4.3.2 Web Media: Google Video: Milton Friedman's “Free To Choose: The Power of the Market”
Link: Google Video: Milton Friedman's “Free To Choose: The Power of the Market” (Google Video)
Instructions: Watch this video (about 58 minutes). Milton Friedman began as a disciple of Keynes’ work on managing the economic cycle. Over time, he came to embrace the role of the free market, particularly as it relates to consumer choice and the limitation of government power.
As you read, consider how economic thought seems to move in waves. For example, Mercantilists believed in government control of major industries and the accumulation of national wealth in the form of gold reserves. In reaction to this, the Classical Economists extolled the virtues of the “free hand” of the marketplace and the prosperity of the individual. The free market was effective, but it also led to booms and busts in the macroeconomy. To smooth out these extremes, Keynes re-introduced the concept of national prosperity. In the 1970s, a period of stagnating economic growth and high inflationemerged. This phenomenon was in turn called stagflation, and its emergence led economists to reconsider Keynes; we subsequently saw a return to free market ideas. Think about how Friedman’s ideas are similar to and differ from those of the Keynesians and Neo-Classicists.
As a special note, a student of economic history ought to be wary of any singular interpretation of events or ideas. New thought emerges in response to new environmental conditions, and theories attempt to solve problems of that era. So, when an economist takes a position that one way is always preferred to another, consider a much longer view and think about how different circumstances may call for other interpretations and solutions.