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September 18, 2007


William Chen

Milton Friedman's concept of letting the marketing rip shows his belief in pure capitalism and having no government intervention. He believes that this method is a form of extension on people's rights, hence the word "Freedom" in the title. My biggest disagreement with his views are with regards to his suggestion of having a flat tax and eliminating a few social services such as welfare and the social security system as mentioned in previous posts. The flat tax would only widen the gap between the rich and the poor. The people at the top percentile getting taxed at the same rate as the people at the bottom percentile, in terms of salary, would only place a burden on the people at the bottom percentile. Moreover, eliminating those social services on top of that would widen the gap even more. If the welfare system is not working efficiently, and some people "take advantage" of it, at least it helps out the people who actually need it. I would much rather try and help ten people, knowing that at least five of the ten are helped and the other five are just taking advantage of it, than not helping anyone at all.

Yelena Bakman

I think that strong institutions are very important. However so is a limited government. And the combination of the two seems to be end goal that Friedman is trying to reach. He believes that currently, our government is dabbling in too much and therefore everything that it is doing it is not doing to the best of its ability. Unlike most posts, I have decided to agree with Friedman, momentarily, on the side against Social Security, since this seems to be the biggest point of disagreement with Friedman’s argument. His points are true in the fact that this society was created by entrepreneurs who lived in a previous system that they didn’t like and moved from it. This tradition, whether we like it or not, is what the country considers the ideal, along with Friedman. Coming from this perspective, the retired should either have planned themselves or should have family or friends that support them since that is what a responsible person with foresight would have done. If we do live a world of people with foresight then and people did plan for at time when you didn’t have to work, then we would have no need for Social Security.

There are two things wrong with his argument against Social Security. First of all, people are not as foresighted as we would like to think we are. Most do not plan their finances well into their old age. As a broker that I know told me, he has people coming to him at 60 to ask how to plan their retirement. Second, people live longer than they expect, so even if they do plan for retirement, they don’t plan for long enough so eventually their private retirement plan can run out. Government sponsored Social Security helps to alleviate the hit of losing their income due to the fact they live longer or support the little amount that they have put aside.

I am very glad that Carolina posted about the negative income tax because personally, as I was reading it, it did not make sense. If anyone can clue me in it would be very nice of you.

I found it interesting that Glory included Sachs and Easterly in her argument. The only time I came across him was in an article/book that he wrote with Bloom regarding Sub-Saharan Africa. The two focused on the past and geography to explain why Africa was in such a bad situation and not institutions. In the same class, Easterly was mentioned several times as well and he does bring up key points regarding the problems of the institutions that deal with Africa, such as the lack of accountability and the prevalence of corruption. He also mentions how things that aren’t as institutional, like diversity in ethnicity have an affect on growth. Overall, my interest came because it was a different interpretation to how I have seen these author’s previously.

Joyce Yawa Amoah

Milton Freidman hates government involvement in the market, his notion of a free market is non- governmental involvement yet he contradicts himself when he says “the existence of a free market does not of course eliminate the need for government. On the contrary, government is essential both as a forum for determining the “rules of the game” and as an umpire to interpret and enforce the rules decided on” (15). If Friedman is convinced that the government is bad for business and should stay out of the economy, then why invite the government to play the umpire. In all games of sport the role of the umpire is a very powerful one. In some games they are referred to as the referee. These are ordinary people but once appointed as umpires/referees have the political power to decide the fate of the game. They have the legal right to end the game or throw a player out. My confusion with Friedman is that why give such a powerful position to the government in the economy if government involvement is that detrimental to the players and to society as a whole?
The truth is Friedman knows that he needs the government to play the umpire because individuals if left on their own, to be judge and jury, will create a mess, a mess that can lead to a total collapse of the entire economic system like the Great Depression. Well, Friedman is convinced that “as a result of relatively tight money conditions imposed by the Federal Reserve System in an attempt to curb “speculation …in this indirect way, the stock market may have played a role in bringing about the contraction…The stock market crash …had some indirect effects on the business confidence” (51).
Friedman is not alone when it comes to blaming government for the poor judgment of individuals and corporations in the economy. The Kenneth Lays and his team of executives were equally convinced that if government had not interfered in the internal management style (fraudulent) of Enron, the Enron stocks will not have collapsed, and investors would not have lost their life savings.
It is so easy to for people like Milton Friedman and the global elites to advocate for free market in its totality. What they need to know is that the free market concept as practiced in the global economy or the one world economy today, is creating environmental disasters, unemployment, and human right abuses all over the world, because organizations like the WTO are promoting the removal of all tariffs and no government controls on local economies.
It is interesting that Jeff Sachs is being metioned in the same breadth like Friedman. I will like to say that just like Friedman Sachs in the past advocated for free market removal of all tariffs and privatization of all government owned and operated industries. Fortunately, for people of the Third World, Sachs has realized that he was very wrong. Now he is trying to make up for his wrong by drawing the world's attention to the abject poverty that his past policies created.
Friedman’s market concept of the survival of the fittest is very selfish and Utopian to say the least.

Kent Yamane

In Milton Friedman’s Book “Capitalism and Freedom” he talks about many changes that should be made and how there needs to be less regulation in markets. But I think that this will end up hurting society as a whole. With the absence of regulation the people that will benefit are the upper class of society. The poor, who already need assistance, will not receive the help that they need. He talks about the alleviation of poverty yet many of the reforms that he talks about will make the poor even poorer. Such as having a flat rate of taxation. No matter your income you will be taxed the same, that means the rich who have the abundance of money are being taxed the same as the people who are living in poverty, this just doesn’t make sense to me. Also, alleviating regulations such as minimum wage would absolutely hurt those that are not educated enough to obtain the high paying jobs. Yes, it is unfortunate and maybe their fault that they do not have the education to be in a high paying job, yet it is the responsibility of the government to try and provide for the betterment of all of its citizens not just the rich.
I somewhat disagree with Miranda when she says that if we “follow Friedman's advice and abolish rent control, minimum wage, social security programs, and public housing, it would cause a lot more people to start saving and reduce spending”. Yes if people are not paid as much and they do not have reserved cash allotments they spending will be reduced, but it may be reduced to a point where they are not able to purchase the necessities of life such as food and shelter. These are necessary and require the bulk of a persons wage, so I believe these regulations are put into place to help those that are struggling to pay for the necessary provisions of society.

Megan Roberto

It is important to remember the context in which Friedman writes. Publishing the book during the 1960s, preceded by the 1950s a time of unseen growth and suburbia, his radically different philosophy comes at a time of relative ease, not hardship. It is not radical, in the sense that we have not seen these liberalist ideas before, but radical in that he was among the first to shift towards openly advocating capitalism after the horrors that were the Great Depression and two world wars. Those previous events created the system that he criticizes in his work Capitalism and Freedom.

He argues that "economic freedom is also an indispensable means toward the achievement of political freedom," and those that wish to change anything are capable because "it is only necessary to convince a few wealthy people to get funds to launch any idea, however strange, and there are many such persons, many independent foci of support." However as Miranda points out, China negates this assumption since it is a highly oppressed but a capitalist society. Thus economic systems do not always bring about the political freedom Friedman desires. The system Friedman seeks depends on the absence of coercion, and in China this is no less present than those existing within socialist societies. This contradiction in his argument then raises the question of conformity that I found interesting within his work.

Friedman argues that "the characteristic feature of action through political channels is that it tends to require or enforce substantial conformity," while action through economic means can be more varied and creative since there can be multiple millionaires, multiple areas of power. Yet, the capitalist system is demanding developing nations to conform to its economic ideals without benefiting the political freedom of the people. As others have said, Friedman lacks the depth of understanding the human implications of economics and the illusion of laissez-faire and free markets have always been at the expense of other humans.

Wei Shao

It seems that Kent took the words right out of my mouth. As Kent pointed out, Friedman's proposed reforms would only widen the economic gap between the rich and the poor. Even though Friedman indicated that economic freedom is indespensible and required to achieve political freedom, however, what he envisioned will not grant econmic freedom, but rather a bondage and enslavement of the poor as the rich take over the soceity.
Having taken courses on international monetary policy and tax accounting, I have many disagreements with Friedman's cases. Let's first look at his stand on government regulation of international monetary policy. He advocated against the Bretton Woods system and government intervention in monetary control in general. My only response to this is "idiotic." The world economy is a delicate scale being balanced by interest rates, exchange rates, natinal outputs, and domestic money supply. The alteration of any one will not only affect the domestic economy, but the global economy as a whole. What Friedman wants is to take the economy off the gold standard and have free floating exchange rates, and to have the Fed raise the money supply by a constant 3% to 5% per year. First of all, if the world were to be pegged to a free floating exchange rate, the world trade system would be in turmoil as inflation and depreciation would undoubtedly engulf the world. And if the Fed were to increase the monetary supply by the constant rate per year (perhaps to keep up w/ the inflation rate), it would take away any means of saving the economy by means of monetary policies, and would result in a drop in interest rate and an increase in exchange rates (money depreciates, more inflation...). The point I'm trying to make here is that the world needs government oversight to ensure that the economy is operating at full capacity.
Secondly, in regards to the taxes. Friedman proposes a flat tax rate so that the rich would not exploit the progressive tax system. What this would result is a lower disposable income for the lower income range. (What progressive tax does is that it taxes less for lower income, and 0 tax under a certain threshhold, to ensure that the poor would still have money) So by Friedman's model, the poor would be taxed exactly the same as the rich, leaving little mark on the richman's wealth while depleting while depleting all the poorman's savings. And in addition, Friedman wants to abolish rent control, public housing, minimum wage, free education, and social security???? How will the poor be able to afford any of these?? How will the society be equal under such circumstances??
Friedman envisioned a world economy free of government regulation so that the free market can prosper. However, in my perspective, I believe that governemnt regulation is not only beneficial, but is also necessary for a free market economy. Government oversight does not hinder free market, but rather it ensures the existence and productivity of a free market; a free market economy is only possible due to governemnt cooperation and must be maintained by the government lest it should collapse on itself.

Zaheer Cassim

I believe what Kent is saying is true. Milton Friedman does not offer a concrete solution in solving poverty; merely throwing money at the poor does not assure that they will have better lives. Though, I think Friedman does make some good points. Friedman’s chapter on occupational licensure has some truth to it, in the sense that lawyers, doctors etc. gain some financial gain from having these committees that give away licenses. By restricting the amount of people that can enter the field, you create less of a supply and thus increase the prices.
Friedman also talks about inequality in the tax system, which I think holds some truth. Some wealthy individuals manage to avoid paying their fair share of taxes leaving the other classes the burden of carrying on a system of governmental spending without adequate resources (172). Friedman’s solution, everybody pays 23.5 % in taxes. Now, I am not an economist, but I do think there is a growing disparity between the rich and the poor. Is Friedman’s solution the only way to fix the problem? Probably not, but his thoughts are a catalyst for others to think about other solutions.
In general though, I think Friedman is insensitive to the social needs of people. An example of this is Friedman’s theory on public schooling. Much of American history was plagued by racism. The racial mixing of schools was a means to bridge gaps between the races and to build a unified nation. If Friedman philosophies, letting the market decide the education system of the individual, many racists would keep their children in segregated schools and there wouldn’t be any mixing of any religions in many regions and even worst, there could be no mixing of the sexes, which I unfortunately had to endure. This breads a society of hatred and intolerance. As Karl Polanyi described in his book, “The Great Transformation,” it is not for the market to become life, but to facilitate it. Under Friedman’s theories, the market becomes more important than the general masses. The market becomes this all knowing decision maker that takes on the shape of a dictator, in the sense that it does not care for the wellbeing of its people, but that of itself.

Ellen Dobie

While Milton Friedman makes a convicing argument regarding economic and political freedoms with a capitalist society, I find his logic falls short of the realities of our world.
It is important to note that while Friedman's arguments have many shortfalls and reality gaps, his logic was received widely by the financial and political power base of the time and converted into widespread policy. Friedman published this novel in 1962, just a decade before the International Monetary Fund redefined its role as the great arbiter of global financial liberalization--indeed, a movement that had hopes of creating greater political and economic freedoms on a worldwide level. However, these liberalization efforts fell short (for a variety of reasons) and ended up benefitting the global North to a large degree while further impoverishing the global South. Milton Friedman's logic, as applied by financial liberalists in the 1970s and 80s, falls short within a global system. Factors such as the Oil Embargo, Saudi petro-dollars and financial interests of Western banks (all of these factors being based in human vices of greed and ego) debunk Friedman's utopia.
Efforts to create a society in which the market "rips" were resumed in the 1990s with the sweeping global neoliberal movement. Free trade policies such as NAFTA (and the current CAFTA)try to give more strength to a self-regulated market. These policies fail to achieve their ultimate objective of a global trade system in which all countries participate based on their respective comparative advantages for many reasons. 1) Neoliberals (who we can consider as mini-Friedmans) assume that, left to its own devices, the market will make less mistakes than the state. However, these thinkers assume the market to be a self-functioning mechanism (an "invisible hand" of sorts) and don't view the market as Polanyi does: as an extension of human activity. Humans create and drive markets, and consequently these markets are prone to have extreme faults. The existence of a "market" does not mean the existence of equal conditions for all; in fact, it seems that the more free trade policies that are passed, the more inequality erupts. Pushing "free" markets upon others, especially in a global system, seems to only exacerbate the inequalities that originally existed. Latin America and Africa are even further behind in their development now than they were before free trade and financial liberalization policies. East Asian tigers were able to constructively interact with free markets, but only as a result of heavy government intervention in their development plans. It seems that Friedman's logic can be applied to already industrialized and developed nations, but his formula falls short in explaining developing nation's quandries in a globally competitive system.

Tal Yeshanov

I believe my classmates have summarized my opinions quite well. I would agree with Miles’ argument that it does not necessarily serve the people’s best interest if the government takes money from the citizens to use towards something else. However something I did like within Milton Friedman’s writing is when he commented on the government interactions that are allowed or necessary within the market. This is in response to a few of my classmates. The United States believes in American Exceptionalism, this thought came about because businesses like oil, transportation, the railroad system and communication systems were in power before government institution were. Americans believe that they are exceptional because they do not need a government to regulate them. This flows into the idea that if the government should not be involved then why should the government care about providing its citizens with a superior system of health care. On that note, another thing to consider is that Milton Friedman thinks that the market should “rip” by allowing it to not be tamed which goes against the thoughts of Keynes and Polyani. Milton believes that it is in the interest of a corporation to profit maximize and thus the market would act in a way that is agreeable with what the public wants. If a company acts in a way to profit maximizes that hurts the community around them then the community will respond with anger and thus the market would be able to regulate itself. All these ideas should be considered for their concept of balance because it is important to consider that government regulation is not always favorable and sometimes it can in fact hurt the very cause it is trying to help. While I do believe it is important for the government to help those in need, sometimes when people are in need, for example, putting a price ceiling on something or setting a minimum wage can hurt the individual so in some cases letting the market rip would not always be the ideal solution.


For arguments sake, I am going to play devil's advocate and support Friedman. Although having the economy 'rip' is clearly the signs of a socialist hoping for economic change and should not be the solution, it does provide interesting grounds.

If no regulation is to exist in the market society and monopolies and large firms are created and dominate the market then the gap between rich and poor will ensue, i will agree to that. But, Friedman clearly states that the market will 'rip' and reach back to zero.

When this economy rips, it was my assumption that the market will correct itself to the best intentions of the community. We must assume that people are inherently greedy but till learn from their mistakes. After an economy is to rip, ie the mistake, the people within that society will reach zero again and will continue a lower level of existence to avoid. Thus self regulating and not regulating on the state. So on a technicality one could say that the market will be regulated but very much indirectly.

Tying into racism and the belief that a tax system that is unfavorable to any in lower brackets because it is not progressive enough is skewed to the romantic view of larger equality. The only one way a person can say that they are equally endowed as the other is through a like tax. If the market is to rip and return to zero then the community will be able to be taxed in kind, and after all reach zero, there will be a natural progression of advancement in society, improving of ones self and if polarization ensues it will only be natural as that is animal nature to have an alpha and omega.

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