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In a landmark lecture series, Nobel Prize-winning economist Milton Friedman explained why democratic governments have repeatedly adopted policies contrary to the interests of many of their citizens.

The Hoover Institution at Stanford University summarized Friedman’s “Free Trade: Producer versus Consumer” lecture, noting that “part of the answer lies in a simple political principle--interests that are concentrated (those of the producer) are more politically effective than interests that are diffuse (those of the consumer).” Friedman stated:

• “You will find it very hard to find any economist who will support farm price supports…Why do we have them? Because the agricultural interest has been concentrated and the consumer interest diffused and widespread. Because you have a relatively small group of people who regard themselves as having much at stake and therefore they are able to be more effective politically than the diffused consumer interest.

• “We often think that this is a country in which we have majority rule. That's true, it is a democracy. We do elect people to congress. We do have majority rule. But it is a very special kind of majority. It's a majority that is formed by a coalition of minorities. If you want to get elected to congress the way to do it is to find 3 percent of the people who will say to you, "If you vote for this, we'll vote for you whatever else you do."  Then you find another 3 percent and another 3 percent, and you build up a 51 percent majority consisting of a coalition of special interests.

• “And yet, that overstates the case. Because it's also true that special concentrated groups of that kind have never been able to get their way, unless they could make a plausible case that it was in the general interest of the country as a whole to promote their special interest….[yet] their interest is in this respect, directly opposite to that of the great body of the people.”[1]

In a 1977 lecture at Utah State University, Friedman noted that government has an incentive to increase its own power against the public interest, and that expansions of government power have arisen almost exclusively from propaganda campaigns by politicians and special interests rather than public demand:

• “The Great Depression was produced by a failure of government, by a failure of monetary policy. It was produced by a failure of the Federal Reserve System to act in accordance with the intentions of those who established it. It was produced by a failure of the Federal Reserve System despite the presence of knowledge on the part of many of the people in the system about the right course of action. It is interesting to speculate for a moment about why this myth is so widespread.

• “The answer is really very simple in this case: private enterprise has no press agents, the free market has no press agents, the government has a great many press agents. The Federal Reserve has a great many press agents, and the Federal Reserve of course would never admit, never proclaim, that it produced the Great Depression.

• “The reality is that if you look at every program that the government has adopted in the direction of extending its scope, it took an enormous propaganda campaign by special propaganda groups to get those measures passed. There was no underlying public demand for those measures. On the contrary, the demand had to be created, it had to be developed, it had to be produced, and it was created, it was developed, it was produced by people who…wanted to see an expansion in the scope of government.”[2]

References

[1] Milton Friedman. “Free Trade: Producer vs. Consumer.” Alfred M. Landon Lecture at Kansas State University, April 27, 1978. Video: https://www.youtube.com/watch?v=T2oalinPCZo Transcript: https://www.k-state.edu/landon/speakers/milton-friedman/transcript.html

[2] Friedman, Milton. “Myths that Conceal Reality.” Utah State University, 1977. https://www.youtube.com/watch?v=OOZxMjo14pw