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September 18, 2007


Alexander Henson

It’s difficult to argue against a man who’s been dubbed one of the greatest economic thinkers of the 20th century, a man who knew a vast amount more about the workings of economics than I probably ever will – but his ideas, while undeniably sound and not theoretically impossible to implement, are too ideal and dependent on a society at large that has a thorough understanding of economics.
Again, I can’t disagree with what Friedman says regards to politics and economics - about the symbiotic relationship between economic freedom and political freedom, about the government’s overly heavy hand in the economy, about the threat of monopolies – but the fact of the matter is that government intervention does work to fix certain ailments in the economy. In the type of laissez faire economy that Friedman advocates, those ailments would right themselves – but it would take time, and an educated public that would know how to react properly to economics downturns. Immediate government intervention produces results in the short run, and for citizens who do not understand the workings of the economy, there will be no complaints about long-term economic effects if the short-term solutions work and bail the economy (and thus the public) out of whatever jam it may be in.
Take, for example, the banking system and money supply in the United States during the Great Depression. Following the stock market crash, the extremely limited monetary supply coupled with the public panic (leading to the runs on the banks) further exacerbated the problems in the economy at the time. Friedman addresses these problems by advocating regular, consistent increases in the money supply and the provision of basic education for all citizens. Friedman’s prescriptions, had they been in place at the time, would have ensured that the monetary shortage would not even have existed, and public education would have prevented the public from making runs on the bank. The stock crash, then, would have just been another fluctuation in the capitalist system.
As it stands, however, government intervention to fix the Great Depression’s problems (along with the rising military industrial complex up to WWII) were undeniably effective, fixing problems in the economy that should not have existed in the first place (if Friedman had had his say). The public, then, has grown to lean on gov’t intervention as a crutch in difficult economic times – they ignore the fact that smart decision making and the passage of time (to allow the economy to regulate itself) will yield the same results with the added bonus of more long-term stability. This is certainly still evident today, considering the very recent problems with loans and sub-prime mortgages. Poor government oversight and an uneducated public reacting to fluctuations in the market all led to another economic disturbance that we look to the government to resolve through intervention. We’ll never learn our lesson.

Norris Tran Duc

Milton Friedman states with many examples the disadvantages of government intervention, stating it as a hindrance to society rather than a benefit. But like Eric said, I do not believe he expects the full absence of the government within the economy, but rather, hopes for a greater strive for reforms which would allow the liberal economy to roam freely. There are some public goods that the market cannot provide or control, and so the state would need to intervene to help supply or promote them, (which I believe Krista’s concern of environmental friendly products could apply), but it seems Friedman begrudgingly sees the scope of those goods as very minimal.

Contrasting with Polanyi’s “Great Transformation” where the laissez-faire economy was given brakes by government intervention, Friedman takes the opposite stance, emphasizing in Chap 2 that the government in a liberal society should enforce laws, order, property rights, since “absolute freedom is impossible,” (25) but with the economy, it should set up flat taxes, eliminate state licensure, strive for greater fairness with Social Security, and set up education vouchers rather than providing free technical education.

His great disdain towards government intervention can be depicted in Chap 3 with his recollection of The Great Depression, which can possibly be argued to be the defining factor that solidified his political economic platform. He states that “[the Federal Reserve System] exercised [monetary policy] responsibility so ineptly as to convert what otherwise would have been a moderate contraction into a major catastrophe.” (38) The Great Depression was a clear indicator of the damage done by mistakes of a few men in the government, intervening in the monetary system.

Although I feel that due to his background, he is justified to be an extreme liberal, I cannot agree with him on some of his stances, such as on voluntary contracts. In Chap 7, Friedman states that fair employment practice to prevent discrimination is an interference of individual freedom. He supports his claim by saying that if a Negro man were hired by a grocery store in a neighborhood inhabited by people who have an aversion to Negro clerks, the store would suffer losses and might close as a result. Despite the fact that the Negro man is “equally qualified in terms of physical productive capacity” (112), there is no harm in not hiring him based on consumer preferences since there has been no physical act of discrimination done. I believe that Friedman completely neglects human nature from the realm of economics, and that morality plays no part in his thought process. I believe that the government is an umpire of rules and order, as well as an enforcer of equal human rights. One must ask whether it is the government’s intervention in fair employment that is wrong or whether it is the socialization process of that particular neighborhood that needs to be reassessed.

Overall, I believe that Milton Friedman is too much of an optimist, offering solutions that seem beneficial from his viewpoint. It is hard for me to see how Friedman, raised with a good background in a merchant family, attending Rutgers, Brown, and U of Chicago, could completely comprehend the plight of those living in poverty. His offers are quite idealistic, such as the education vouchers for the entire country, or reforms on Social Security, and the flat tax system. He acknowledges that there is something wrong, but I feel like with his privileged background, he does not realize the extent at how wrong he is as well, to just expect the market to be fair, moral, and equitable, without some sort of government intervention.

Andrew Epstein

Idealistically I found Friedman to be the most intriguing thinker so far in this class. However as Ghilly said we must look into the time and circumstance in which Friedman is writing. Friedman focuses his theories on post depression politics and economics, he even goes so far as calling the Great Depression “a testament to how much harm can be done by mistakes on the part of a few men when they yield vast power over the monetary system of a country.”(50) Clearly he believes the government has too much power and he puts his faith in the public to maintain political and economic stability through the free market. He is not advocating total anarchy calling the idea attractive but infeasible in “a world of imperfect men.”(25) He wants government to serve as an umpire or rule maker making sure the goals of imperfect and greedy men do not ruin the system for those who want to use it correctly.
Unfortunately Friedman seems to believe people in the market are willing to set aside personal goals to maintain a free democratic society. This is odd considering he called men “imperfect” just pages after. I would think he would take into account the fact that all people are not driven by the same goals and that the market, without the help of government, is too vulnerable to being taken advantage of by rich and “imperfect” men. He claims those who should want the free market to succeed the most, “the minority groups” are recruited by the enemy of the free market which he claims is Socialism and Communism. (21) He should realize these people are not willing to wait around to climb the ladder of a free market economy and that the thought of equality throughout economics and politics as seen in a communist system would be vastly more appealing. These people rely on the government through welfare, or the thought of a government owned economic system in order to become equal. Because of this there is no way a complete market economy can thrive without the protection from a government watching over it.

Irina Zeylikovich

While reading Capitalism and Freedom I found myself strongly disagreeing with Friedman’s initial abstract notions, then being slightly more persuaded when he analyzed the specifics. However, my initial aversion would not let me be won over. Friedman is afraid of centralized government, he sees it (and its intervention) as a process to institute “uniform mediocrity” and by effect stagnation, but government intervention need not be solely standardization – it can allow for “individual genius” to seek its full potential.
It seems that at its foundations Friedman’s argument is really an argument concerning freedom. For him, economic freedom is an inalienable part of human freedom; since he sees the individual as the sovereign actor, the government is completely out of rights to impose any restrictions upon this economic freedom. Friedman makes a good point when discussing social security, especially in pointing out flaws such as “the subsidy [being] independent of the [receiver’s] poverty or wealth,” but ultimately his argument rests on the idea that paying to support the elderly is an imposition on the economic freedom of the taxpayer. This is where Friedman and I differ – personally I am willing to have a portion of my wages go to support elderly Americans, and be comforted in the knowledge that (hopefully) the same care will be granted to me when I am old. If that is an imposition on my economic freedom, then it is one I will gladly accept.
I can appreciate many of the arguments that Friedman makes, especially when he points out flaws in the system, which should not be ignored – however, I think relying solely on private measures and individual responsibility would leave much to be desired, especially those necessities that fall outside the scope of individual interest, like paying for the maintenance of roads.

Karina Tregub

Many of the previous comments have summarized Milton Friedman’s arguments very well, so I won’t be repetitive. For me, the biggest flaw in his advent of a laissez-faire liberal system, with minimal government intervention, is that people are not willing to give up their rights as citizens to be protected by the government. Friedman asserts that “the basic roles of government in a free society: to provide a means whereby we can modify the rules, to mediate differences among us on the meaning of the rules, and to enforce compliance with the rules”. However, he does not specify where that line should be drawn. If the government enforces rules, meaning it also punishes those that do not abide by the rules, then should it not also account for future violations, and impose certain policies to better protect the citizens against violators of the rules? The free market may give individuals more freedom, although I agree with Julia that he does a poor job actually defining freedom, but the market cannot protect individuals, provide social services that are needed and demanded, or allocate property and rights accordingly, as Ziwei also points out. These social nuances are not natural, and therefore need the government to help facilitate these rules and systems in order to create a better-functioning and fairer society. Tomas is right in pointing out also that people are not willing to spend their own time and money to ensure public services, but expect the government to make those provisions, and facilitate the fair functioning of the market. Friedman says himself that the function of the government is “to do something that the market cannot do for itself, namely, to determine, arbitrate, and enforce the rules.” For argument’s sake, he tries to downplay this task of determining, arbitrating and enforcing rules as still not infringing upon economic and social freedoms for the citizens. However, I agree with Elizabeth and others in the fact that though the government should not overstep certain boundaries, and become authoritarian; it should definitely be responsible for welfare issues that citizens themselves cannot control, since they do not have as much power as the government in arbitrating fair rules and enforcing those rules across the entire social structure. Friedman also posits that the market “is a sys¬tem of effectively proportional representation”. Although neoliberal theorists would like to believe this to be the case, many late-developing countries that have tried to adopt the free market ideals have definitely not had proportional representation, and as Ziwei points out, have only increased their poverty levels and economic distress. Therefore, as attractive as it sounds for the market to be a free and natural system that accounts for inequalities and “permits unanimity without conformity,” as Friedman states, his opinion is an idealistic one, and in practice, letting this market rip and limiting the government involvement in it simply cannot provide the outcome that Friedman underlines, at least not within the framework of modern political economy just yet.

Jason Edwards

I say Julia makes a good point. While skimming this read over and over again I could not find one shred of eveidence that I saw to be usefull. Now I have been told that I am quite stubborn and think that America is evil in the way we exploit other countries, but I do however strongly believe that an outside force should regulated the market. Now sadly however, the only force that I think is capable of doing such a thing it government, however I think the government rule will be much more benificail in the long run over “no” rule. Friedman’s argument at times seemed unimaginable to me at times, (I guess this is where my stubbornness kicks in). I just don’t have enough faith or trust in anyone or anything having to do with big companies or corporations to just let them play about all unsupervised. Julia’s words are “his worst mistake in my opinion was his naïvete about human nature.” I could not have said this better my self. Friedman seems to hope for the same ideological faithin people that Norman Angell hoped for, (which I pointed out in an earlier assignment, was not a very bright idea).

Sarah Dryden

Friedman’s philosophy is classically libertarian; or as he calls it, liberalism in its “original sense – as the doctrines pertaining to a free man.” This idea of government and economics champions the individual’ free will, and the right to make his own choices. Friedman argues that the government is a system put in place by society to organize individual actions, rather than dictate the actions of a societal body. Government, he says, is for the purpose of protecting its citizens’ individual freedom from foreign enemies and each other, or for accomplishing tasks too difficult for individuals. For Freidman, the role of government in economics and politics is strictly as an “umpire,” because the free market can accomplish success much more efficiently than could a centralized plan.

This idea of limited government functions has always been an appealing one to me; I was always a believer in being “left alone.” This stemmed, I believe, from beliefs and values of self-reliance and personal responsibility that I developed growing up. But something as simple as learning how to take care of myself in college has given me perspective on this narrow view. Though many of Friedman’s paragraphs were distinct echoes of my own philosophies growing up, I appreciated those sections where he explored the use of government to combat things such as what he calls “neighborhood effects,” and what I call negative externalities (economics). The entire book seemed a thoughtful exploration of the limits of a self-reliance creed in accomplishing the most good for the most people with the most fairness.

However, Friedman is not a compassionate soul. I can only believe that this limited view is based on something that severely limited (and still limits) my own past beliefs: it is very easy to look around the world at our homeless and poor and say, “you must not have worked hard enough. I know many people who worked their way up from the bottom, and if you can’t, you deserve to be destitute.” I know that growing up in a comfortable middle-class household was a huge empowerment in itself; my parents took for granted that I was smart, that I would go to college, and that I would be successful. It is much harder to have such ambition and drive if one is beaten down since birth with the worries and troubles of poverty. Not everyone can do it, and even if libertarians call this “weakness of will,” I do not believe in a Darwinian society where weak citizens are doomed to failure. I do believe in incentives and rewards for those who innovate and move ahead, but a death sentence for those not lucky enough to be born capable is wanton and inhumane.

Polanyi and Keynes recognized that the ruthless live-or-die competition of strict capitalism was dangerous if left unchecked. Friedman’s fear is that the government will take over if given too much power, compromising and lowering efficiency and stifling innovation. Both of these views are valid, but each can lend strength and practical credibility to the other with compromise. Government should indeed be kept to essentials, and the press for power checked wherever it threatens to become dictatorial. However, government initiative can also do much to alleviate the distress of our fellow men, while making it easier for them to personally succeed. For instance, I believe that education should be available to all. If the classic libertarian stance on privatized education be implemented, children would not all start out with the same opportunities, and it is this opportunity to succeed that everyone deserves.

Kieren makes an interesting point in saying that Friedman does not factor in human character flaws like greed, corruption, etc. into his recommendation to “let the market rip.” I think that this is wrong; the general assumption of unbridled capitalistic competition is that humans will attempt to overcharge, embezzle, and generally cheat customers. However, with enough competition for business these evil tendencies will be “checked” as more fair-minded businessmen attract customers. It is socialism instead that seems to rely on a blind faith in human adherence to ideals over practical gain. While capitalism acknowledges men’s greed by making it the motivating factor in exchange (Friedman’s “both parties must gain” stipulation), socialism clings to the hope that people will always work for the intangible “general good will” without gaining individual compensations. In a family, this could work because every member has genuine goodwill and love towards the others. In a country of millions, each citizen cannot be expected to love every other enough to give up his own wish for better living.

Christina J. Adranly

Agreeing with Ziwei, I think it is most important to acknowledge that Friedman does NOT advocate the end of the state. This view is overly simplistic and assuming so can be problematic when trying to dissect his argument. What Friedman does advocate, however, is a limited, decentralized government based on the fact that government regulation rarely lives up to what it promises, and often does more harm than good. Some of his specific postulates as to the role of the state include the allocation of property rights, the enforcement of law and order, and economically/fiscally, the prevention of monopoly and the control of money.

Friedman’s belief (for me) is ideal in theory. I do not think the government should concern itself with economic operations, because the market can and will regulate itself through free bargaining and trade. As long as citizens have and can keep their property and know that justice will be served if their property is taken, and as long as prices do not increase unfairly and excessively due to monopoly, social stability should ensue. In liberal democracies, it is necessary for income inequality to exist to some extent, and the government should not negate this fact by force. This vigorous redistribution in fact becomes a hindrance to economic freedom.

In practice, though, Friedman’s idea does not necessarily ensure economic and social freedom. As Eric notes, his theory can only function when it is assumed that all people have equal education and conception of law. This clearly isn’t always the case; people inherently do not share these characteristics. So, practically, the government should assume the role to provide equal access to information in order to standardize thought process and ensure that despite economic or social class, people can obtain the same information which they can then apply to make educated economic decisions.

Andrew Gurwitz

In reading Milton Friedman’s theory of why we should “let the market rip,” I found myself constantly thinking back to Polyani. I find that one of Friedman’s first major flaws in arguing that a truly free market will bring about true freedom, is not appreciating Polyani’s claim of how the free market traps freedom in a free market, where everyone is compelled to live within its boundaries. Friedman argues that almost everything should be decided by the free market, with the exception of the role of government as rule-maker and umpire, control for “neighborhood effects”, control for technical monopolies, and national defense. I find that in granting government these responsibilities, no line of distinction of where government responsibility ends and free markets rips fully exists and there is no indication that governments will resist, as they have not been able up to now, the urge to regulate. Additionally, Friedman cites the example of the constitution where consensus en masse is necessary, but it is hard to see how that might be conducted and government structures built in a society that Friedman writes about, in fact, it seems a more centralized government must precede the truly free market in order to establish norms of freedom, property rights, and dispute settlement.

Primarily though, Friedman traps people in a free market where he believes they will be best served as each man can have what he wants, regardless of minority or majority. Friedman’s arguments are based on the concept of “bi-lateral, voluntary, and informed” transactions, but if our modern economy tells us anything, it is that Friedman fails to take into account the role and power of large corporations and those who hold commodities. With the division of labor that comes into being with the market economy, people become dependent on others for necessary goods. Large companies have the power to extort and determine prices and small minorities rarely have the means to make these transactions voluntary or equal. Also, Friedman describes a free-market as eliminating discrimination by offering choices based solely on economics; however, it is clear today that the most prevailing discriminations are those based on socio-economics. As Tomas states, a market that includes firefighters would only help the rich. As would be the case with vouchers, those who provide services would almost exclusively service the rich and there would be a constant disparity. As Kiernan points out, Friedman’s response that one may simply move in a free market, ignores the moving costs that the poor will almost always never be able to overcome.

Dave Koken

Friedman argues that government’s role in the economy should be limited to creator of the “’rules of the game’ and as an umpire to interpret and enforce the rules decided on,” because he believes that a system of “competitive capitalism” will not only create economic freedom but also political freedom. Political freedom, he states, “means the absence of coercion of a man by his fellow men.”

However, a convincing arguments presented by many of the “social-democratic” authors we have read dispute the claim that coercion does not exist in a free-market system. In completely free markets, some will inevitably gain more than others and will thus achieve vastly greater economic power relative to their peers. The problem, then, is that vast disparities in wealth, when completely uncontrolled, create huge differences in bargaining power and act in direct opposition of Friedman’s presumption that transactions can be “bilaterally voluntary and informed.” The differences in economic power created in a “competitive capitalist” system can, in fact, create relationships clearly denoted by coercion. Bargaining power, which is created by economic wealth, allows certain parties to control transactions and impose their will on lesser parties. The only way that fairness (which is an essential aspect of freedom) can be maintained is by government extending the “rules of the game” into the economic arena and controlling what contracts can freely be engaged in

Furthermore, Friedman claims that “economic…promotes political freedom because it separates economic power from political power and in this way enables the one to offset the other.” But it seems that this statement is inherently untrue. Although a completely free market system may have a formal “separation” between the government and the economy, he fails to realize how unregulated, unrepentant freedom of economic action can directly create situations so unequal as to eliminate the ability of many individuals to effectively participate in the political process. Lobbying, campaigning, advocacy, etc. are all political processes that are very dependent on one’s economic conditions. So to say that economic freedom generally promotes political freedom is too much of a simplification because it can definitely have the opposite effect as well; giving certain people the means to influence the political process far more substantially than others.

“Competitive capitalism” is a key component of freedom, but some government intervention is necessary to promote fairness and equality of opportunity. The government must walk a fine line with its interventionist tactics to create an optimal blend of complete freedom of action and a regulated fairness and equal opportunity.

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