Milton Friedman on Self-Interest and the Profit Motive 1of2 Video

This clip is from the 15-part lecture series, "Milton Friedman Speaks"
http://www.ideachannel.com/product_info.php?products_id=1137

Transcript available via FreedomChannel: http://freedomchannel.blogspot.com/2007/12/milton-friedman-on-slavery.html


Summary:

A student poses a series of question on based on Friedman's notion that people should pursue their own self-interest. The student points out that he'd read that Friedman had previously come out against disaster aid for victims of a flood in Pennsylvania. Friedman corrected the questioner and noted that he did not come out against private aid for flood victims but instead was against the Federal Government providing discounted flood insurance in advance to home purchasers which motivated people to build houses in areas where they otherwise would not have been able to obtain insurance privately. If not for the discounted insurance, it's likely many of the flooded houses would never have been built in the first place as it wouldn't have been in peoples self-interest.

The student went on to note that it was recently reported that an old man in Ohio died when the electric company turned off his power when he'd failed to pay his electric bill. Was it moral for the company to act in it's own self-interest to do so? Friedman responded by asking what if the electric company never turned off the power for anyone? Who would pay the cost--the people who own or work at the electric company? It would be unjust to impose that responsibility on individuals who are running an honest business of providing electricity. Friedman suggests that the true responsibility lies on the mans neighbors and friends who were not charitable enough to allow him to meet the electric bills.

Finally the student uses the example of Ford deciding not to install a $13 block of plastic which would prevent it's Pinto cars from exploding in a rear-end collision. Ford estimated such a move would cost 200 lives a year at a cost of $200,000 per life lost. They multiplied and found that it wasn't worth it to install the plastic block. He asked if a corporation seeking it's own self-interest was a good thing in this case? Friedman responded by asking, what if it cost $1 billion to save each life, should Ford have put in the block? It's simply not practical to put an infinite value on an individuals life. If it took $1 billion in resources to keep one individual safe, and acquiring those resources meant that a million people must starve, it's a bad deal. Friedman concludes that he doesn't know if the $200,000 number that Ford used was the right number to maximize the overall benefits, but at the end of the day the principle is that we can't simply protect ourselves from everything and impose that cost on others. Friedman posits that the question the student should be raising, is should Ford be required to attach the statement to the car, "we've made this car $13 cheaper, and therefore it is X% more risky for you to buy it".

See also:

Free to Choose - All 15 episodes streaming online for free
http://www.ideachannel.tv

A history of Free to Choose
http://www.freetochoose.com

@tehatemachine I ...
@tehatemachine I agree that capitalism would have punished Ford for making a death car, but this kid, and Milton Friedman, both agreed, even if they wouldn't want to admit it, and even if most people watching the video don't want to admit it, that Ford should never? have been given the chance to kill, the government has a duty to force Ford to reveal the safety of their car to all potential customers, and if they do not, they are in violation of law and must face consequences.

@nerfmyaccount The ...
@nerfmyaccount The only problem with those companies is if their execs are able to grab hold of and influence government decisions with tariffs and interfering with foreign competition. Which stumbles growth. Friedman in his others vids couldn't stress that enough to his viewers. So far nobody has listen TO THIS DAY. and alot of jobs are now shipped out of the U.S due to growing regulations and heavy? city ordinances which burdens Even local businesses.

@nerfmyaccount " ...
@nerfmyaccount "because the money from the lawsuits would be less than? the money changing the car" But again I mentioned that you'd still not be saving any money in the end by paying for lawsuits. You'd garnish a bad reputation for your business and people would spread the truth by word of mouth. Then afterwords you'd have a big decline in customers. That's what happened to General Motors and Chrysler. They made alot of cheap crap cars that nobody wanted to buy.

@nerfmyaccount they ...
@nerfmyaccount they would of saved alot more money if they spent a little more in bette throughout or made components. Because cutting to many corners in the end does cost you far more than you? initially planned to save by being to cheap. So the only way to not loose as much customers is to do the right damn thing in designing well engineered products that don't kill or crap out on the consumer.

@nerfmyaccount Of ...
@nerfmyaccount Of course I have, This was after the incident started though. And they really did mess up on their calculations because in the End they'd be loosing far more money than what they would be saving by being greedy a*****es. Same thing happened to microsoft and their red ring of death. People? where p**sed and the people in charge of that area weren't being accountable so they started to loose customers. Then they HAD to recall all of them which cost them even more.

@tehatemachine did ...
@tehatemachine did you watch the video? Ford had an internal memo where they calculated that they could save money in the long run by releasing a death trap? car because the money from the lawsuits would be less than the money changing the car. And then Friedman says that the government HAS THE OBLIGATION AND IN FACT MUST ENFORCE a private business providing all important safety information about the car so the consumer can make an informed choice, and consequences if they dont!

@nerfmyaccount if ...
@nerfmyaccount if my customers would be dieing i would be loosing money and market fast as hell. People pullout whenever s**t like that happens. But for the first exploding pinto. There was no way for us consumers to see that coming, Neither was it for the? engineers who designed it wrong, Faults happen and bad things as a result contribute. it's like trying to predict an earthquake. but the aftershock makes people more aware and prepared next time in choosing their methods.

@nerfmyaccount He ...
@nerfmyaccount He said what he said so quit interpreting information. He was clearly stating that people within themselves have a responsibility to choose. If a company makes a death trap, That's their loss because nobody will buy that car after that incident, and likely since that car will not sell they will remove it all together. Do? you think people working in that company really benefit fully if their customers are dead and cannot buy anymore from them?

@aviwolfowitz10 No, ...
@aviwolfowitz10 No, that guy in the orange being Michael Moore is a big misnomer on the internet. Look at a picture of Moore in college and he doesn't look much like Moore in College. You'll also note this guy looks? quite a bit better than Moore in college.

@mnypwrrspkt thats ...
@mnypwrrspkt thats a young michael moore?

@ ...
@ItsDonaldSutherland? the guy in the orange is michael moore

@KalilYiuTubiu No ...
@KalilYiuTubiu No Friedman very clearly (or perhaps not so clearly since his fans don't see it) concedes that Ford has a responsibility to inform people that they have decreased the safety of the car in order to increase their profits, and? that the government has an obligation to enforce that condition. I understand that Friedman attempts a deflection with a philosophical question of mortal risk in daily life, but he ultimately has to agree with the kid and does, albeit sneakily

@nerfmyaccount what ...
@nerfmyaccount what Friedman does is try to understand the principles behind orange kid's argument... In this debate Ford responsability is irrelevant. Friedman says that there will always be a tradeoff between quality (risk) and price, and its the costumer responsability to know what he is buying. Every car is? a death car, every car can be made a little safer but theres always a cost, and its your responsability to bear that cost.

@Hayleyfire929 No ...
@Hayleyfire929 No it's not Michael Moore. That video was just giving the? kid a derisive nickname. Like if I see a kid running around ordering the other kids to give him their toys I might joke he is a "young hitler"

@ ...
@ItsDonaldSutherland Lots of people have rage over the profit system. It's destructive and harmful. If Friedman zealots were actually interested in seeking knowledge and not blindly following their leader they would see something very interesting in this debate.? Friedman never refutes the kids point, he attempts to obfuscate the issue, and then finally concedes that Ford should have been liable to the courts and had a legal obligation to inform people it built a death car

@TheOnlyFIshy I ...
@TheOnlyFIshy I loved the Zeitgeists, but why do you think that they never actually try to put in place their system? Why could a system that? supposedly would work for 7 billion people not work for a hundred thousand? The reason is simple. Individuals have information that society is not privy to. You cannot run things top down. The answer they always give is "computers" as if that is an answer. Profit represents value you have given to society (so long as it is gained by free exchange).

@ ...
@ItsDonaldSutherland totally agree. its just obnoxious when someone interprets disagreement as a personal insult. You just can't be Socratic with someone who thinks they belong to The Great and the Good, who must vanquish? the Evil and Malevolent in order to further Progress.

@hawkeyery Really?! ...
@hawkeyery Really?! I saw another video titled "Milton Friedman destroys a Young Michael Moore", but I had? no idea it actually was o.O

god damn Ayn Rand, ...
god damn Ayn Rand, I mean, Milton? Friedman.

I never knew ...
I never knew Michael Moore was capable of being thin.?

@ ...
@ItsDonaldSutherland He's? just a kid. People grow up.

@ ...
@ItsDonaldSutherland Okay I think I made a typical outburst comment there. Recently I've changed my view on how every country in the world? is run, this is because I watched Zeitgeist movies, which constantly backs up all the information it gives and from that point of view it's safe for me say that I don't support any major corporation/business in its aims for 'profit'. And to be honest there isn't any point of debating about this as it's one of those topics that's too deep.

@TheOnlyFIshy Why ...
@TheOnlyFIshy Why is profit wrong in your view? Profits-what's left after expenses (rent, insurance, utility). Profits used to pay employees, invest in new equipment, research and development. If your business only breaks even then you don't eat, you don't progress and there is no incentive. Profit motive is why you have an X-box or I-pad to enjoy this Christmas or a car to go to Grandma's house (Ford perfected the unit & made it affordable). Non profits wouldn't do it. No incentive to do it.?

@ ...
@ItsDonaldSutherland What's funny is that this? kid is none other than Michael Moore!

@ ...
@ItsDonaldSutherland Are you f***ing kidding me? this man's answer to the electric bill case was that "other people" was to be blamed rather than the electricity providers finding an alternate solution. He is obviously a profit based? individual (worst scum of the earth) like everyone else on wall street.

3:47? -- gold digger
3:47? -- gold digger

Read "The Banker ...
Read "The Banker Who Saved His Soul"? - it'll open your eyes.

What Friedman's ...
What Friedman's generation of intellectuals lacked was the ability to apply discernment and wisdom within the context of a scientifically delineated system. And honestly, I can understand the impetus for his generation's worldview. Mankind had seen tremendous advancements in technology and quality of life since the? industrial revolution. As a result, they venerated the scientific process above all else. Notice how he's willing to accept the virtues of freedom at the cost of mercy and humanity?

@bluegalactic ...
@bluegalactic Chile was not a disaster during the reign of Pinochet.. Never before in the history of Chile have they had as high an? amount of economic growth and reduction in poverty as during that period of time. Chile is now one of the richest countries in South America, is this really that much of a failure? You must distinguish sharply beetween the murders commited by Pinochet and his economic policies