Reading Questions (Friedman, Chapter 2) and - Book Report/Review Example

number Reading Questions: Friedman, Chapters 2-3 Chapter 2 What is Friedman saying in the first paragraph of the chapter? Tease out the argument he presents there. He is saying that the economic and political systems of a country affect the types and levels of individual democracy. He gives an example of Russia, and notes that it is not possible for the political arrangements to ensure individual freedom. Only specific combinations of economic and political arrangements are possible and these affect the types of democracy in the country (Friedman 15).2. What are the primary acceptable means for the achievement of ends according to Friedman’s liberalism?

It is through a suitable economic arrangement that ensures freedom in the society. This arrangement should also ensure political freedom, and so a compatible political arrangement comes along with it (Friedman 15).3. What does Friedman say the ideal is for which we should aim? He argues that what is idea is compatibility of the economic and political powers of a nation. People should therefore, aim at ensuring that the society has a centralized political power and decentralized economic powers.

Decentralized economic powers can serve as a check and counter to political power (Friedman 22-3). 4. What does Friedman mean when he says the market is a ‘system of effectively proportional representation’ whereas politics tend towards ‘conformity’? He means the market allows voluntary cooperation and free discussion leading to harmony in the society without any form of coercion. Politics tend towards conformity because if forces people to conform to certain views that define a political force (Friedman 27).5. Friedman grants that some goods/services cannot be provided by effective proportional representation (i.e. markets).

What are some of the goods he lists? National and individual defense (Friedman 28) 6. Why does Friedman think that political solutions cause social instability? Because such solutions strain the most important factors that contribute to social cohesion. Political solutions require people to conform to certain views or issues, which if are many, may cause conflict among people; hence social instability (Friedman 28).7. Name some of the ‘economic freedoms’ which Friedman believes are in tension with one another.

Freedom to combine is in conflict with the and freedom to compete (Friedman 30)People’s rights may also conflict with the definition, interpretation, and enforcement of property rights, and the provision of a monetary framework (Friedman 31).8. What is a technical monopoly? It is monopoly situation where the monopolist is the only good or service provider that ensures there is effective freedom of exchange. There are no good or service providers with the technical competence required by the market except the monopolist (Friedman 31). 9. What is a public monopoly?

Public regulation? Public monopoly is when the government is the sole provider of the goods or services in the market to ensure effective freedom of exchange. Public regulation is monitoring of market activities to ensure effective freedom of exchange (Friedman 31).10. Of these three, why does Friedman think private monopoly is the least evil? He argues that it is the least evil because public regulation and public monopoly take a lot of time to respond to changes in the society, and so will take time o eliminate monopoly.

Private monopoly responds quickly to changes in the society, and so there is high likelihood that it will quickly eliminate the state of monopoly in the market (Friedman 32).11. What does this passage mean: “The choice between the evils of private monopoly, public monopoly, and public regulation cannot, however, be made once and for all, independently of the factual circumstances. If the technical monopoly is a service or commodity that is regarded as essential and if its monopoly power is sizable, even the short run effects of private unregulated monopoly may not be tolerable, and either public regulation or ownership may be a lesser evil.

”It means that for any type of monopoly to be considered evil, there are certain factors that should still be considered. There are situations when public regulation or public monopoly is better than private monopoly, for example when the monopoly power is too great (Friedman 32).Chapter 31. What is a commodity standard? A physical commodity used to determine the value of other commodities.2. If a commodity standard were stable, why would such a solution to monetary policy suit a liberal such as Friedman?

Because it would ensure an effective security against irresponsible monetary action and government tricks with the currency (41)3. Why does Friedman believe that adopting a commodity standard is inherently unstable? Because adopting a commodity standard is not feasible and desirable. Lack of feasibility is due to lack of beliefs that make it effective. Lack of desirability is due to its need for a large amount of resources it requires to produce monetary commodity (42).4. Explain how the instability of a commodity standard introduces the need from government intervention concerning monetary policy.

Instability of a commodity contributes to financial crises that only require government intervention. For example the financial crises observed in the years 1873, 1884, 1890, 1893, until 1907 (43). 5. What is the Federal Reserve System? It is a government organization established with the aim of managing monetary conditions to ensure stability. It is given enough power to attain prevent monetary instability and ensure stability (48).6. Friedman clearly opposes a strict commodity standard for monetary policy as well as a powerful Federal Reserve System.

What does he propose? He proposes that legislations give the public the power to control monetary policy through political authorities, and again shield monetary policy from political authorities’ desires (49). 7. Explain why Friedman believes that law based institutions are preferable to institutions with discretionary power to determine policy on a case-by-case basis. Because institutions with discretionary power will always do what is required by the rules, if only it wants to (51)8. What specific law does Friedman propose for the Federal Reserve?

That the Reserve System shall ensure that there is a monthly increase in the total stock of money, and if possible on a daily basis, at an annual rate of 3 to 5% (51)9. Friedman recognizes the limits of his proposal. What are they as he sees them?The rule gives unwanted power to the treasury and Federal Reserve authorities under achievement of specified rate of growth in debt management, money stock, banking supervision, and so on. It does not consider fiscal and banking reforms which Friedman notes are important (52)Works CitedFriedman, Milton.

Capitalism and Freedom. London: The University of Chicago Press, Ltd. 1982. Print.