Feb 14 2009

Lest we forget… Milton Friedman on the power of free enterprise

Milton Friedman: “there is no alternative way so far discovered of improving the lot of ordinary people that can hold a candle to the productive activities that are unleashed by the free enterprise system”

With all the talk of government spending, fiscal stimulus, nationalization of the financial industry, the “new new deal”, infrastructure, education, health, “job creation”, and on and on… I thought it wise to share this bit of wisdom from the greatest advocate of free markets of the last 100 years, Milton Friedman.

AP Economics teacher Michelle Hastings sent the link to this video to the AP Econ email list. Thanks, Michelle.


Discussion Questions:

  1. What is Friedman’s view of command economies?
  2. Does Friedman imply that “greed is good”? To what extent is greed an important component of free markets?
  3. Do you think Milton Friedman would support the current $800 billion fiscal stimulus package being debated in Washington right now? Why or why not?

About the author:  Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course. Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this author

6 responses so far

6 Responses to “Lest we forget… Milton Friedman on the power of free enterprise”

  1. […] Click here to view the embedded video. […]

  2. Virginia Hasenmeyeron 02 Mar 2009 at 2:26 am

    I thought this interview was very interesting. We also watched it during TOK with Mr. Doolan, because we were discussing Reason.

    I think the point of Friedman is true. I think that people are greedy from nature, therefore it is impossible to have a world without greed. Friedman says that it is impossible to have a country by lead by the government, and that there is no country or person in the world who is not greedy. Also he believes that must conflicts happen after a nation was under capitalism. Friedman takes the example from Einstein: he says that Einstein did his experiments because he wanted to and not because some government forced him to. This leads to the assumption that the world can only grow more, if there are people who work for their own benefit.

    Also, I think that Friedman thinks that greed is a good thing, because it makes our society work for their own benefit and this improves our living standards. If there is a free market, greed is a very important factor. Due to greed, people work hard so that they get their money in reward. If there is no government intervention and someone invents how cars can fly then he will be rewarded for it, and this will be in the form of money and fame. Therefore it can be concluded that greed is an important factor for a free market.

    I am not sure if Friedman would support the $800 billion fiscal stimulus package, because I don't have enough information on him. However, from his point of view on greed, I think he would not agree. He says that when a government does intervene it mostly goes wrong. Also, since there is greed, people will want to continue to get profit and will make themselves achieve a way out it. However, since this is a lot of money, I am not sure how much it would help the companies and if it is 100% necessary for the population.

  3. Christian Clausenon 03 Mar 2009 at 5:14 pm

    He most certainly agree that capitalism is based on greed, but also says that it is the individual's greed, as opposed to communism, who's greed comes from the government – but doesn't it only require one mind, and one incentive to be innovative? And perhaps change the way we think?

    To some extent Milton agrees that greed is good, as it is the core incentive to do the work as best as you possibly can, but he is also aware that Industrial Revolution, and the greed it evoked in people has harmed other countries.

    I believe that he would not support the stimulus package, since, judging by his beliefs he would think that the free market would have to work through this themselves, since we brought it upon ourselves. However, in some cases the government has managed to trade with the private market, rather than just funneling money into the company – which Milton might agree with.

  4. Younes Huberon 04 Mar 2009 at 3:17 am

    Friedman makes it clear that he definitely does not believe in substitute of capitalism, especially not a command economy (communism). According to him, liberty which capitalism grants is key to allowing people to produce creative results, such as Einstein and Ford. Overall, I agree with him. I think that a command economy does not create the "spark" needed for people to be creative and to want to achieve something, rather it suppresses it. In a command economy people do not have the ability to sway the market; it is controlled by the government.

    Therefore their incentives are largely crushed.

    Well, Friedman answered the other man's question with his own question "is there some society you know that does not run on greed?". This question, I believe, brings us straight to the point. Which society does not truly run on greed? Even communism runs on greed, some government officials in such a society often are corrupt and use the power to further their own ends, not to mention the money they so happen to assemble stimultaneously. A capitalist society also runs on greed, we can see this when we regard all private firms and what they do, how they are willing to do almost anything to cut costs, including externalization. The definition so often mentioned in class, they are profit maximizing machines. Hence, greed is a crucial component of free markets.

    Addressing the third discussion question, it is very difficult to determine what Friedman would have suggested in such a ferverent situation. One could argue that he believed in free markets, so he would give power over to Smith's invisible hand. However, in the current situation, the USA could find itself in a very unstable position if it does not deliver this package. I think in the end he would see the need of this package and would probably allow it.

  5. jabbobbon 04 Mar 2009 at 4:31 am

    Milton Friedman clearly speaks AGAINST command economies. He is arguing that "the great achievements of civilization have not come from government bureaus". Individuals such as Albert Einstein or Henry Ford are the ones, that brought improvements for civilization.

    Friedman's opinion on GREED in a market seems shocking in the first moment, but absolutely makes sense in regard to incentives for example. As pointed out before in the other comments, a government controlling the market is nothing else than one big greedy power trying to control everything else. We probably wouldn't be at this stage in society, if it wasn't for greedy telecommunication companies to provide the most entertaining show, for bakeries to sell the best bread, or for pharmaceutical companies, trying to make high profits by permanently improving their medicine.

  6. Nick S.on 05 Mar 2009 at 10:31 pm

    He says that Capitalism is based on greed, he goes on to say that it is this greed that makes it work and is the reason that we can benefit. the problem with Communism is that the lack of green and incentives makes it impossible to make real sustainable growth and development. people need incentives, incentive and the goal of profit drives entrepreneurs. Which is arguably the most valuable of all resources. without pioneering inventions and ideas our economy would be stagnate or fail to exist. Saying this though does not mean he would agree to the stimulus package. he is far to right wing to agree that we should try and repaired a flawed market system. If the current market system is to work it will must have/need the ability to self correct.

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