Friedman wrote Capitalism and Freedom in 1962. John Lovett writes,
that "He really established himself as a unique combination: A highly
intellectual thinker and a popular writer, with this work" (Source:
Lovett, John, "A Short Milton Friedman Biography", TCU Web Site,
<http://faculty.tcu.edu/jlovett/about_econ/Bios/Friedman.htm>).
"Capitalism and Freedom" is classic in economic literature, discussing
Friedman’s conclusions and observations on the aspired economic
structure. Lovett adds, that in this book, "Friedman argued that
government should attempt to harness the Invisible Hand (i.e. market
forces) in curing social ills. He argued for the negative income tax,
school vouchers, and floating exchange rates among other things"
(ibid).
Dan Ross writes, that "The basic concept of this book, like F.A.
Hayek’s Road to Serfdom, is that governments shouldn’t play too large
a role in our society and that greater government involvement is a bad
thing because it keeps the free market from working" (Source: Dan
Ross, "Capitalism and Freedom" - Book Review, BetterBizBooks.com,
<http://www.betterbizbooks.com/bb/capitalismandfreedom.htm>).
Friedman is a great supporter of the free market and minimal
government theory, and that reflects in the issues you've mentioned.
Monetary Policy
---------------
- Monetary policy should be aimed at slowing down (or stopping)
inflation.
- That should be done by cutting governmental spending.
- It should be done because "inflation is highly destructive and that
only monetary policy can control it – but that monetary policy is a
heavyweight instrument and cannot be used for short-term economic
management." (Source: Adam Smith Institute, "Milton Friedman", The
Adam Smith Institute Web-Site,
<http://www.adamsmith.org/friedman/home.htm>).
- This book "was heavily responsible for economic thoughts on monetary
policy in the 70’s / 80’s, which enabled the U.S. government to slow
down inflation which was running rampant due to the oil embargo in the
mid 70’s" (Ross, op. cit.).
Education
---------
- Education is central to Friedman's thought, and he devotes the sixth
chapter only to this issue.
- Education is essential for a free market democratic society - "a
stable democratic society is impossible without a minimum degree of
literacy and knowledge on the part of most citizens" [Source: Milton
Friedman, _Capitalism and Freedom_, p. 86].
- However, public (government ran) education lacks many important
functions.
- It encourages underachievers and discourages the overachievers, it
educates to mediocrity. "Government involvement in this area has led
to so many problems, primarily because of its rigid, “one size fits
all” approach that often punishes otherwise high performers (both
students and teachers) and rewards underachievers" (Source: Cary,
Bryan, "Milton Friedman and the Glory of Capitalism" - book review,
Epinions Website, <http://www.epinions.com/content_76574396036>) .
- Ideally, there would be no government involvement in education.
- Yet, the system of public education is "is so entrenched that it
will be very difficult to change it" (Cary, ibid).
- The solution is school vouchers, and letting the parents choose a
school in free market atmosphere.
Discrimination
--------------
- Discrimination reduces profits (when employers choose people because
of their skin-colour, gender, etc., they might lose more profitable
workers)
- In a free market, employers would not be discriminating, because
that would hurt their competitiveness
- The state actually perpetuates discrimination with its laws, because
regulation would mean that those who are "undesirable" would not be
able to pay more to get services.
(See: John Maloney, "BEE1013 Introduction to Political Economy",
University of Exeter Web-Site,
<http://www.ex.ac.uk/sobe/Courses/BEE1013/Materials/11-Handout.pdf>,
p. 2)
Monopolies and Social Responsibility
------------------------------------
- "Monopoly implies absence of alternatives and thereby inhibits
freedom of exchange" (Source: Online Magazine, "Capitalism and
Freedom" - Outline of the book, Online Magazine Web Site,
<http://www.online-magazine.com/careertapes/audiobooks/audiobook_descriptions/capitalism_and_freedom.html>
- Monopolies exist because of failure to create a "real" free market,
because of "market inefficiency".
- Private monopoly is a "least of the evil", while governmental
monopoly is disastrous: „ - „I am inclined to urge that the least of
the evils is private unregulated monopoly wherever this is tolerable.
Dynamic changes are highly likely to undermine it and there is at
least some chance that these will be allowed to have their effect."
(Friedman, op. cit., p. 128); "Probably the most important source of
monopoly power has been government assistance, direct and indirect."
"Perhaps the three clearest examples are tariffs, tax legislation, and
law enforcement and legislation with respect to labour disputes."
"Tariffs have of course been imposed largely to 'protect' domestic
industries, which means to impose handicaps on potential competitors.
They always interfere with the freedom of individuals to engage in
voluntary exchange. After all, the liberal takes the individual, not
the nation or citizen of a particular nation, as his unit. Hence he
regards it just as much a violation of freedom if citizens of the
United States and Switzerland are prevented from consummating an
exchange that would be mutually advantageous as if two citizens of the
United States are prevented from doing so." "Clearly ... tariffs do
foster monopoly. It is far easier for a few firms than for many to
collude to fix prices, and it is generally easier for enterprises in
the same country to collude than for enterprises in different
countries." (Op cit. p. 129)
- Social responsibility is not exactly the business of the businessmen
- their main obligation is to the share holders. If the managers do
anything that is not profit yielding with the money, which is like
theft (see p. 133-4). See also
http://www.mgmtguru.com/mgt499/Friedm.htm
- "Individuals pursuing their own interests and using their "invisible
hand" of choice (Adam Smith) in a marketplace will ensure that social
benefits are achieved. Firms intervening to bring about certain social
ends are not capable of achieving results as good as those achievable
by government or through the processes of the invisible hand."
(Source: Chris Jarvis "Capitalism, the Entrepreneur and the Invisible
Hand?" BOLA project Brunell University Web Site,
<http://sol.brunel.ac.uk/~jarvis/bola/ethics/capital.html>).
Occupational licensure
----------------------
- Occupational licensure is bad for the society, because it prevents
the entrance to the market of people who could otherwise compete. See
p. 148.
- "Friedman says that licensure almost inevitably becomes a tool in
the hands of a special producer group to obtain a monopoly position at
the expense of the rest of the public." (Source: Melvin D. Barger,
"Occupational Licensure
Under Attack" Liberty Haven Web-Site,
<http://www.libertyhaven.com/personalfreedomissues/freespeechorcivilliberties/occuplicen.html>).
Various programs to deal with inequality of income, social welfare and
poverty
------------------------------------------------------------------------------
- "Two major measures, graduated income tax and inheritance taxation,
in Friedman's opinion:
1) led to minor narrowing of differences in family income;
2) Has introduced arbitrary inequalities of incomes between persons
within the same tax bracket;
3) Undetermined overall effect on equality of treatment.
- "Mitigated effects of Graduated Taxation: on redistribution of
income due to the following:
1) Increased inequality of pre-tax income distribution
2) Tax evasion
3) Impedes accumulation of wealth"
- Friedman suggests instead: "Flat Rate Tax- would be an effective and
ethical alternative system of taxation since:
Noncompulsory-The masses would no longer be able to impose their will
on the very wealthy
Graduated- Equality is built in and achieved through higher absolute
payments by wealthy
Higher Revenues- Result since there is no need to redefine incomes and
engage in tax evasion"
(Source for all three points: Michael A. Morales, "Chapter X-The
Distribution of Income" CSU Pomona,
<http://www.csupomona.edu/~fbarreto/505/friedman%20ch10.doc>).
- In other words, the welfare and tax system actually hurts the poor.
I hope that answered your question. Please feel free to address me
with clarification requests if you feel that you need one, before you
rate the answer. |
