Milton Friedman, Adam Smith, and Charles Beard have significantly impacted the way Americans view public policy implementation through their unique views of the economy. Understanding their unique views could offer further insight to current politicians in lieu of the economic crisis.
Contributions of Milton Friedman
Milton Friedman, a notable economist and Nobel Prize winner, discussed government intervention in the free market. His theories began to gain notoriety in the 1970s when stagflation plagued the country. He argued that the government’s fiscal policy has relatively little impact on businesses. Instead, he posited that business cycles were more likely to be affected by money supply and interest rates. To Friedman, government intervention would not solve for the identified problems with business. Thus his ideal public policy would be to refrain from enacting deals such as the recent economic stimulus package passed in Congress.
In Capitalism and Freedom, he argued that free market capitalism would solve for a number of social problems i.e. that education vouchers would solve failing schools systems by forcing schools to operate like businesses, thus turning educational results into a competitive commodity. In this system, a public policy based off of little governmental regulation would be a proper solution to solve both economic and social problems. Many Republicans and Libertarians today have sided with this ideology and made the free-market enterprise a central theme to their policies.
Contributions of Adam Smith
Adam Smith, often considered the father of economics, saw the ‘invisible hand’ as a driving economic force. In The Wealth of Nations, Smith argues that in a free market, the invisible hand is a result of individuals pursuing their own self-interest which ultimately leads to community well-being. He argued that that property rights should be upheld and that there should be policies hedging against theft and misrepresentation. In terms of economics, Smith posited that the government’s role was to defend the rich from the poor.
While Smith viewed government intervention in the free market skeptically, according to Herbert Stein, Smith’s policies “could justify the Food and Drug Administration, the Consumer Product Safety Commission, mandatory employer health benefits, environmentalism, and discriminatory taxation to deter improper or luxurious behavior.” Many have argued that Smith was not as staunch a supporter of the anti-government revolution as he has been previously portrayed. Regardless of the debate, finding a balance between intervention and the free market has become the forefront of American Politics today.
In the face of the Fannie Mae and Freddie Mac collapse, many Democrats have argued for regulation in order to supervise and maintain a modified, yet functional, free-market system, maintaining the best of free market capitalism while still giving the government a parental role. Yet others have argued for even less regulation.
Contributions of Charles Beard
Charles Beard, one of the two most influential historians of the 20th century, argued that economic policies are a result of examining other aspects of the public sphere. Therefore discussions of free markets, stagflation, and other economic theories are necessary to create an informed and educated solution in terms of public policy. This educational aspect is necessary to properly allocated time and resources on a limited Congressional budget and to make the right decisions regarding interest rate cuts and increases at the Federal Reserve. Milton’s theories also posited the existence of a natural rate of unemployment, but furthermore argued that government should not micromanage aspects of the economy because individuals would adjust and counteract this governmental action. This idea has been fundamental in developing today’s modern roles of government and public policy by curtailing policies that seek to too tightly regulate the economy.
Through these famous contributers to economic philosophies provide significant connections between the economy and the role of government.
(For more on the legislative process, see "Power Players of Public Policy: The Basis of Politics")
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