The Liberal Economy

Question 1

What areas of the economy do classical liberals and modern liberals agree on?

Answer 1

1. Both believe in a limited state in the economy. All liberals believe the economy should offer freedoms to the consumer and producer as this promotes negative freedom. To enable this to occur there should be minimal government intervention. The state is not needed much within the economy as all liberals believe individuals are rational and are capable of making rational economic choices…. John Stuart Mill would also agree that a free market economy is needed as individuals should be able to do as they please as long as they don’t harm anybody else
2. All liberals would agree that in the economy there will be a rich and poor divide in the economy due to meritocracy. Because all individuals have equal opportunity there will be divides due to differences in how hard people worked. Betty Friedan would agree with this as she believes in equality of opportunity for both men and women
3. Overall they both agree with the idea of a a capitalist economy as they believe all individuals have relatively equal opportunity to be whatever they want and therefore this grants them freedoms - both of their main goal is to maintain negative freedom

Question 2

What areas of the economy do Modern and Classical Liberals disagree on?

Answer 2

1. Classical liberals believe that there should be a free market economy without government intervention. John Locke would agree that government intervention is not needed in the economy because individual liberty should be preserved. Whereas modern liberals believe Keynesian economic management is needed in extreme circumstances like a recession (the government manipulates the economy e.g through taxes) They believe this as it helps the worst and will help individuals live to their potential (positive freedom)
2. Furthermore, classical liberals do not believe in welfare state as they believe within the free-market everybody has equal opportunity. However, Modern liberals suggested that due to the manner in which absolute poverty disadvantages people a welfare state should be implemented and that would create true equality of opportunity and provide positive freedom - Betty Friedan would support this as it provides equality of opportunity for both men and women
   3 - Classicals believe that the free-market economy is self-regulating, they have an idea it is guided by an ‘invisible hand’. Modern liberals on the other hand would argue that the free-market is not self-regulating and leads to crashes and exploitation of the poor and is therefore lacking in positive freedom as those impoverished cannot be fulfilled