Milton Friedman: No Free Lunch
Few individuals have actually had as profound an effect on modern economics as financial expert Milton Friedman. His Nobel Prize-winning ideas on free enterprise resonated throughout the world and continue to do so. Johan Norberg, Senior Fellow at the Cato Institute, informs Friedman’s remarkable story.
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Script:
” There is no such thing as a free lunch.”
That’s generally all you require to understand about economics– or for that matter, about life.
Whatever comes with a cost and there are no best options, only compromises.
If you believe you’re getting something for “free,” you’re tricking yourself. One way or another someone needs to pay for it– and that “somebody” generally includes you!
This little bit of invaluable knowledge was popularized in the 1970s by University of Chicago economic expert, Milton Friedman. And it made him, along with his many other permeating insights, the most influential economic expert of his time.
Born in Brooklyn in 1912, the kid of two poor Jewish immigrants from what is now Ukraine, Friedman never ever seized the day America used him for granted. He dedicated his life to making the case for free enterprise. Nobody has ever made it more persuasively.
His scholarly work centered on financial theory, the concept that the development or contraction of the money supply has an extensive impact on a nation’s economy. The Great Depression of the 1930s, which had triggered a lot suffering, and which Friedman had actually lived through personally, made his case.
Friedman revealed that the Depression was not a failure of an out-of-control free enterprise, but an out-of-control Federal Reserve– the Fed– the reserve bank of the United States.
Rather of keeping the cash supply stable in an economic crisis, the Fed choked it off. This began a series of “bank runs”– individuals actually going to get their cash out of their bank before their bank ran out of cash.
That, according to Friedman, was not the Fed’s biggest error. No Fed, Friedman thought, no Great Depression.
However the Fed’s members had no self-confidence in the market. Their self-confidence remained in their own capability to fine-tune America’s exceptionally intricate economy.
This self-confidence was lost. The Fed, and the President who controlled the decade, Franklin Roosevelt, made one bad choice after another, and the Depression dragged on.
Friedman saw another grave mistake being done in the early 1970s. He made the bold forecast that the Fed’s efforts to print money to keep the nation out of an economic crisis would cause something even worse: stagflation, the combination of high inflation and high unemployment.
Which’s precisely what occurred. Numerous economic experts who had actually previously dismissed Friedman now acknowledged that he was right. In 1976, he received the Nobel Prize in Economics, yet another vindication of his work.
However as observant as his economic theories were, his special gift was his capability to describe his theories to the general public and his willingness, indeed eagerness, to do so.
He composed very popular books and had a column in Newsweek for 18 years. In 1980 he hosted the popular ten-part TV series Free to Choose for PBS.
The theme of the program was pure Friedman: while others relied on the government to make good choices, Friedman trusted people and the market.
Extreme government control, tax, and regulation, he persuasively argued, distorted incentives and put cash in the hands of bureaucrats and politicians who had not earned it and suffered no effects if their policies failed.
There were other ways government intervention distorted the free enterprise, Friedman stated: protectionism, for instance, increased rates for customers and discouraged innovation; overregulation allowed big business with its lobbyists and attorneys to drive out small rivals; minimum wage laws resulted in less jobs for those who needed them most.
Everything followed from Friedman’s basic idea that countless individuals working for their own functions might make much better choices than a bunch of unelected bureaucrats who had no stake in the result.
However Friedman didn’t just grumble about the issue. He had options all set when and where they were required.
For the complete script, see: https://www.prageru.com/video/milton-friedman-no-free-lunch
source
Few people have had as extensive an impact on contemporary economics as financial expert Milton Friedman. Born in Brooklyn in 1912, the boy of 2 poor Jewish immigrants from what is now Ukraine, Friedman never took the opportunities America used him for granted. That, according to Friedman, was not the Fed’s biggest error. No Fed, Friedman believed, no Great Depression. Numerous economic experts who had previously dismissed Friedman now acknowledged that he was.
