POEC 301 Syllabus

Schedule (* denotes a reading from the packet):

Thu 9/8 Introduction and Organization

John Locke, Second Treatise on Government, Chapter 5 "Of Property," secs. 25-28 [photocopy to

be handed out in class].

Locke's Chapter V has been considered an awkward defense of property and definitely not Locke at his best. These reflections nevertheless represent what has been an influential way of thinking about an important problem, justifying private property.

I. CLASSICAL THEORIES OF POLITICAL ECONOMY

A. Free-Market Liberalism: Adam Smith

Mon 9/12 Principles of a Free Market Economy

The Wealth of Nations (henceforth WN), Introduction through [Book.chap.sec.] I.iii.,8; I.iv.1-5,

11-18; I.v.1-10; vi-vii (pp.--text not general introduction--10-36; 37-39; 44-46; 47-52; 65-81).

Adam Smith saw a direct link between the division of labor and human civilization. He considered this idea so important that he placed it first: the famous example of the pin factory is no digression but rather an illustration of what Smith considered fundamental to all that followed. The discussion goes on to relate the division of labor to market size and to money. Smith then turns to price determination in chaps. V-VII (which we will discuss also next time). There he employs what was in his time a fairly common scheme describing three great classes in society--those who earn their living from wages, those who live by profits, and those who receive rent. These definitions, based entirely on roles in production rather than on income levels (not to mention "lifestyles"), appear later in Ricardo and Marx. Note: “corn” follows British usage to mean “grain;” “police” corresponds roughly to our “policy.” “Stock” is just invested capital.

Study Questions:

1. Why is it, according to Smith, that some nations are rich while others are poor (I)?

2. Do people really have a natural “propensity to truck, barter, and exchange one thing for another” (25)? How would Smith’s argument differ if he had begun from Hobbesian premises—say, with a “propensity to steal”?

3. Compare the division of labor in Chapter I (the pin factory) with the examples given in Chapter II. If the division of labor arises from voluntary decisions, why does it intensify work?

4. For Smith, how should we properly regard profit? How does he distinguish it from rent—economically and (it seems) ethically (VI)?

5. What is the difference between “absolute demand” and “effectual demand” (73)? How do Smith’s definitions compare with those of modern economics? Why is the distinction important?

Thu 9/15 Prices, the Distribution of Income, and Economic Growth

WN I.viii.1-33, 36-48; I.ix.1-4, 11-24; I.x.a., I.x.b.1-34; I.x.c.1-32, 60-63; I.xi.a.1-9; I.xi.p.1-10;

II.iii.1-9, 13-22, 28-32; (pp. 82-93, 96-102; 105-06; 109-15; 116-28; 135-46;157-59; 160-62; 264-67;

330-34,337-39, 341-44).

The readings for this class focus on Adam Smith's views of the determinants of prices, income distribution, and economic growth. Here you can find his some of his most trenchant critiques of the guild system along with a view of markets that places labor (and the laborer) front and center. You’ll also find a great deal of attention to politics. Note: in Chapters x.a.2 and x.c, the "policy of Europe" refers to the mercantile system (which involved national economic strategy and had an important role for guild regulations) and "corporations" to guilds.

Study Questions:

1. What is Smith's rather complicated view of the relationship between high wages and general prosperity (pp. 91-93, 96-99)? Does it still apply in the international market of today? What do you think about Smith's (related) arguments about population and slavery (pp. 98-99)?

2. On pp. 79 and 116, Smith refers to a situation of "perfect liberty." What does he mean by this term? How does Smith's conception of liberty compare to your own sense of what freedom entails?

3. In chapter X, Smith discusses the perceived sources of inequality among wage laborers. What are the real sources of these differences, according to Smith? Do they suffice to explain wage differences today—say, between an NBA star and a housepainter? (Or between a housepainter and a housewife?)

4. Is Smith right about his assessment (pp. 264-67) of the degree of confluence between the particular interests of each of the three fundamental social groups (those who receive rent, profits, or wages, respectively) and the general interest?

5. How does Smith distinguish between productive and unproductive labor (Book II, chap. iii)? We will see a similar distinction at work in the tale of the profligate landlords (III.iv). Is such a distinction relevant today?

Mon 9/1915 Progress and Policy

WN III.iv.1-7, 10-18; IV.ii.1-16, 23-45; IV.ix.48-52; V.i.b.1-20, 25; V.i.c.1-2; V.i.d.1-8;

V.i.f.1-16, 47-61; V.ii.b.1-6 (pp. 411-15; 418-22; 452-60, 463-72; 686-88; 708-20, 722-26; 758-64,

781-89; 825-27).

Here is Smith on how good government can result from the spread of markets—and how, in turn, government can foster market expansion and national wealth. In both cases he uses an argument that forms the bedrock of liberal optimism—that freedom has non-obvious, usually unintended, but highly beneficial consequences. Book III gives a quick historical sketch of how state power was tamed by capitalism—an account that, in broad terms, was anticipated by Montesquieu and the physiocrats, and has been repeated by many others since Smith’s time. Books IV and V give us some of Smith's best arguments for laissez-faire--and for government. The former begins with the "invisible hand" passage, which occurs at the conclusion of a well-formed syllogism about how to maximize aggregate national value-added (pp. 455-57). Because of its importance, both to Smith's purpose (here is a formula that directly involves the wealth of nations) and to liberal optimism generally, the argument deserves close attention. Book V (introduced and summarized at the end of chapter ix, Book IV) is on fiscal policy, but it contains lots of philosophical and sociological asides. Its careful discussion of appropriate revenue sources—especially the four maxims on taxes (825-28)--is still relevant today. Also revealing is Smith’s honest statement of his misgivings (V.i.f.) about the same division of labor he praised so highly at the outset.

Study Questions:

1. Consider Smith’s tale of the merchants, landlords, and “civil government” in Book III. Is the argument plausible? Why? If merchants, once rich, decide to become landlords, why don’t they adopt the traditional attitudes of the class?

2. Outline the logic (three premises plus conclusion) of the "invisible hand" argument. Is it persuasive? Are the premises realistic?

3. Consider Smith’s discussion of the “natural” causes of “subordination” (710-14). Smith remarks that these—which include “riches”--are “antecedent to any civil institution,” but he later asserts that "civil government, so far as it is instituted for the security of property, is in reality instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all” (715)? Can these two propositions be reconciled? Are these causes of deference just as “natural” to us now?

4. In Smith’s discussion of justice and revenue (715-20), how does justice emerge from the self-interested actions of sovereigns and litigants? Is Smith’s account a convincing one—above all, does he answer the critic who alleges that a free market in judges’ decisions would be more “ natural”?

5. Smith issues a scathing indictment of the division of labor for its effects on the minds of workers (pp. 781-86). Is his proposed remedy adequate? Does the increase in wealth from the division of labor make this sacrifice worthwhile in Smith's view, or in yours?

Thu 9/22 Moral Foundations of Capitalist Society: Smith and his Progeny

Excerpts of The Theory of the Moral Sentiments from Heilbroner, The Essential Adam Smith, pp. 65-69, 78-110, 118-23.*

Richard Cobden, “Free Trade”: Speech at Covent Garden, Sept. 28, 1843.*

William Cullen Bryant, “Introduction” to the Political Writings of Richard Cobden, American edition, 1866.*

Arthur Latham Perry, “On Free Exchange” and “On Production,” from his “Papers on Political Economy” in the Springfield Republican, 1864.*

Smith fir st published The Theory of Moral Sentiments in 1759, well before the Wealth of Nations, but he continued to think highly of it until his death. In it we may find support for some of the moral premises of the later, more famous arguments; but there are also points on which Smith may have changed his mind. Richard Cobden (1804-65) was a Manchester cotton textile manufacturer early in his life; he was later the leader of the Anti-Corn Law League (“the League” for short) and the member of Parliament most responsible for repeal of the Corn Laws in 1846. He was also a lifelong advocate of peace, and paid a heavy political price for his unpopular opposition to the Crimean War. William Cullen Bryant (1794-1878) was one of the most renowned men of letters of 19^th-century America. He was an influential opinion-maker by way of the New York Evening Post, which he edited and published for fifty years (1829-78), and through organizations like the American Free Trade League, of which he was the first president. Bryant and other reformers, including fellow Williams alumnus (and professor) Arthur Latham Perry (1830-1905), battled for free trade in the United States in a campaign modeled after Cobden’s anti-Corn Law agitation. Perry’s 1864 “Papers on Political Economy” in the Springfield Republican evolved shortly afterwards into his Elements of Political Economy, the most widely read American economics textbook in the last decades of the 19^th century.

Study Questions:

1. What distinction does Smith make between beneficence and justice? What is the significance of each to the proper ordering of economic life?

2. What does Smith mean by “sympathy” and what role does it play in the TMS?

3. Do you think Smith (especially TMS 123) romanticizes the poor? How does the passage on p. 123 relate to his thinking as a whole?

4. What is the role of public life—through human vanity and the sentiment of shame—in sustaining morality? Does Smith muddle the distinction between shame and conscience?

5. Adam, Adam, Adam Smith

Listen what I charge you with!

Didn't you say

In class one day

That selfishness was bound to pay?

Of all of the doctrines that was the Pith,

Wasn't it, wasn't it, wasn't it, Smith?

How would you reconcile the arguments in The Theory of Moral Sentiments with those in The Wealth of Nations? In particular, how does Smith see the relationship between virtue and the pursuit of self-interest?

6. Is the moral force of Cobden’s argument derived from beneficence, justice, religion, or some other wellspring? What about Perry’s? Does each perceive the marketplace to have the same moral status as Smith does?

7. If, to Cobden, free trade has all the implications articulated at the conclusion of his speech, there must be a more fundamental principle recommending it. What is that principle? How was it at stake during the U.S. Civil War, in which Bryant claims (not entirely accurately) that Cobden championed the Union’s cause.

B. Early Critiques of Economic Liberalism

Mon 9/26 Elaboration and Critique of Classical Political Economy

David Ricardo, Principles of Political Economy and Taxation (1821), chap. 5 and sect’ns 9-19 of chap. 7.*

Karl Marx and Friedrich Engels, “The Communist Manifesto” [1847], part I, and “Wage Labor and Capital,” in Tucker, ed., The Marx-Engels Reader, pp. 473-83; 211-17; 53-54; then 26-46)

Smith's influence on political-economic thinking during the nineteenth century would be hard to overstate. But one notable difference can be seen already in Ricardo's much more pessimistic tone. Much of this was due to the influence of Thomas Malthus and his famous population theory, according to which a geometric increase in population combined with an additive increase in food production entailed a future of increasing misery. It shows up here in Ricardo's argument about the trend of real wages; its horrible implications also animated Marx and Engels's rejection of "bourgeois ideology" in favor of a revolutionary alternative. (Note: the poor laws in force until 1834, about which Ricardo writes, provided subsidy payments based on family size and were administered at the local parish level. The 1834 reform reflected the triumph of arguments like Ricardo’s; it appalled Marx and Engels.) The last two excerpts of Marx and Engels direct their critique toward religion and its role in a capitalist society O . (Note: in "On the Jewish Question," whose first part is your last reading, be sure to distinguish between Marx's own words and his long quotes and paraphrases of Bruno Bauer.) The readings on religion are difficult, but please note that there is much more here than a critique of “the opiate of the masses.”

Study Questions:

1. What view of the world lay behind Ricardo's recommendations about relief for the poor? Do you agree with his conclusions, and with his premises?

2. What historical role do Marx and Engels assign to capitalism? Do they, for instance, reproach it for having destroyed indigenous cultures around the world? Could a serious Marxist be an investment banker?

3. For Marx and Engels, "the executive of the modern State is but a committee for managing the common affairs of the whole bourgeoisie". How does this differ from Smith's view that "the proposal of any new law or regulation which comes from [the merchants and dealers]"..."comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public" (p. 267)?

4. According to Marx, in the liberal revolutions of the 18th and 19th centuries, "Man was not liberated from religion; he received religious liberty. He was not liberated from property; he received liberty to own property" (45). Does Marx think people should be forcibly "liberated" from religion and property?

5. What, for Marx, accounts for the existence of religion? Why does he think of it as "alienating"?

Thu 9/29 Protection and the Utopia of the “American System”

The Marx-Engels Reader, pp. 392-97, 160-163.

Henry Clay, “Defence of the American System”: in the Senate of the United States, Feb. 2, 3, and 6, 1832. (pp. 9-25, 46-50).

Henry C. Carey, selections from “Man and Land” and “Concentration and Centralization”: chapters I and X of The Past, the Present, and the Future (1847).

In the Marx readings we work backward , mostly from to find out what Marx thinks , he writes extensively about what it means to be free--genuinely emancipated. The first reading refers to different kinds of division of labor—one in which independent producers exchange goods in a market and another in which a factory manager assigns jobs to workers. While it’s easy to expect Marx’s antipathy toward the second, note his pejorative description of the first. The next reading is about how any division of labor restricts freedom and has as its political counterpart an "illusory from of communal life." Henry Clay (1777-1852) was a longtime Whig congressman, senator, speaker of the U.S. House of Representatives from Kentucky, and presidential candidate in 1844 and 1848. He was the chief advocate among politicians of the “American system” of trade protection for manufactures -- the history and effects of which he traces in this speech. Henry C. Carey (1793-1879) was his theoretical counterpart and the principal foe of Bryant and Perry. A descendant of Irish immigrants and an early advocate of free trade, his conversion to protectionism came to him “as with a flash of lightining” in 1845. He worked out the theory and published it as The Past, The Present, and The Future in 1847. Carey famously accused the apostle of laissez-faire, Frederic Bastiat, of plagiarism. Consider as you read Carey’s book how he could make such a charge -- but consider at the same time the similarity of his methods to Marx’s.

Study Questions:

1. Bourgeois intellectuals, according to Marx (p. 395), approve of rigorous planning and central control within factories, but are horrified at the prospect of extending such planning to the economy as a whole. Is there an important contradiction here?

2. Marx says that in his ideal society, "nobody has one exclusive sphere of activity but each can become accomplished in any branch he wishes," (and in the next, famous passage) "to hunt in the morning, fish in the afternoon, rear cattle in the evening...just as I have a mind" (160). Does this mean that the division of labor is abolished? Would such a life be desirable? Possible to achieve for most Americans?

3. What would Marx have to say about people who argue against welfare on the grounds that it wrongfully denies richer people the opportunity for acts of charity?

4. What kinds of anxieties underlie the nationalist argument against free trade? How would a liberal respond?

5. Perry argues that the gains from trade stem from the growth of production; Clay, too, argues that the gains from protection stem from the growth of production. Perry, Bryant, and other free traders argued that the protectionists favored “monopoly”; Clay, Carey, and other proponents of the American system argued that the free traders supported monopoly. Adjudicate between their arguments.

6. How, according to Carey’s system, could restrictive legislation be necessary to guarantee freedom? Why is demolition of Ricardo’s theory of rent so important to his case?

C. Reformist Liberalism and Social Democracy: Mill, George, Keynes

Mon 10/3 9/29 Socialism and Private Property

John Stuart Mill, Principles of Political Economy, pp. 199-234, 936-971.*

In the nineteenth century, John Stuart Mill (1806-73) was just as famous for his political economy as for his other philosophical works.O The Principles went through six editions in his lifetime (the readings come from the last of these, which came out in 1871). Through his father he was influenced heavily by Bentham's utilitarian thought, turning these principles in a reforming direction and staking out then-radical positions on free speech and women's rights. In these readings you see a relentlessly logical mind seeking to justify private property and government action, and perhaps straining logic when his valued principles come into conflict.

Study Questions:

1. Mill says that “the laws of private property have never yet conformed to the principles on which the justification of private property rests.” (207). What does he mean by this, and how does he propose to remedy the problem?

2. What do you think of Mill’s separation of production and distribution?

3. Mill devotes a long section to the question of inheritance (218-26). Do you agree with his position? Why do you think the problem is so important to him?

4. Is it true that "the uncultivated cannot be competent judges of cultivation" (p. 947)? Who is competent to judge such matters? Are reformers like Mill necessarily also elitists?

5. How does Mill's discussion of defensible government interventions in the economy differ from that of Smith? How might you explain those differences?

Thu 10/6 Poverty and Public Finance2 PovePoverty and Public Finance.

Henry George, selections from Protection or Free Trade? (1886): Ch. XX, “The Abolition of Protection”; Ch. XXI, “Inadequacy of the Free-Trade Argument”; Ch. XXII, “The Real Weakness of Free Trade”; Ch. XXIV, “The Paradox”; Ch. XXVI, “True Free Trade”; Ch. XXVIII, “Free Trade and Socialism”;

Henry George and David Dudley Field, “Land and Taxation: A Conversation”. The North American Review, July, 1885.

Henry George (1839-1897) was the author of Progress and Poverty (1879). His attribution therein of widespread poverty amidst national affluence to private ownership of land, and his outspoken and eloquent advocacy of the single tax on land as a solution to the problem, claimed enormous attention in the late 19^th century (and maintains some of it to this day). Protection and Free Trade is his contribution based on the same principles to the U.S. tariff controversy. David Dudley Field (1805-1894), an esteemed lawyer known for his systematic rewriting and simplification of the Civil Code of New York, was successor to William Cullen Bryant as president of the American Free Trade League. He shared George’s commitment to free trade, although for different reasons -- and he doubted both the viability and desirability of George’s single tax.

Study Questions:

1. Would Cobden have come to George’s conclusion about the “inadequacy of free trade” if he had lived another twenty years?

2. Is George a conservative or a radical? A capitalist or a socialist? Where he argues that consistency with the free trade principle requires governmental controls (p. 310), is he in agreement with Henry Carey?

3. What impediments are there to the implementation of George’s proposal for public finance? Are they practical or metaphysical?

4. Consider again the passage of Perry’s paper “On Production” where he writes about “the gratuitous help of nature.” Does Perry’s system support, or is it antagonistic towards, Henry George’s central idea?

5. Could, or should, Henry George’s proposal be adopted today? In what instances, and why?

6. Thinking back to Locke’s ideas about property rights and labor, would you consider George’s, or Field’s, position to be closer to Locke’s?

Mon 10/10 6 No class, Reading Period

Thu 10/13 Imperfect Markets, Finance, and Knowledge

J.M. Keynes, "The End of Laissez-Faire,“National Self-Sufficiency," and, from The General Theory of Employment, Interest, and Money, sections V and VI from chap. 12 on equity markets (pp. 153-61) and "Concluding Notes."*

Doug Henwood, Wall Street: How It Works and For Whom (1997), pp. 72-86, 277-94..*

James Surowiecki, The Wisdom of Crowds (2004), chaps. 1-4.*

There are a lot of pages here but they read very quickly, especially those from the last book. John Maynard Keynes (1883-1946) is famous for his General Theory of Employment, Interest, and Money (1936), from which the last two excerpts comes. Keynes thought the massive unemployment of workers during the Great Depression effectively refuted the classical liberal belief that capitalism would work well if only markets were left alone. A believer in personal liberty, he did not advocate the abolition of capitalism, proposing to rescue it through government intervention, yet his position on finance (including the “euthanasia of the rentier”) sounds radical today. Keynes, himself an immensely successful stock market investor (a rare case amongst economists!), was skeptical of the ‘collective rationality’ of the stock market. That the stock market somehow indicates our collective (and rational) economic forecast was a mere convention to him – a convention developed by man so that “he need not lose his sleep merely because he has not any notion what his investment will be worth ten years hence.” The daily fluctuations in the stock market only reflected the precariousness of this convention—but to Keynes, theyse fluctuations were a positive menace for they triggered booms and busts in the real economy and thus became self-fulfilling. In the HenHenwood piece we read a contemporary version of this critique, directed at Wall Street. Editor of Left Business Observer, he earned this reaction from the then-Executive Editor of the Wall Street Journal: “you are scum”…”it’s tragic you exist.” This approximates Henwood’s own attitude toward the financial sector (not the people, he says, but the system). He argues that Wall Street serves no economic purpose worthy of its immense wealth and power. The last reading, by Surowiecki, builds on Keynes in a different way: by asking when the “average wisdom” of large groups of people does (Who Wants to Be a Millionaire?) or does not (asset price bubbles) improve upon individual human rationality.

Study Questions:

1. How does Keynes treat the relationship between free trade, global investment flows, and world peace? Do you agree?

2. What does Keynes mean by "the euthanasia of the rentier" (Concluding Thoughts, p. 376)? How does it relate to his argument about finance (“let finance be national”) in “National Self-Sufficiency”? What do you think about these arguments?

3. What is Henwood’s argument against the view that the stock market is an important source of investment capital? Do you agree?

4. So what, for Surowiecki, distinguishes situations in which the aggregate judgment of a crowd is wise from those in which it is biased and wrong?

5. What does his conclusion about the judgment of experts imply about highly paid fund managers and CEO’s? Do you agree?

II. CONTEMPORARY WRITINGS ON POLITICAL ECONOMY

A. Contemporary Liberalism: the Defense of the Market

10/17 Mon The Case against Central Planning

F. A. Hayek, The Road to Serfdom, introduction by Friedman and pp. 37-

Hayek, The Road to Serfdom, pp. 56-111.

Perhaps the most important contribution of Hayek (1899-1992) provides an overview of his theory of the market process, a theory which some have taken to be incompatible with and superior to the theory of the market in neoclassical economics. Perhaps his most important contribution to social theory is his insistence that knowledge--of talents, capacities, scarcities, and potential consumer demands--is dispersed among countless individuals, so central planners cannot coordinate all this knowledge as effectively as markets. Along with laying the groundwork for this important point, The Road to Serfdom develops an argument that central planning not only produces poverty, but also destroys liberty.

Study Questions:

1. Chapter VI of The Road to Serfdom posits a distinction between the formal operation of laws which apply to all people equally and the exercise of ad hoc judgments in the awarding of privileges and rights in a planned economy. Is the distinction workable? Why is important?

2. Hayek describes democracy as one means for attaining the end of liberty. Just saying something is democratic doesn't mean it is good, because the democratically imposed will of the majority can be just as dangerous to freedom as the rule of the autocrat (pp. 70-71): "Democratic control may prevent power from becoming arbitrary, but it does not do so by its mere existence." What do you think?

3. Hayek argues that the term "privilege" should not apply to the ownership of property: "to call private property as such, which all can acquire under the same rules, a privilege, because only some succeed in acquiring it, is depriving the word privilege of its meaning" (TRtS, 89). He contrasts formally open ownership with the closed ownership of feudal times. What do you think? If I am born rich, am I privileged or not?

Thu 10/13 No class, Reading Period

10/20 16 Hayek's Critique of the Welfare State

F.A. Hayek, The Constitution of Liberty, pp. 22-53; 133-147; 306-323.*

F. A. Hayek, "Competition as a Discovery Procedure."*

Thanks in no small part to the force of Hayek's logic, few people still believe in the desirability of central planning. But if central planning is a dead issue, mustn't Hayek be irrelevant to the burning issues of our day? These excerpts from the Constitution of Liberty (1960) are part of Hayek's attempt to demonstrate the continued relevance of his arguments in the era of the welfare state. In "Competition as a Discovery Procedure," Hayek (1899-1992) returns to his theory of the market process, a theory which some have taken to be incompatible with and superior to the theory of the market in neoclassical economics.

Study Questions:

1. According to Hayek, "the more civilized we become, the more relatively ignorant must each individual be of the facts on which the working of his civilization depends” (CoL, 26). What does he mean? In he consistent here? How does a person (say, Hayek himself) come to know these facts? Is this an abandonment of rationality, or does he give us good reasons to submit to something unintelligible?

2. Early in his discussion of progressive taxation, Hayek says that the idea of the interpersonal comparability of utilities has been “generally abandoned”(309). Yet it has not: many economists and policymakers continue to believe that a rich person gains less utility than does a poor one from income gains of the same magnitude. Is this belief plausible? If we deny comparability, must we also abandon the Golden Rule?

3. According to Hayek, "What is required [in the field of taxation] ... is a rule which, while still leaving open the possibility of a majority's taxing itself to assist a minority, does not sanction a majority imposing upon a minority whatever burden it regards as right" (CoL, p. 314). Is this a good argument for a "flat tax"?

4. What do you think of Hayek's statement ("Competition..." p. 255) linking the value of competition to its production of unpredictable results? Does this exempt market outcomes from criticism?

5. Suppose Hayek is right to claim that freedom is essential to generate and mobilize information about human wants and capabilities. Does this make an iron-clad argument for freedom?

Mon 10/24 0 Liberty, State, and Market

Milton Friedman, Capitalism and Freedom, Intro., Chaps. 1, 2, 7, 10.

Milton Friedman was Ronald Reagan's favorite economist. An early opponent of Keynesian economics (though not initially on public-finance grounds), he has written influential works on economic methodology, the consumption function, and most famously, on money. But he has also written influential works of advocacy, like this one and the lighter Free to Choose, which have been important guides for Republicans in recent years.

Study Questions:

1. Friedman asserts that "underlying most arguments against the free market is a lack of belief in freedom itself" (15). How does he define freedom? How does it differ from that of Marx in his discussion of "emancipation," or from that implied by Henry George?

2. Is Friedman a democrat? Consider also his idea that markets offer a kind of proportional representation (15).

3. Friedman argues that minorities have often wrongly blamed capitalism for the "residual restrictions" upon their lives, "rather than recognize that the free market has been the major factor enabling these restrictions to be as small as they are" (p. 109). What do you think?

4. Is Friedman a utilitarian in his argument for free markets, arguing that they maximize well-being, or does he stand on somewhat different ground?

5. Are inequalities resulting from chance easier to accept than those from other sources (pp. 165-66)? Who is the better liberal on this point, Friedman or Hayek (TRtS , 104), who argues the opposite? How would things be different if economic rewards were distributed entirely randomly?

Thu

10/27 3 Liberal Principles Applied