Capitalism and Freedom by Milton Friedman

The grounds for government intervention are widely different in these two areas and justify very different types of action. In applying these general principles to education, we shall find it helpful to deal separately with (1) general education for citizenship, and (2) specialized vocational education, although it may be difficult to draw a sharp line between them in practice. The problem of drawing a reasonable line between action justified on these paternalistic grounds and action that conflicts with the freedom of responsible individuals is clearly one to which no satisfactory answer can be given. In general, this problem is avoided by regarding the family as the basic unit and therefore parents as responsible for their children in considerable measure, however, such a procedure rests on expediency rather than principle. The belief in freedom is for “responsible” units, among whom we include neither children nor insane people. The third derives from an ambiguity in the ultimate objective rather than from the difficulty of achieving it by voluntary exchange, namely, paternalistic concern for children and other irresponsible individuals. A second is the existence of substantial “neighborhood effects,” i.e., the action of one individual imposes significant costs on other individuals for which it is not feasible to make him compensate them or yields significant gains to them for which it is not feasible to make them compensate him - circumstances that again make voluntary exchange impossible. One is “natural monopoly” or similar market imperfection which makes effective competition (and therefore thoroughly voluntary exchange) impossible. Beyond this, there are only three major grounds on which government intervention is to be justified. In such a free private enterprise exchange economy, government’s primary role is to preserve the rules of the game by enforcing contracts, preventing coercion, and keeping markets free. In what follows, I shall assume a society that takes freedom of the individual, or more realistically the family, as its ultimate objective, and seeks to further this objective by relying primarily on voluntary exchange among individuals for the organization of economic activity. The role assigned to government in any particular field depends, of course, on the principles accepted for the organization of society in general.

The result has been an indiscriminate extension of governmental responsibility. This situation has developed gradually and is now taken so much for granted that little explicit attention is any longer directed to the reasons for the special treatment of education even in countries that are predominantly free enterprise in organization and philosophy. Education is today largely paid for and almost entirely administered by governmental bodies or non-profit institutions.

Capitalism and Freedom by Milton Friedman