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Example research essay topic: Minimum Wage Laws Free Market Economy - 2,239 words

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How far does Fee Market Works-what are the Consequences Within the course of this research, we will elaborate on the principles of free market, liberalism. Although there is a growing body of support for a free market theory and liberalism, there is also some opposition to it, and both will be discussed within the conceptual framework of this essay. We will talk about how free market has become possible in America, as well as discuss the views of Milton Friedman on liberalism and free market. From the early day of the colonization, trade and commerce has played an important role in the forming and shaping of civilization in America. America offered the common people of the world the opportunity for financial gain and self-sufficiency. From these humble beginnings, the roots that became the American economic system formed.

The combination of improved roads, steamboats and canals served to connect vast areas of the country with an increasingly dispersing population to major ports and markets. The flow of goods and products two and from markets became much more efficient and cost effective. The increased trade that resulted stimulated economic growth throughout the country and encouraged migration to western lands. New farming methods and machinery that developed in the early 19 th century significantly increased efficiency and productivity of the American farmer, enabling more products to be brought to market. Improvements in the reaper greatly reduced the harvest time of grain. Other labor saving inventions include the horse hay rake, which performed the work of seven men, the mowing machine did the work of 10 men equipped with scythes and the thresher which could harvest over 12 times as much in an hour as six men equipped with hand flails.

These mechanical improvements in farming greatly reduced man-hours and made it possible for a family to farm between 30 or sixty acres rather than 10 or 15 (Kirkland 114). In the South, the invention of the cotton gin in by Eli Whitney gave birth to the Cotton Kingdom. Prior to the cotton gin, the difficulty of removing the seed from the fibers prevented the crop from being commercially farmed in large quantities. A pound of cotton took almost a whole day to process.

The crop could now be prepared cheaply and easily for the market. In the year prior to the invention of the cotton gin, the country produced around six thousand, five hundred pound bales. The following year, production had increased by 10, 000 bales. By 1859, 4. 5 million bales were produced, accounting for half of the entire country's exports (Kirkland 125, 126). The rise in cotton production reinvigorated the institute of slavery. Prior to the cotton gin, slavery was becoming less profitable and practical, and may have died on its own.

With the demand for cotton high, the slave trade grew. The wealth generated from the cotton industry created a demand for products such as corn, flour, pork and beef. The need for manufactured goods from the North also increased. The growth of the Cotton Kingdom expanded internal trade and stimulated settlement in the West (Nettels 204).

While the American improvements in transportation, farming and trade created the framework and structure that led to the national free market, it was the spirit, vision and will of the American people that created it and made it work. The country provided a non-interfering, non-oppressive government and opportunity for personal advancement to the common man on a scale never before seen in history. It is this freeing of man that accounts for the development of the free market. The economic system that started from such humble beginnings, in a short period of time, grew to become greatest the world has ever seen and has elevated the quality of life mankind to levels that not even the boldest visionaries of the day could have predicted. The role of government in this free market system that emerged in the United States has been questioned a lot. In his book Capitalism and Freedom, Friedman states that government is a necessary evil in a society of imperfect humans, but is one whose scope should be limited to only absolutely essential tasks.

He very specifically defined these tasks; as he states in the introduction of the book, a fully functional government would be one which, maintained law and order, defined property rights, served as a means whereby we could modify property rights and other rules of the economic game, adjudicated disputes about the interpretation of the rules, enforced contracts, promoted competition, provided a monetary framework, engaged in activities to counter technical monopolies such a government would clearly have important functions to perform. (Friedman, p. 22) Basically, he views any government action beyond the scope of this as improper, including agricultural price supports, import tariffs and quotas, rent controls, minimum wage laws, industry regulation, military conscription, toll roads, and many others. Friedman's basis for opposition is that the best method of making any decision is in the market setting because a market allows for numerous different outcomes for different individuals with different preferences. Governmental or political decisions are made on a majority basis; they do not allow for differing levels of choice for individuals because they produce a single outcome; the market allows for each individual to come to an agreement at the level he feels comfortable. Thus, the more that is left within the scope of the market, the more likely it is that agreement can be achieved while still maintaining freedom. (Friedman, p. 80) Friedman believes that the modern trend has been to curb the scope of the market in favor of government intervention, a trend which has had poor results overall. While he concedes that the market does not function perfectly, he states that the effects of extensive government intervention over the past few decades have proven to have even worse results around the world. One area that Friedman focuses on as being problematic is government fiscal policy, which consists of taxation and spending.

According to him, the US government has subscribed to the traditional Keynesian philosophy of fiscal policy, which involves deficit spending and tax cuts during periods of recession in order to lower unemployment, and reduced government spending during periods of expansion to combat inflation. (Friedman 78) Friedman's basic criticism of this policy is that historically, it has done little to combat recession due to time lags in fiscal policy implementation. Instead, it has put inflationary pressure on the expansions that follow a recession and has fostered a continuous and permanent increase in government expenditures which were originally supposed to be temporary. Friedman's response to those who insist on using the government budget as a balance wheel to keep the economy on track is to use taxation rather than expenditure as a policy tool. He realizes, however, that the political implications of a tax increase during times of prosperity make this an unlikely course of action to be followed. While Friedman only provides a preliminary criticism of US fiscal policy in Capitalism and Freedom, he does make certain points which are valid. Since the Depression era, perhaps the government has overreacted to fears of unemployment gains and has focused on expenditure too much; the ridiculous size and rate of growth of the government budget deficit is evidence of this.

The idea of a time lag is also valid; by the nature of our political mechanism, fiscal policy is slow to be implemented, and it is likely that much of the government spending that has been undertaken has been after the problem of low private expenditure has already taken care of itself. Another area which Friedman focuses on extensively is the broad topic of social welfare policy, which he divides into a few categories. (Friedman, p. 162) One area that he addresses is minimum wage laws, which have exactly the opposite of their intended effect in his opinion. The idea behind a minimum wage is to decrease poverty by outlawing wage rates below some specific level. However, while such a law does guarantee that wage level, it does not guarantee that employers will hire workers at this new inflated wage, and only serves to increase unemployment. The people who had hoped to receive these minimum wage positions would have been better off with their previous lowered wages than with no income at all. The problem, according to Friedman, is that the visible parties are those who are helped by the minimum wage, the workers who are able to receive jobs at that wage; the vast majority of people, those who lose their jobs or are never able to acquire a job, remain anonymous.

The government would be best to let the market determine wages; a minimum wage causes an unnecessary market failure while only creating the illusion of poverty improvement. Another government policy criticized by Friedman was agricultural price supports, which he claimed worked inverse to need. (Friedman, p. 113) Since the successful farmers were those who sold a large portion of their goods, the farmers who actually need help, those who are unable to sell, see an unbalanced portion of the benefits. Rather than raise income per farmer, as intended, the price support program has only raised agricultural output, not the intended outcome. The program has imposed numerous costs on the American public, however; consumers not only pay in taxes to support the program, but pay once again in higher food prices. Also, in order to maintain a price higher than the equilibrium world price, quotas on farm products have been established, further restricting the free-functioning of the market. Thus, according to Friedman, farm price supports are a policy which do not benefit society, but rather restrict the freedom of the public and interfere with the functionality of the market.

Poverty among farmers cannot be addressed through artificial mechanisms such as price supports, just as poverty among other workers cannot be solved through a minimum wage, he states. Again, this point seems to have some validity; while agricultural products have a relatively inelastic demand, allowing for price increases while still being purchased, the benefits seen by the small farmer do not seem commensurate to the price paid by society. By encouraging increased output, the government has only served to lower prices, hurting the poor farmer and the public at the same time. Another topic Friedman addresses is social security, which he finds numerous problems with. Social security involves compulsory savings for old age and a redistribution of income, from current income-earners to retirees.

The paternalistic standpoint of the government in terms of forcing the public to save is the major problem Friedman has with social security; it completely removes personal freedom and is a display of the ultimate government expansion at the expense of freedom and market functionality. The idea that the government should make savings decisions for the public in order to save the few people that become charges on the public, as he puts it, is one that does not make sense, and only increases bureaucracy and the inefficiency of the system. (Friedman, p. 139) Milton Friedman cites many reasons why government expansion is harmful to society as a whole; his view that the market is always the best decision-making model for society is one that is controversial but also holds some validity. Government intervention in social issues is one of the most highly debated topics in economics and politics today, as it has been forever. Friedman delivers many examples of how government intervention has not had the intended effects and has actually harmed society, and how the trend towards further government expansion is one that should be stopped immediately. Although Friedman's views are rather convincing, there are also a lot of those who oppose free market theory and liberalism at large. There are a couple of solid reasons those people state on why free market theory is wrong.

One of the most significant arguments is that free markets can lead to an economical crisis that the government would not be able to foresee or stop is only minimal intervention into economy is allowed. The Great Depression is the best example that illustrates when government foes not have enough control over society's and businesses economic activities. (Rutherford, p. 113) Other arguments suggest that free market economy creates opportunities for those who already have enough capital to start their businesses, leaving those without money no chance to even start something. This is perceived as unfair by a lot of experts, who believe that the entrepreneur spirit should be fostered by government in order to develop the economy in the most effective way. (Klein, p. 177) However, despite those arguments, free market economy seems to be the best option so far for the American society. Words Count: 2, 109. Bibliography: De Soto, Hernando. The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else.

New York: Basic Books, 2000. Friedman, M. Capitalism and Freedom. New York: Random House, 1998. Kirkland, C. A History of American Economic Life.

New York, NY: Meredith Corporation, 19689. Klein, N. No Logo. London: Pluto Press, 2001. Mavundla, L and Mesotho, M. Freedom to Be Enterprising: The Informal Economic Agenda.

Johannesburg: Pavement Books, 1991. Nettels, P. The Emergence of a National Economy Volume II. New York NY: Holt, Rinehart and Wilson, 1992.

Powelson, J. The Moral Economy. Ann Arbor: University of Michigan Press, 1998. Rutherford, S. The Poor and Their Money. London: Oxford University Press, 2000.


Free research essays on topics related to: milton friedman, free market economy, minimum wage laws, cotton gin, humble beginnings

Research essay sample on Minimum Wage Laws Free Market Economy

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