Because we can decide what markets there are, and set up markets to deliver the kinds of distribution that we want. But I feel like the spirit of the piece is suggesting “…so there’s not that much we can do about income distributions, because we’ve got to just let market prices decide them.” I don’t know if that is what they go on to argue, but I wouldn’t agree with that. So, I suppose I agree with the Friedmans when they say “affect” – it seems likely that prices do affect. But their existence is a question of will – it’s something that a country can choose to do or not do… Their prices probably play some role in the distribution of income, if the law wills them into existence. These assets probably play some role in the distribution of income, if the law wills them into existence. But all other prices affect personal incomes only indirectly, so the extent to which they affect income distribution will be mediated by a bunch of other institutions.įor example, the existence or otherwise of intellectual property assets is a question of legal structures created at will by governments and courts. I certainly agree that that allowing that price to vary does carry information, and will affect income distribution. There’s only one price that directly affects income, and that’s the price of labour. “it simply is not possible to use prices to transmit information and provide an incentive to act on that information without using prices also to affect, even if not completely determine, the distribution of income.” You can travel from one end of the industrialized world to the other and almost the only people you will find engaging in backbreaking toil are people who are doing it for sport. On the Effects of Economic Growth on the Difficulty of Work If what a person gets does not depend on the price he receives for the services of his resources, what incentive does he have to seek out information on prices or to act on the basis of that information?
However we might wish it otherwise, it simply is not possible to use prices to transmit information and provide an incentive to act on that information without using prices also to affect, even if not completely determine, the distribution of income.
The Tight Connection Between Incentives, Information, and Outcomes
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Here are two from Free to Choose that I particularly like: There are so many pithy passages in both books. I’m giving a talk in southern California later this month on the importance of Milton Friedman’s 1962 book Capitalism and Freedom and of Milton and Rose Friedman’s 1980 book Free to Choose.
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