Essay question: Milton Friedman's claims that voluntary exchange is a necessary condition for both prosperity and freedom.' Carefully examine the assumptions about power', choice' and market efficiency' that underpin his claim. Give reasons for your agreement or disagreement with him.
This essay is a short critique of the theory by Milton and Rose Friedman, "Free to choose: A personal statement", focusing on chapter 1. I will argue that Friedman is right in saying, "
voluntary exchange is a necessary condition for both prosperity and freedom" but that there are shortcomings in his theory. Voluntary exchange is defined as a trade of something which is done with both persons consent. For instance a problem with the theory Milton Friedman expresses through voluntary exchange is; how voluntary is a voluntary exchange when looked at in certain conditions. I will attempt to show that the prosperity and freedom promised by Friedman's theory has not been achieved by everyone. Friedman has many shortcomings and this essay will outline and criticise them, focusing mainly on his assumption of power, choice and market efficiency. This essay also addresses the issues of globalisation, as this is a concept also talked about by Friedman in his essay and is also relevant in neoliberal theory. Neoliberal theory is, "an updated version of classical political economy that is dedicated to market individualism and minimal statism." As I point out in the essay these dedications are not thoroughly adhered to by businesses for which this theory is supposed to entail. The first topic will be on choice followed by power and market efficiency. Andrew Heywood says of Milton Friedman, "The free-market view, advanced by theorists such as Hayek and Friedman, holds that general prosperity is best achieved by a system of unregulated capitalism." This essay also hopes to prove that this assumption is false. Milton Friedman is a free market economist who attacks the economic role of government. He is closely associated with Neoliberalism which is seen as a form of market fundamentalism. Market fundamentalism is viewing the market as always right in a religious sense. Adam Smith's proverbial invisible hand', will correct any inefficiency that the market produces. Smith assumes that individuals try to maximize their own good through trade and entrepreneurship and therefore society as a whole will be better off. Any government intervention in the economy isn't needed as the invisible hand would guide the economy and fix any shortcomings better than the dead hand' of government.
Friedman talks about being free to choose where to live. He refers to the United States predominantly but his statement should also be taken into consideration for worldwide migration. This is not true. I would like to live in the rich suburbs but I cannot afford to do so for the sole reason that I'm not rich. Many others are in my situation. It is a fact that where you live plays a major part in your income. Generally speaking, poor people live in the poor suburbs, middle class in the middle class areas and the rich in the rich areas. Poor people can move to another suburb but it is going to be restricted to another cheap rent area or different city where rents are low.
There is a large hypocrisy with free market advocates such as Milton Friedman. They promote minimal government yet, happily encourage and support government policies which directly benefit them. Examples include subsidies and tax cuts. Susan George comments on the hypocrisy, "According to neoliberal doctrine, the welfare state is bad and wasteful when it provides allocations to citizens, but good when it provides them to businesses that have made disastrous mistakes." She is referring to government bailouts to large businesses such as Credit Lyonnais and Chrysler. The Chrysler bailout was large at 1.5 billion, U.S. Despite the fact that the money provided to Chrysler was in the form of Federal...
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