The economics of irresponsibility

The classical economic assumption, from the days of Adam Smith, is that we all have free will and this freedom ensures the best possible outcomes for the economy, provided those decisions are based on greed and self-interest. This week’s episode opens with a student questioning Milton Friedman about the freedom of a man who couldn’t afford to pay his electric bill, so the power company cut him off and he died. Friedman says the fault lies with friends and neighbours who didn’t step in to support him. Perhaps they were too busy acting in their own self-interest. In a far-reaching discussion Phil asks Steve whether this is a failing of economics – and, if decisions can’t be made by free-will, who makes them?

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