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Transcript
Biography Of Milton Friedman
• Milton Friedman was born on July 31, 1912 in New York to Jewish immigrants.
• He was one of the most prominent advocates of the free market.
• He attained a B.A at 20 years, from Rutgers University, an M.A from the
University of Chicago in 1933, and a Ph.D. from Columbia University in 1946.
• He received The John Bates Clark achievement which honors economists
under 40.
• In 1967, he served as an adviser to President Richard Nixon, and was
president of the American Economic Association.
• In 1976 he was awarded the Nobel Prize in economics for his achievements.
• He retired from the University of Chicago in 1977 and became a senior
research fellow at the Hoover Institution at Stanford University (Liberty Fund
Inc, 2008).
• He passed away on November 16 2006 in California.
Key Terms
✣Capitalism
✣An economic and political system in which a country's trade and
industry are controlled by private owners for profit, rather than by the state
✣Freedom
✣The power or right to act, speak, or think as one wants
✣Liberalism
✣Is a political philosophy or worldview founded on ideas of liberty and
equality
Main Message
“How can we benefit from the promises of government
while avoiding the threat to freedom?”
Economics and politics are intimately connected. Capitalism is the only
known economic arrangement that promotes political freedom because it
separates political & economic power. In his view, economic freedom is
means to the end of political freedom. However, it is possible to have
capitalism as the principal economic arrangement of a nation whose
political arrangements are not free.
Theme: “The role of competitive capitalism. The organization of the bulk
of economic activity through private enterprise operating in a free market
as a system of economic freedom and a necessary condition for political
freedom”
Money And Finance
The alleged instability of "private free-enterprise economies" is untrue. This has allowed government to
intervene in the economic market on the basis of "full employment” & "economic growth".
He demands that gvt solitary role outside economic interference should be providing a stable monetary
framework through physical policy or monetary in two ways called Scylla and the Charybdis
He advocates the end of the Bretton Woods system in favor of a floating exchange rate system and the
end of all currency controls and trade barriers, even "voluntary" export quotas. This is the only true
solution to the balance of trade problem.
Friedman argues against the continual government spending being used to "balance the wheel" and help
the economy to continue to grow. Federal government expenditures do not make the economy more
stable, but have failed to balance out recession. Friedman uses concrete evidence from his own
research, demonstrating that the rise in government expenditures results in a roughly equal rise in GDP,
contrasting with the Keynesian multiplier theory.
These are not be-all and end-all solutions however Friedman suggested that the Reserve System shall
see to it that the total stock of money rises consistently at an annual rate of X percent, where X is some
number between 3 and 5.”
Role Of Government
The roles of the government in a free society are:
1. Provide a means whereby citizens can modify the rules.
2. To enforce compliance with the rules.
3. Mediate differences among citizens on the meaning of rules.
4. Clearly define property rights.
5. Run the monetary system.
6.Suppliment private charity and the private family in protecting the irresponsible(mad men and
children)
The roles of the government in education are:
1. Denationalize education.
2. Advocating for school voucher to be adopted.
3. Merit pay for teachers.
Discrimination, Licensure And
Monopoly
Capitalism lessened the discrimination suffered by racial and minority groups. Its emphasis on
freedom meant everyone stood an equal chance of being successful based on individual
capabilities
Capitalism allowed for one to be discriminatory for economic reasons as they have that freedom
and are acting based on their own economic interests
State coercion will always crush on the freedoms of one individual whilst trying to enforce the
freedoms of the other therefore it was better to let free markets regulate their own activities
Free markets were able to effectively separate efficiency from the factors which Milton
Friedman considered irrelevant such as race, religion and gender
•Licensure establishes medieval guild like attributes, with the state assigning control to the
professional class; Regression of freedom
•Occupational Licensure is supposed to protect the public
Discrimination, Licensure And
Monopoly
•It claims to raise the standard of competence
•Three Levels of Control- Registration, Certification, and Licensure; Allows for a monopoly to be
created by special producer groups
•The American Medical Association rationalizes licensure by claiming to raise the standards of the
profession, and ensuring high income to reduce unethical behavior
•Friedman says there are many alternatives to the existing organisation of practice.
The establishment of corporate and income taxes, tariffs and support of cartels among private
producers by government and government operations promote monopoly in an economy which
limits individual’s voluntary exchange and also results in the inefficient use of capital.
The only social responsibility of a business is to use its resources in increasing its profits.
Income And Poverty
In a free market economy, ethical distribution of income is based in the idea that "to each according
to what he and the instruments he owns produces.” - You earn as much as you produce.
Ethical distribution of income can also be achieved through “equality of treatment.” Those who take
on greater risks and/or work harder than another person should be rewarded more. However
government fail to do this when they “redistribute” income through progressive taxation.
By doing this, government is forcing those who have earned more money to share with others. Not
earning what is due them will serve as a disincentive to work and poor allocation of resources.
There is less inequality in capitalist countries because it has provided technologies that make work
easier for all, luxury to the masses and opportunities for citizens to develop their capabilities.
Friedman advocates for the abolishment of the ways in which social welfare is being measured.
This is because they intend on doing more harm than good to society since the majority of the
society suffers from its detriment.
Capitalism reduces poverty levels and private charities are more effective in reducing poverty as
people give off voluntarily as opposed to gvt social welfare programs
Insights
There cannot be real economic freedom if government intervenes extensively in the market; without
economic freedom, it’s difficult to achieve political freedom.
The individual’s freedom in a free society is best enhanced by the existence of a free market.
Capitalism is not necessarily an avenue for private firms to reel in profit .However, it is a measure to
check the power of governments and preserve the liberty of the citizens. The interactive nature of
state policies imply that government makes every decision with respect to a political background.
Sometimes the hand of government can be forced in selfish decision that save political campaigns
yet are threatening to economic structure.
The control of the flow of money is vital to any economy. The more abundant money is the lower
the value and so whoever is charged to regulate money flow must hold the penultimate legal order.
The role of the government is a free society should be well defined. The government needs to
intervene in a free society because most often men’s freedom conflict and there has to exist an
institution to limit these freedoms.
Critiques
Positive Critique
He deserve commendation for clearly showing how taxation promotes monopoly in an economy.
He provided suggestions on how the distribution of income can be done without having to take from
the rich and give to the poor.
Negative Critique
Although, he advocated for the abolishment of corporate taxes and a drastic reduction of income
taxes, he provided no alternative source through which government can source funds for its
activities.
Friedman’s argument sometimes seems to dwell more on liberty being important to society rather
than the full impact of holistic economic freedom to private institutes.
Implications On Contemporary Leaders
Obama’s economic advisors recognize that there are serious problems with occupational
licensure(Novak, M., 2015). Contemporary leaders would have to think through either
revising or abolishing licensure requirements so as to reduce its effects.
We as young leaders must endeavor to understand the principles of the free market and
monetary policy and like Friedman states, “further improve” banking and finance systems
as our knowledge grows.
To understand the extent to which governmental intervention is necessary in the free
market in order to promote the economic wellbeing of the society.
Property right in Kenya-The property rights were revised to allow women to have property
rights
Contribution To The Good Society
Community
Equality
Efficiency
Liberty
Liberty and efficiency vs equality and community
Milton Friedman views liberty as being the main drive towards an efficient society where
each individual is pursuing their own economic interests and contributing towards a
prosperous society.
For Friedman, equality and community could only be achieved through thee voluntary
efforts of private entities and their willingness to give; in so doing they still maintain their
freedom.
Equality had been achieved through allowing every person to pursue their own interests
and it was now up to the free market to regulate each person’s efforts.
”in a free society, there is one and only one responsibility of a business to use its
resources and engage in activities designed to increase its profits”
Thank You