Ep 9. How to Cure Inflation

In season 1 episode 9 of the original 1980 TV Series Free to Choose, titled "How to Cure Inflation", economist Milton Friedman explores the causes and consequences of inflation and proposes solutions for combating it.

Friedman begins by explaining that inflation is caused by an increase in the quantity of money relative to the quantity of goods and services being produced. When there is more money chasing the same amount of goods, prices rise, leading to inflation. Inflation can have severe consequences, causing uncertainty and reducing the purchasing power of money.

Friedman then explores the different types of inflation, including demand-pull inflation, which occurs when there is excess demand for goods and services, and cost-push inflation, which occurs when production costs increase, causing prices to rise.

To combat inflation, Friedman suggests several policy measures. One approach is to reduce government spending and reduce the deficit, which can help to reduce the amount of money in circulation. Another approach is to increase interest rates, which can make it more expensive to borrow money and reduce the amount of money in circulation.

Friedman argues that the most effective way to combat inflation is to establish a stable monetary system, with a fixed rate of growth for the money supply. This can be achieved through a system of automatic adjustment, such as a gold standard or a monetary rule that ties the growth of the money supply to the growth of the economy.

Friedman also discusses the role of wage and price controls in combating inflation, arguing that such controls are ineffective and can have unintended consequences, such as reducing incentives for productivity and encouraging black markets.

Throughout the episode, Friedman emphasizes the importance of economic freedom and free markets in combating inflation. He argues that government intervention in the economy can often have unintended consequences, and that market forces are the best way to ensure that resources are allocated efficiently and prices are kept under control.

Overall, "How to Cure Inflation" is an informative and thought-provoking episode that explores the complex issue of inflation and proposes solutions for combating it. Friedman's insights and arguments remain relevant today, making this episode a must-watch for anyone interested in economics and public policy.