Public Policy and Economic Liberalism: The Contributions of Milton Friedman

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Public Policy and Economic Liberalism The
Contributions of Milton Friedman

• Peter J. Boettke
• Econ 828/Fall 2004
• 04 October 2004

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Main Points of the Paper

• The influence of Milton Friedman is not just
  indirect and limited to the basic ideological
  shift away from the state and toward the market.
• Direct influence can be seen in the way that the
  ideological shift was instantiated in terms of
• Monetary policy
• Tax policy
• Privatization method

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Structure of the Argument

• From Capitalism and Freedom to Free to Choose
• Measures of influence
• Reviews, sales, translations
• Change of emphasis
• Public choice theory of Buchanan and Tullock
• Informational role of prices and the price system
  from Hayek
• Scientific Influence
• Citation study of classical liberals
• The Indirect and Direct Influence of Friedman in
  1989 and 1991 in the former communist bloc
  countries
• Ideological vision
• Classical liberalism and the free market
• Analytical framing of the problem
• Problems with planning in theory and in practice
• Policy strategy
• Voucher privatization and flat tax

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Social Science Citation Index
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East and Central Europe

• Poland
• Czech Republic
• Russia

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E.g, evidence from Klaus
Reading and studying Milton Friedmans works
helped me and many of us to understand economic
reality, to understand economics, to understand
its methodology, the role of the market in
society, the role of the state in a free market
economy, the role of money in the economy etc.
All that helped us to understand the tenets of
the old communist regime and its oppressive
character and economic irrationality. With Milton
Friedmans works as our background we had no
dreams about the so-called third ways, about
perestroika, about the reformability of
communism. Milton Friedman  helped us to
interpret the actual communist economy not as a
textbook command economy, based on directives
going in the vertical direction from the central
planning commission at the top to individual
firms but as a very strange and truncated market
economy with imperfect, but nevertheless dominant
horizontal relations among economic agents at the
microlevel. At the same time, the works of
Milton Friedman helped us to understand the logic
of the transformation of a communist country into
a free society and a full-fledged market economy.
Because of him, we had a clear vision where to go
and a pragmatic strategy how to get there. We did
not want to mastermind the whole process because
it would not be possible and definitely not
successful. We knew we had to trust free citizens
to create the new world - with a moderate help
from the above only.  
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Conclusion

• Measuring influence in a persuasive manner is not
  an easy task.
• It is easier in the case of the Friedmans because
  of the ubiquity of references to their work in
  the international free market movement.
• Their influence was indirect in terms of the
  vision of a liberal society, and direct in terms
  of specific analytical arguments and strategies
  on how to move to a world where free and
  responsible individuals are Free to Choose.

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From Capitalism and Freedom and Beyond

• The Control of Money
• Money supply and inflation
• Monetarism versus Keynesianism
• Fiscal Policy
• Ineffective
• Crowding out
• Supply side movement and the balanced budget
  movement
• Education
• Competition and parental choice
• Vouchers, home schooling, etc.
• Monopoly and the Social Responsibility of
  Business
• Power of profits to guide business
• Deregulation and business ethics
• Social Welfare Policy
• Incentives and losing ground
• Welfare reform
• Relation Between Economic Freedom and Political
  Freedom
• Economic Freedom Index

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Per Capita Income and Life Expectancy
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What are these maps and figures telling us?

• Countries with the best political freedom scores
  are also those with the best economic freedom
  score.
• Countries that are politically repressed are also
  economically repressed.
• Countries with the greatest amount of economic
  freedom also provide the best opportunities for
  their citizens to live healthy and prosperous
  lives.
• Friedman hypothesis cannot be rejected