Milton Friedman and His Moral Perspective

Topics: Free market, Pareto efficiency, Economics Pages: 5 (1502 words) Published: July 26, 2013
Milton Friedman and His Moral Perspectives

DeMartino argues in his book Global Economy, Global Justice that neoclassical theory which purports to be value-free is in fact intertwined with normative judgments. Both welfarism and libertarianism, among three ethical perspectives, serve as normative foundation in neoclassical economics, which lead them to embrace free market. The difference is that libertarianism justifies the means of neoclassical economics, while welfarism justifies its end. This essay aims to distinguish the two moral philosophies and explain how they both reach out to justify free market. It will then tease out the normative claims of welfarism and libertarianism by virtue of Friedman’s defense of free market in his most classic book Capitalism and Freedom. Welfarism is deeply rooted in the utilitarian tradition. It carries forward the utilitarian commitment to consequentialism but replaces the summation of utility by the Pareto criterion. An outcome is Pareto superior if at least one individual in a society prefers it while no one gets harmed. In an attempt to make this theory more practical, a broader approach suggests that outcome A is deemed Pareto-superior to outcome B if those who are better off under A can fully compensate those who are better off under B. In other words, if the benefits of an action from winners can outweigh the loss of losers, it is considered as Pareto improvement. The compensation principle reveals the tendency of welfarist economists in judging the righteousness of a deed in light of its consequences. Such a principle also seems to adjudicate welfarism as entirely objective. However, the justification of welfarism by Pareto optimality rests on its ultimate goal of maximizing social welfare. “To make the biggest pie” appears to be scientifically objective, but such a goal itself is a normative belief and is by no means value-free. Also economists construct a Pareto-criterion framework to link the original neoclassical assumptions with that of their ultimate goal. In this regard, welfarism fits neatly with the opening premises of the neoclassical theory: rational and self-interested individuals produce goods to satisfy their own needs, given the scarcity of natural resources. In sum, the Pareto criterion itself cannot legitimize the objectivity of welfarism, because it only plays a role in justifying the normative claim of maximum social welfare. In contrast, libertarianism is a theory that advocates the maximization of individual liberty in both thought and action, and the presses for minimization of state intervention. Libertarians hold the idea that each individual has a fundamental right for liberty, provided one does not violate other people’s rights to do the same. Any acquisition or voluntary transfer of what are justly owned shall be legitimized from the liberatiran point of view. In this sense, libertarianism demands a strict enforcement of property rights and considers any intervention in the disposal of personal properties a social coercion that infringes upon human freedom. Therefore, libertarians call for a minimal state to ensure individual autonomy and to prevent “theft” in the name of governance. A point worth noticing is that libertarianism salvages neoclassical thinking from those normative criticisms of welfarism by justifying the means, rather than its end. As we know, welfarists and egalitarians differ from each other when it comes to the question of “what makes

 

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for a good economic outcome”. While welfarists manage to maximize the total of social welfare, egalitarians merely emphasize the equal distribution of primary goods. Libertarians, on the other hand, attempt to eschew the debates over outcomes at all by focusing entirely on just acquisition and voluntary transactions. As a result, most libertarians only care about how well economic arrangements serve liberty and to what extent they secure human rights. In his book, Hausman even...
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