Milton Friedman

Definition

Milton Friedman was an influential American economist and a leading figure in the Chicago School of Economics, known for his advocacy of free-market capitalism and limited government intervention in the economy. His ideas about monetary policy, consumption analysis, and the role of government have significantly shaped modern economic thought and are often discussed in the context of ethical dilemmas faced by businesses and policymakers.

5 Must Know Facts For Your Next Test

1. Friedman received the Nobel Prize in Economic Sciences in 1976 for his research on consumption analysis and monetary history.
2. He famously argued that 'the business of business is business,' suggesting that companies should primarily focus on maximizing shareholder value.
3. Friedman's advocacy for the negative income tax was aimed at providing a safety net while reducing government welfare programs, illustrating his belief in minimal government intervention.
4. He believed that inflation is always a monetary phenomenon, emphasizing the importance of controlling money supply to stabilize prices.
5. Friedman's ideas have sparked debates on the ethical responsibilities of businesses, particularly regarding how far they should go to address social issues beyond profit maximization.

Review Questions

• How did Milton Friedman's views on free-market capitalism shape discussions about ethical dilemmas in business?
  • Milton Friedman’s views emphasized the importance of profit maximization for businesses, arguing that companies should focus on generating returns for shareholders. This perspective can create ethical dilemmas when corporate actions potentially harm stakeholders or the environment. The challenge arises when businesses must balance profit-making with social responsibility, highlighting the tensions between Friedman's economic principles and modern expectations of corporate behavior.
• Evaluate Milton Friedman's concept of monetarism and its implications for government policy during economic crises.
  • Milton Friedman's monetarism emphasizes controlling the money supply to manage inflation and promote economic stability. This approach suggests that during economic crises, rather than intervening directly through fiscal policies, governments should focus on regulating monetary growth. This has implications for how policymakers respond to downturns, influencing debates about effective crisis management strategies while also raising ethical questions about prioritizing market mechanisms over direct aid.
• Analyze the relationship between Friedman's economic theories and contemporary practices in Corporate Social Responsibility (CSR).
  • Milton Friedman’s strong belief in free-market principles often puts him at odds with contemporary views on Corporate Social Responsibility (CSR). While Friedman argued that the primary obligation of businesses is to maximize shareholder value, CSR advocates assert that companies should also consider their broader social impacts. Analyzing this relationship reveals an ongoing tension where businesses must navigate profit motives alongside ethical obligations to society, raising important questions about accountability and corporate governance in today's world.

Related terms

Monetarism: An economic theory that emphasizes the role of governments in controlling the amount of money in circulation as a means to manage economic stability.

Chicago School: A school of economic thought that promotes free-market principles and argues that markets are best left to operate without government interference.

Corporate Social Responsibility (CSR): The practice of companies taking responsibility for their impact on society, which often involves ethical considerations in business decision-making.