The problem of income inequality in the view of John Kenneth Galbraith and Milton Friedman

Abstract

The paper presents the approach to income inequality of two great American economists: a representative of neo-institutionalism – John Kenneth Galbraith, and the creator of monetarism – Milton Friedman. Both of them dealt with this problem extensively. The paper aims at revealing differences in both seeking the sources of inequalities and ways to combat them. Although both economists were against excessive inequalities, the methods of overcoming them were perceived differently by each of them. Galbraith advocated that the state should be activated. Therefore, he proposed the implementation of various aid programs, claiming that there should not be poor people in rich countries, even if not everyone honestly uses such assistance. Moreover, various forms of poverty alleviation should be introduced in poor countries. On the other hand, Friedman concluded that the best way to mitigate income inequalities is a non-intervention approach of the state and free market should be left to work freely. According to him, only the market can reduce income disparities. He considered all programs implemented to overcome them to be unsuccessful because they cause social indolence as the number of people using these forms of help increases. In addition, the state is not a charitable institution and it should not include such a form of activity that is only appropriate for bodies specially appointed for this purpose (charity). The paper uses the source analysis method and the comparative method. The main works of both economists were examined in an attempt to highlight the specific nature of their approaches.