Milton Friedman Predicts the Rise of Cryptocurrencies in 1999 and Expresses Optimism in the Internet as One of the Major Forces for Reducing the Role of Government

An excerpt from a 1999 interview with Nobel Laureate Milton Friedman conducted by NTU/F, where Dr Friedman expressed his optimism that “the internet is going to be one of the major forces for reducing the role of the government” and predicted the rise of cryptocurrencies. Video source: Benjamin Gustaffson YouTube channel.

(see video below transcript)

Transcript:

I think there are two reasons to be optimistic. One is that ideas have changed. The rhetoric fifty years ago was very different from the rhetoric now. Fifty years ago, the rhetoric was that everybody was a socialist. All intellectuals were socialists, they all believed that government was the answer to every problem. Today nobody believes in socialism, if you listen to them. That's the rhetoric. The reality is that we are much less free now than we were fifty years ago. Government is bigger, takes a larger fraction of our income, it imposes more controls on us.

We are freer in some dimensions. There's been great social progress in tolerance of minorities. Our racial problem has been much improved. Not through government but through private activity. Nonetheless, that rhetoric is having its effect.

There has been a reduction in government price and wage regulation. The kind of thing, the deregulation of airlines, deregulation of communications. But what we have tended to do is to replace that by social regulation. Aid to disability, OESCA, that kind of environmental thing.

So the question is will the rhetoric, will the change in intellectual ideas carry through and produce the change in actual policy? I think there is a tendency for that, that's one source of optimism. But I think a much more reliable source of optimism is a growth of the Internet. In your area, the major effect of the Internet will be to make it harder for government to collect taxes. Governments collect taxes best on things that don't move. Land is an ideal base for taxation because you can't take it away. Individual states cannot go as far in taxing personal income as the Federal Government can, because people can move from one state to the other more easily than they move across countries.

The internet is going to make it very difficult to collect taxes on services of all kinds; after all you can complete these transactions in cyber space and not on the ground. Computer companies are now getting programming done in India. I doubt that anybody is paying any taxes on any of that. So I think the internet is going to be one of the major forces for reducing the role of the government.

The one thing that’s missing, but that will soon be developed, is a reliable e-cash. A method whereby on the internet you can transfer funds from A to B, without A knowing B or B knowing A. The way in which I can take a 20 dollar bill and hand it over to you and there’s no record of where it came from. And you may get that without knowing who I am. That kind of thing will develop on the Internet, and that will make it even easier for people to use the Internet.

Of course, it has its negative side. It means the gangsters, the people who are engaged in illegal transactions, will also have an easier way to carry on their business. But I thing that the tendency to make it harder to collect taxes will be a very important positive effect of the Internet.

Translated by: Jadranko Brkic