher system?
�Improve quality of schooling
�Give parents greater agency
�Promote competition between schools
What are criticisms of the voucher system?
�Separation of Church and State
�Possibility of fraud
�Possibility of increased racial segregation
�Economic Class issue
�Elevate private schools at expense of poor students
�Impact on public schools
When considering alternatives to state-sponsored higher education, what is meant by the "alternative to government finance"?
Instead of Govt subsidized loans, Friedman suggests equity financing: investors pay for a share in someone's education in return for a percentage of their future earnings.
Who was Horace Mann?
He was the first secretary of the MA Board of Education in 1837. Considered the Father of American Public Education.
Who was John Griscom?
US educator who imported the Prussian education model into America
What are obstacles to the voucher plan?
Perceived self-interest of the educational bureaucracy: they have a virtual monopoly on public education, and a voucher system would undermine it.
What is an issue related to higher education funding?
Fixed money loans don't address the diversity in graduate earnings. Graduates with higher earnings would have no problem paying it off, but those with only modest incomes would struggle.
What is a solution to higher education funding?
Establish a National Student Loan Bank and make long-term loans with repayment partly contingent on current earnings
What is the difference between liberty of conscience and toleration?
�Toleration assumes a positive civil role in matters of conscience
�Liberty of Conscience assumes no positive civil role in matters of conscience
What does the 1st Amendment disestablish?
It disestablishes a national religion.
What is the shift in the language of section XVI of the Virginia Constitution?
It shifted away from "fullest toleration in the exercise of religion" to "free exercise of religion
Why did the shift in the language of section XVI of the Virginia Constitution occur?
It occurred in order to establish freedom of conscience as an absolute right
What is the significant of Section XVI of the Virginia Constitution relative to the US Constitution?
It influenced the first amendment which incorporated freedom of conscience
How was property defined during the early founding era of America and the US?
It was defined as Internal and External
�Internal: faculties and conscience
�External: money and property
What was the nature of Patrick Henry's Bill of Assessment?
It proposed to levy a tax to support Christian educators, and thus grant the Virginia Assembly legislative power in religious matters, and a prerogative in establishing Christianity.
Why did Madison craft his Memorial and Remonstrance?
He delivered it to counter Henry's Bill of Assessment
What was the main argument of Madison's Memorial and Remonstrance?
The use of the legislature to enforce assessments would be a dangerous abuse of power. Religion should only be exercised by conviction, not by coercion.