chapter  1
40 Pages

Broad Theories

Milton Friedman. the author of our second reading, is generally seen as reviving an older view which holds that government should playa lesser role in the economy. This increasingly influential view sees the major role of government as one of providing the defense and law and order that make contracts and private markets possible. It feels that govenunent provision of other goods tends to be inefficient, and that where govenunent does provide them, it should do so tluough contracts with private producers. It holds that strong efforts to redistribute income lead to reduced work effort and savings, cutting eeonomic growth. It says that government attempts to manage the economy are often misconceived, ill-timed, or rendered impotent by expectations, and that govenunent should concentrate on providing a stable money supply and a balanced budget and avoid fme-tuning the economy. It maintains that the extent of monopoly in the private sector is often exaggerated. and its evils overstated. It fears that attempts by govemment to solve admitted problems like pollution and poor infonnation can easily result in doing more harm than good.