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Friday, April 21, 2006

The Glories of Smith-Friedman Economics

Matt Laar became Prime Minister of Estonia when he was only 32 years old. He had read only one book on economics: Milton Friedman's Free to Choose. He naively believed the book merely reported economic reforms that had already been implemented in the West. Despite the fact that his economists told him his flat tax, free market moves to privatize an economy that had been almost completely state-run could only fail, he pushed ahead.

The result: Estonia achieved the largest real per capita income of any of the former Soviet states. His policies are now being copied in the former eastern bloc.

Now, he's being honored with the Cato Institute's $500,000 Milton Friedman Prize for Liberty. That prize is aptly named, friend, because economic liberty is a massive part of what liberty is all about.

Read more from the Cato Institute and Pejman Yousefzadeh.

4 comments:

Tom Van Dyke said...

Fascinating. Reminds me of a quote attributed to Reagan, I think, about economists along the lines of, "Sure, it works in practice, but how about in theory?"

Evanston2 said...

Hunter, thanks for the link. Interesting article, validates what I learned as an econ major at UVA but also what I live day-to-day. Every time I think of working harder (higher salary, etc.) I think of the higher brackets of the "progressive" tax system and prefer to "aim low" and take more time off. Liberal idealists have no clue regarding how much they suppress the spirit of productive Americans.

Hunter Baker said...

You don't know the half of it, Evanston. Pre-Reagan the marginal tax rates were so high that many high income individuals would only work a few months a year. This included people like successful salespersons. It was a seriously screwed up system with disincentives for people to earn money and pay more taxes!

Evanston2 said...

T-Man, you're right, it's a shame that Estonia has now generated all this capital but has failed (so far) to lift all its people out of poverty. Perhaps you can give us all an example of an economy that reflects your priorities?