Milton Friedman, recipient of the 1976 Nobel Prize for Economic Science, was one of the most recognizable and influential proponents of liberty and markets in the 20th century, and the leader of the Chicago School of economics. Here he gives his views on the myth of the free lunch.
Milton Friedman omitted from his analysis the most significant free lunch of all – the economic rent of land and natural resources when it is not collected by the community that created it but is privatized.
Despite this in 1978 and again in 2006 Milton Friedman called land value tax the “least bad tax”:-
Question: I find income tax totally antagonistic to true free enterprise. Can we run the country without income tax?
Dr. Friedman: There’s a sense in which all taxes are antagonistic to free enterprise . . . and yet we need taxes. We have to recognize that we must not hope for a Utopia that is unattainable I would like to see a great deal less government activity than we have now, but I do not believe that we can have a situation in which we don’t need government at all. We do need to provide for certain essential government functions – the national defence function, the police function, preserving law and order, maintaining a judiciary. So the question is, which are the least bad taxes? In my opinion the least bad tax is the property tax on the unimproved value of land, the Henry George argument of many, many years ago.
[Reprinted from The Times Herald, Norristown, Pennsylvania; Friday, 1 December, 1978]
Q Is there no tax you like?
A Yes, there are taxes I like. For example, the gasoline tax, which pays for highways. You have a user tax. The property tax is one of the least bad taxes, because it’s levied on something that cannot be produced — that part that is levied on the land. So some taxes are worse than others, but all taxes are bad.
— Milton Friedman, interview with Scott Duke Harris,
San Jose Mercury News, Sunday November 5, 2006
He never promoted land tax. His prescription was to cut taxes, deregulate, privatize, and avoid excessive expansion of the money supply and he influenced Reagan and Thatcher. He apparently did not appreciate the fundamental role played by land in the absence of any significant holding fee (land value tax) in capitalising all the benefits and progress into higher rent and site values, lowering real wages, and speculative land pricing driving the boom-bust cycle. He did not recognise that the rising value of land, its economic rent, when not collected as revenue for the community that created it, is the free lunch that is at the basis of the ever increasing void between rich and poor. He would probably not have been so influential if he had.