The Story About Friedman

As it turns out, my Ph.D. is in economics and one of my fields of specialization was monetary theory so I have read every piece of prose professor Friedman ever wrote and studied under one of his students, Thomas R. Saving, Ph.D. who is now retired and has been for some time.

The author of this story is completely mistaken in his premise that corporations maximize profits at the expense of everything else. That is a heuristic model that is useful in permitting predicting certain results in a world of pure and perfect competition. Such a world does not exist but the model does provide some useful predictions about how companies in such a world would price their products and compensate their factors of production such as land, labor and capital.

Corporations have other interests such as investing in their factors of production, including employee training. Many pay for the ongoing education of their employees.

Corporations also have an interest in maintaining a good relationship with their communities and their customers. They want to please their shareholders to be sure, but one element of happy shareholders is happy customers and good publicity generally.

Friedman advocated relatively unfettered markets by which I mean the fewer regulations from the government, the better. But he also advocated legislation preventing monopolies. And he believed that the Fed should follow a fairly simple rule of increasing the growth rate of the monetary base at 1%, which he believed was a growth rated sufficient to encourage innovation.

On a personal note, I had the pleasure of meeting him once when he was in College Station. He was one of the more modest individuals I ever met, self-effacing and completely uninterested in talking about himself. He was very interested in my research. I never met a more interesting person.