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Milton Friedman (1912- ) Leader of the market-oriented “Chicago School” of economists Defender...
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Transcript of Milton Friedman (1912- ) Leader of the market-oriented “Chicago School” of economists Defender...
Milton Friedman (1912- )
Leader of the market-oriented “Chicago School” of economists
Defender of theories based on “unrealistic” assumptions―a good theory “abstracts from reality in a useful way,” and generates strong hypotheses.
Won 1976 Nobel prize in economics
The Problems?
Inflation Poverty Ineffective Schools Drug Crime and Addiction
Inflation: Analysis
“Inflation is always and everywhere a monetary phenomenon.”
Milton Friedman, Studies in the Quantity Theory of Money, 1956
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Consumer Price Inflation Rate(3-year moving average, lagged 1 year)
U.S. Money Growth and Inflation, 1951-2001
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Ghana Money Growth and Inflation, 1967-2001
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1961 1966 1971 1976 1981 1986 1991 1996 2001
% Growth of the Money Supply
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Argentine Money Growth and Inflation, 1961-2001
Inflation: Solution
Maintain slow, steady growth of the stock of money – don’t try to “fine tune” the economy.
Poverty: Analysis
“Most of the present welfare programs
should never have been enacted. If they had not been, many of the people now dependent on them would have become self-reliant individuals instead of wards of the state.” Milton and Rose Friedman, Free to Choose, 1979
Poverty: Solution
Replace existing programs with a “negative income tax” – cash benefits that decline slowly as a person earns income, providing a strong incentive to work.
Milton and Rose Friedman, Free to Choose, 1979
Ineffective Schools: Analysis
Public school systems are bureaucratic and monopolistic, so they have little competitive pressure to operate efficiently and provide a high-quality product. Monopoly power reduces the incentive of the individual to act in the public interest.
Ineffective Schools: Solution
School Choice Program: Allow families (especially those with children in low-performing schools) to select their own schools in an open “marketplace,” paying with publicly-funded vouchers.
Milton and Rose Friedman, Free to Choose, 1979
Drug Crime: Analysis Our system of drug laws and controls, like the attempted
Prohibition of alcohol, isn’t solving the drug problem, but it is “destroying our poorer neighborhoods in city after city, creating a climate that is destructive to the people who live there.”
This is an example of “the philosophical disagreement between Plato's view that it is right for some of us ("philosopher kings") to tell others of us what they must do because it is good for them, and the doctrine of John Stuart Mill that the role of government is simply to prevent people from doing harm to others…”
Milton Friedman, “The War We Are Losing,” 1991
Drug Crime: Wrong Solution
“We could … eliminate drugs if we were willing to … cut off the hands of a drug offender; if we were willing to impose capital punishment on drug dealers… Those are cures that are clearly worse than the disease.”
Milton Friedman, “The War We Are Losing,” 1991
Drug Crime: Friedman’s Solution
Decriminalize drug use for people over 18 years old. Drug use would increase, Friedman concedes, unless prevention becomes effective, but associated drug crime and use of dangerous street drugs would decline.
Milton Friedman, “The War We Are Losing,” 1991