Capitalism and Freedom

by Milton Friedman

the banner of liberalism has been claimed by those who advocated “the very policies of state intervention and paternalism against which classical liberalism fought.”

He argued for a negative income tax to support lower-income households—an idea that became the earned income tax credit.

the kind of freedom Friedman thought dangerous was the freedom to regulate markets or redistribute property.

the role of government was exploding under the influence of initial welfare state and Keynesian views.

central planning is indeed The Road to Serfdom, as Friedrich A. Hayek titled his brilliant 1944 polemic.

Free to Choose, a direct lineal descendant of Capitalism and Freedom

there may be an inescapable connection between capitalism and democracy

the draft is the only item on my list of fourteen unjustified government activities that has so far been eliminated—and

government must be limited. Its major function must be to protect our freedom both from the enemies outside our gates and from our fellow citizens:

Enemies foreign abd domestic

government power must be dispersed.

Each day brings new problems and new circumstances. That is why the role of the state can never be spelled out once and for all in terms of specific functions.

liberalism. Unfortunately, “As a supreme, if unintended compliment, the enemies of the system of private enterprise have thought it wise to appropriate its label,”1 so that liberalism has, in the United States, come to have a very different meaning than it did in the nineteenth century

liberalism emphasized freedom as the ultimate goal and the individual as the ultimate entity in the society.

readiness to rely primarily on the state rather than on private voluntary arrangements to achieve objectives regarded as desirable.

The nineteenth-century liberal regarded an extension of freedom as the most effective way to promote welfare and equality; the twentieth-century liberal regards welfare and equality as either prerequisites of or alternatives to freedom.

revival of the very policies of state intervention and paternalism against which classical liberalism fought.

the twentieth-century liberal favors centralized government. He will resolve any doubt about where power should be located in favor of the state instead of the city, of the federal government instead of the state, and of a world organization instead of a national government.

liberalism in its original sense—as the doctrines pertaining to a free man.

Liberalism=liberty/freedom

It is widely believed that politics and economics are separate and largely unconnected; that individual freedom is a political problem and material welfare an economic problem;

a society which is socialist cannot also be democratic, in the sense of guaranteeing individual freedom.

economic freedom needs special emphasis because intellectuals in particular have a strong bias against regarding this aspect of freedom as important. They tend to express contempt for what they regard as material aspects of life, and to regard their own pursuit of allegedly higher values as on a different plane of significance and as deserving of special attention.

capitalism is a necessary condition for political freedom.

modern totalitarian state like Russia or Nazi Germany, in which economic totalitarianism is combined with political totalitarianism.

Welfare rather than freedom became the dominant note in democratic countries.

Philosophical Radicals—Dicey, Mises, Hayek, and Simons,

expansion of freedom occurred at the same time as the development of capitalist and market institutions.

As liberals, we take freedom of the individual, or perhaps the family, as our ultimate goal in judging social arrangements.

there are only two ways of coordinating the economic activities of millions. One is central direction involving the use of coercion—the technique of the army and of the modern totalitarian state. The other is voluntary cooperation of individuals—the technique of the market place.

division of labor could not go very far if we had to continue to rely on the barter of product for product. In consequence, money has been introduced as a means of facilitating exchange,

“neighborhood effects”—effects on third parties for which it is not feasible to charge or recompense them.

Externalities

The existence of a free market does not of course eliminate the need for government. On the contrary, government is essential both as a forum for determining the “rules of the game” and as an umpire to interpret and enforce the rules decided on.

Political freedom means the absence of coercion of a man by his fellow men.

The fundamental threat to freedom is power to coerce, be it in the hands of a monarch, a dictator, an oligarchy, or a momentary majority.

Tyranny of the majority

freedom includes his freedom to promote communism.

The Hollywood blacklist was an unfree act that destroys freedom because it was a collusive arrangement that used coercive means to prevent voluntary exchanges.

the role of the market in preserving political freedom,

any form of coercion is inappropriate.

we can afford neither the time nor the effort that would be required to achieve complete unanimity on every issue. We must perforce accept something less.

our willingness to resort to majority rule, and the size of the majority we require, themselves depend on the seriousness of the issue involved.

Our legal structure is full of such distinctions among kinds of issues that require different kinds of majorities.

Something like essential consensus was achieved initially in accepting them, and we require something like essential consensus for a change in them.

Constitutional amendments eg.

the basic roles of government in a free society: to provide a means whereby we can modify the rules, to mediate differences among us on the meaning of the rules, and to enforce compliance with the rules

what constitutes property and what rights the ownership of property confers are complex social creations rather than self-evident propositions.

In summary, the organization of economic activity through voluntary exchange presumes that we have provided, through government, for the maintenance of law and order to prevent coercion of one individual by another, the enforcement of contracts voluntarily entered into, the definition of the meaning of property rights, the interpretation and enforcement of such rights, and the provision of a monetary framework.

monopoly frequently, if not generally, arises from government support or from collusive agreements among individuals.

private monopoly may be the least of the evils.

The emergence of road and air transport has reduced the monopoly element in railroads to negligible proportions.

“neighborhood effects.” An obvious example is the pollution of a stream.

Freedom is a tenable objective only for responsible individuals. We do not believe in freedom for madmen or children.

The ultimate operative unit in our society is the family, not the individual.