In Greg Ip’s and Mark Whitehouse’s academic journal “How Milton Friedman Changed Economics, Policy and Markets”, the authors discuss how Friedman’s views on free markets, government intervention, and how central banks could fight inflation played a part in reshaping capitalism. When it came to many of Friedman’s ideas i.e. setting money supply targets to make the nominal interest rates hit the double digits, many central bankers did not immediately accept his prescriptions. However, when Paul Volcker became the FED chairman in 1979, he put Friedman’s policies into play as both inflation and unemployment decreased during the 1970s. In view of this, the results did prove Milton’s theory that there was no such thing as a rigid tradeoff between inflation and unemployment. Milton Friedman’s policies on inflation, a negative income tax system, and fixed-currency exchange rates had the most ideological influence in the 20th century, causing markets to solve economic problems more efficiently than the government, forming the basis for what is known as the Chicago School of Economics, has made a more friendly and appreciative atmosphere towards the free market.
In Milton Friedman's Article "The Social Responsibility of Business is to increase its Profits", he demonstrates what the real social responsibilities of businesses should be. For many businesses, a social responsibility may be to provide employment, eliminate discrimination, avoid pollution, or any other goal of a typical reformer. Instead, Friedman ferociously talks these ideas down and clarifies that the only wise ritual of a business is to simply acquire as much cash as possible. With regard to this, one of the key obligations of a corporate executive is to act in the same interest as his employers. When executives act distinctly from the interests of their employers in the name of "social responsibility", as Milton goes on to explain, for example from increasing the price of a product to reduce inflation, or spending more on pollution control than required, the executive is spending someone else's money, not their own and the executive is shifting tax burdens. Milton argues that it's the government's function to determine tax policy in accordance with the desires of the public and their elected officials, that is not the role of the business. When executives act in this way they are accepting socialism, not the market to determine the allocation of resources. Milton concludes that the doctrine of corporate social responsibility, if taken seriously, undermines free society; therefore, the only social responsibility of a business is to maximize profits so long as businesses play within societal rules and fair competition.
In Milton Friedman’s video “A Conversation on Minimum Wage”, Friedman first starts off by stating that the American Federation of Labor went through a hearing to raise the minimum wage, but this would only help protect their employees from the competition of lower skill level workers, instead of trying to help the poor. In general, minimum wage laws are supposed to help young people, minorities, and lower-skilled workers. At the same time, when unions increase the minimum wage laws for their employees, this also comes at the cost of restricting entry for other workers. In addition, this is also the same as when government increases the minimum wage for its employees which comes at the cost of the tax payer. Regarding this, Friedman illustrates that when workers get better opportunities from the free market, this comes at no one’s expense. He then points out the three important things that contribute to the result of better opportunities for workers are: productivity, investment and more highly and widely diffused skills. Not only is this good for the worker, but also for the consumer, the tax payer and the employer. It is true that minimum wage laws have helped many people; however, Friedman believes that minimum wage laws have not greatly affected or represented the best interests of many workers due to the existence of labor unions. The fact that labor unions and government have used minimum wage laws to benefit their own workers without considering the needs of others, it has also prompted a decrease in productivity and prosperity to the economy.
In Stephen Denning’s article, “The Origin Of ‘The World’s Dumbest Idea’: Milton Friedman”, Denning describes how the idea of a firm to only generate profits for its shareholders is completely ridiculous. To begin with, Denning denounces Friedman’s definition of a corporate executive that it is not an employee of a shareholder, but rather an employee of a corporation. Furthermore, he also rebuts against Friedman’s claim that if a corporate executive uses the money for any social interest, then he is only wasting the shareholder’s money. Denning goes on to explain that there is no logical reason for a firm’s money to randomly be a stockholder’s money. With regards to this, the questioning goes further as to who the money belongs to. Do the profits belong to either the stockholder, the customer or the employee? However, in the fantasy world of Milton Friedman it is unclear as to what the correct answer is. Stephen Denning clarifies that the real legal owner of the money is the organization. This was due to the private sectors during this time that felt a growing trend of competition and a good way to increase profits, was totally forgetting about any concerns for their employees. The idea that a corporate executive’s role in a business was to only create profit was proven to be false by Michael Jenson and Dean William Meckling of the Simon School of Business using mathematics. This was published in their article called “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership”.
In Noam Chomsky’s video “What Was Wrong with Milton Friedman’s View of The World”, he states that Friedman’s philosophy on the will of the free market to achieve great outcomes is false. In addition, Chomsky clarifies that there is no value to be admired in markets competing with one another. Noam Chomsky uses the example of the United States being the most economically powerful country in existence due to the massive state intervention that has occurred. Concerning this, he explains that historical events such as the industrial revolution have contributed an enormous amount to the economies of many nations and has nothing to do with free markets. Free markets are useful for many things such as conveying information. Chomsky points out an IMF study conducted during the 2008 financial crisis on how the 6 biggest American corporations achieved an owning of 40% of the nation’s profit. This is due to a public subsidy defying the usefulness regarding free markets and disagreeing with the ideology of Milton Friedman. The fact that throughout history’s use of state intervention, times of recession and industrial revolutions, this has provided Chomsky with information to conclude his argument that free markets had little impact with the development of a strong economy.
In Richard Adam’s article, “Milton Friedman, Right or Wrong”, Adams demonstrates a cautionary reasoning into Milton Friedman’s policies. First, he compares Milton Friedman with Paul Samuelson. Richard Adams does state that Milton Friedman did deserve a Nobel Peace Prize; however, Paul Samuelson was very influential on post-war politics. Milton Friedman took his school of thought from Alfred Marshall, and it was Samuelson’s analytic skill that replaced Marshall’s ideas. This left Friedman with no school of thought. Regarding this, Adams also goes on to explain that it was better that some of Friedman’s policies were ignored, like the abolition of the Federal Reserve after its performance during the great depression. Milton Friedman did articulate though the concept of the Non-Accelerating Inflation Rate of Unemployment (NAIRU). It is also quite strange how Edmund Phelps, who developed the expectations-augmented Phillips curve, did not receive as much influence by policy makers and academics for what Adams explains as a real achievement. The fact that Friedman’s proposals such as floating exchange rates, free markets and school vouchers which have been advocated by many other economists, does give an explanation as to why Milton Friedman was not one of the most influential economists.