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September 18, 2007


Stephanie Loville

After spending weeks reading and discussing the writings and political economic theories of those such as Polanyi and Keynes I have found that I was somewhat biased on my thoughts on the role of government in the realm of economic life. I was highly convinced by Polanyi in his argument that the market alone fails to deliver freedom and prosperity and the role of the government is to correct in some sense the failures of misgivings of the market. So when I look at the argument that Friedman makes I am quite unconvinced that the market is able to correct itself and is able to bring about freedom and prosperity in and of itself. This does not mean that the government is the enemy nor do I believe that the government is most effective in correcting the ills and failures of the market. I do feel that something, some source of legitimate authority is necessary to regulate control over that economic issues and disparities that arise due to the fact that not all people start off in life at the same point. Disparities in education, class, living conditions and various other factors are reasons which are out of the hands of many in our society and often pose negative economic barriers which in turn limit freedom and prosperity.
I feel that it is a utopian ideal to say that the market will correct itself in a way that will bring the greatest good to the greatest number of people. Without at least a limited role of government in the sphere of economics, is to some degree anarchy, as the economic decisions undoubtedly affect daily social life.
Finally, I feel that his biggest flaw lies in his argument that “economic freedom is also an indispensable means toward the achievement of political freedom” in addition to being a “component of freedom” as an end in itself. First of all I agree with Hye in that economic freedom does not necessarily lead to political freedom. But I would also like to raise the question of how can you say that the market itself ensures economic freedom for all? Sure the market system offers economic freedom to those who are informed and educated on how the market works. Economic freedom is provided for those able to participate in it. But what about those who lack the skills or education to do so? What about those living in poverty and lacking the political resources to request what is needed for them to actively and effectively participate in the market? I think that often, as Polanyi argues politics and economics are inextricably intertwined more than we with privilege understand. The two freedoms go hand in hand, one often cannot hope for economic freedom without first gaining a measure of political freedom (or at least some sort of government protection/intervention economic affairs).

Lisa Xu

Friedman’s argument for economic freedom is divided into two parts: economic freedom as an essential component of overall freedom, and economic freedom as a means of preserving political freedom. I think that there are flaws in his approach to both of these arguments, but the more fundamental flaw is perhaps found in his advocacy of economic freedom as being of essentially the same nature as civil and political freedom. The problem with this equation is that we readily accept limitations on civil and political freedom when it endangers the lives of other people. The old example of shouting “FIRE!” in a crowded movie theater illustrates how easy it is to do so. There is a proscribed limit to the freedom of speech when the probability of someone getting hurt is high enough. Most people would agree that that this limitation is hardly oppressive (although there could be a debate over the appropriate penalty for shouting “FIRE!”).

While Friedman acknowledges that there are limits to economic freedom, he limits these to the possibility of physical coercion, and certain basic market failures only: monopoly and negative externalities. However, he presupposes a smaller degree of economic interdependence than really exists. The economic freedom to keep the entire sum of one’s income might seem fair to that person, but the loss of tax revenue might mean that another person would be deprived of an essential public service. In our society, an individual’s economic freedom (say, to earn enough income to consume) is actually enabled by the concession of other individuals’ economic freedom, whether through taxes, minimum wage laws, or a requirement to disclose information about mortgage payments. Unlike political or civil freedom, it is impossible to grant everyone the same high degree of economic freedom, without eventually eroding economic freedoms for some people, due to unequal bargaining power.

Friedman’s analysis of how state control of the economy could lead to restraints on political freedom makes a bit more sense, but there are plenty of examples to show that democratic socialism isn’t an oxymoron. He also makes an interesting argument that inequality actually promotes subversive political activities, since they need to be financed by wealthy patrons. However, this does not guarantee that the wealthy patrons won’t simply finance the cause which does the most to advance their own interests (say, the reduction of taxes on the top income bracket), and because they are the ones who have access to political officeholders and the money to lobby them, they can unduly influence public policy. Economic freedom, by producing inequality, can thus erode democratic forces.

Christiaan Strong

Friedman argues for decreased control over the economy, which he believes will be coupled by greater political freedoms of the citizens of the state. He main arguments address the points of income distribution, income taxation, social welfare measures, and fiscal policies of the state. Friedman contends that current fiscal policy, consistent with Keynsian economics, does not provide the most benefit for the economy. Friedman’s findings indicate that an increase in government expenditures is not consistent with the results of found by using the Keynsian multiplier theory. Rather, Friedman finds that increase in governmental expenditure yields a rise in GDP that is about equal, not a certain factor greater, as the Keynsian multiplier theory would find. While this claim made by Friedman is justified by his own data, some of his other theories of capitalism and freedom of the market do not necessarily reflect greater political freedoms of the state’s citizens.
Friedman’s biggest flaw, as others have mentioned, is his faith in society’s ability to make the right decisions based solely on his belief that they have quality judgment. While I don’t believe that anyone would intentionally make a decision that is detrimental to their finances, or any other interest they may have, people are constantly failing to recognize the harmful positions they put themselves in until it’s too late to correct them. And, his theory of greater political freedoms being coupled by decreased government control of the market is not quantitatively proven but rather is simply one of Friedman’s quantitative theories.

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