Monday, January 08, 2007

Friedman: Free to Choose Part 1

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The video is part 1 of documentary series "Free to Choose" by Milton Friedman, followed by a discussion between Friedman and others about free markets/capitalism/government intervention/corporate power/freedoms. The discussion is good and brings up lots of points in the debate as compared to the documentary which shows only part of view points.

In the documentary Friedman purports various benefits of free markets. He stresses the point that free markets provide economic freedom to everybody and even though in sweat shops the conditions maybe bad, people choose it over other options and they move on to better futures after the hard work. Here he is making a big assumption that people are free to choose which is debatable. In my opinion people who "choose" sweatshop labor have a very constrained set of choices - maybe between a tyrannical government or sweatshops. The goal should not be to find which is the better option among these choices but rather to find policy options to broaden and enchance the set of options in order to make a truly "free" choice.

He goes over the neo-classical economic theories of "Magic of Prices" and how they provide incentives. He seems to be a great beleiver that free markets lead to more freedoms both political and social and for this he uses example of Hong Kong which has almost zero tariffs, low or non-existent government regulation but which is thriving. But the fact is that HK with all the prosperity has huge disparities in income with the inequality index of 0.46 in 1996.

I would question his premise the free markets help everybody and is the solution to poverty. Free markets are not level playing fields and dont provide equal freedom to all. They are highly skewed in favor of the rich who get more votes - in terms of voting with their checkbooks - while poor get less votes as they have only so much to spend. Free Markets are definately good for the rich as they get more votes, their voices are heard. Like for example pharamecutical industry comes up with drugs for the illnesses of the rich but rarely comes with new drugs for the illnesses of the billions of poor like malaria etc as shown by recent new medicines introductions.

He is a strong proponent of reducing government regulation. He says govt regulation tends to work for the industralist and government anyway cant do anything good so its better when they intervene the lease. He tends to believe government regulation restricts indiviual freedom. Again this point is highly debetable. Absence of government regulation in my opinion instead of freeing the poor, empower the rich as they have more voting power in this new setup. I understand over government regulation stifles innovation and leads to a bureucratic power strucutre where again the rich seek benefits. But this does not mean complete de-regulation and no government oversight as that leads to corporations exploitation of labor, communities, enviornment. There needs to be a balance between the two and only government where - one person, one vote holds true to a large degree can represent interest of the poor.

The discussion which follows brings up series of interesting points. Though in theory if everybody has equal power than free markets will benefit everybody but power strucutres are too squewed towards corporations & the rich for a free market setup to benefit everybody. The challenge I think is to device government regulation and control upto extent where the less powerful are represented, without giving the rich additional powers. I would highly recommend the documentary, especially the discussion.

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At 9:56 PM, Blogger johnsmith said...

Friedman was widely regarded as the intellectual leader of the Chicago School of monetary economics, which stresses the overwhelming importance of the quantity of money as an instrument of government economic policy and as a determinan of business cycles and inflation. He was also an outspoken public defender of free markets, which he inevitably linked with political freedom.



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