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Capitalism and Freedom

The definitive statement of Friedman's immensely influential economic philosophy

By Milton Friedman
13-minute read
Audio available
Capitalism and Freedom by Milton Friedman

Capitalism and Freedom (1962) is one of the most influential discussions of the relationship between economic and political freedom to have ever been put to paper. Written at the height of the Cold War between Soviet socialism and Western capitalism, Milton Friedman argues that only free markets can guarantee liberty. His theory remains every bit as relevant and thought-provoking today as when it was first published.

  • Economics buffs fascinated by the intellectual history of the last century
  • Free-marketeers, classical liberals and libertarians
  • Opponents of free-market capitalism interested in the other side of the argument

Milton Friedman (1912-2006) studied mathematics and economics at Rutgers University during the Great Depression before taking up a position at the University of Chicago in 1946. Over the following three decades, he established himself as one of the world’s most vocal champions of the free market. His work was a major influence on Margaret Thatcher and Ronald Reagan’s governments. Friedman won the Nobel Memorial Prize in 1976 and is regarded as one of the most important economists of the twentieth century.

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Capitalism and Freedom

By Milton Friedman
  • Read in 13 minutes
  • Audio & text available
  • Contains 8 key ideas
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Capitalism and Freedom by Milton Friedman
Synopsis

Capitalism and Freedom (1962) is one of the most influential discussions of the relationship between economic and political freedom to have ever been put to paper. Written at the height of the Cold War between Soviet socialism and Western capitalism, Milton Friedman argues that only free markets can guarantee liberty. His theory remains every bit as relevant and thought-provoking today as when it was first published.

Key idea 1 of 8

Economic and political freedom are both dependent on a small, decentralized government.

Economics and politics are often taught as separate subjects in school. We typically learn that economics is about material well-being, while politics is about individual freedom. Follow that approach to its logical conclusion and you soon end up with the idea that any political system can be combined with any economic system.

But that’s a mistake. In reality, you can’t mix the state-led socialist economy of the Soviet Union with the individual political freedoms of the US to create a kind of “democratic socialist” society. Why not? Well, economic and political freedoms are actually interdependent and, if you curtail the former, you also limit the latter.

Imagine a hypothetical British holidaymaker in the aftermath of the Second World War set on taking a vacation in the US. As he goes about booking his travel, he realizes he can’t afford the trip, because the government’s capital controls mean that sterling is undervalued relative to the dollar.

Now compare that to the case of an American citizen who isn’t allowed to visit the Soviet Union because she holds pro-capitalist views. In both cases, restrictions on economic and political freedoms have the same result: they prevent individuals freely pursuing their own dreams and destinies.

That means you need a system that guarantees both the economic and political liberties we need to thrive. That system is called free-market capitalism. Let’s take a closer look at how it works in practice.

The most important point is that the government’s role in this ideal society is strictly limited. Its purpose is to guarantee basic law and order rather than infringe upon our individual freedoms. Think of it as setting the rules of the game. Buying and selling is a basic economic freedom, and we’re at liberty to use it as we please. The government, on the other hand, has only one job: to enforce individuals’ property rights and protect them against theft and extortion.

When governments restrict themselves to this role, the free market can take care of the rest – how people want to live their lives, what they want to buy and sell and, ultimately, who they want to be.

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