Capitalism And Freedom Summary

Milton Friedman

Capitalism And Freedom

  • Plot overview and analysis written by an experienced literary critic.
  • Full study guide for this title currently under development.
  • To be notified when we launch a full study guide, please contact us.

Capitalism And Freedom Summary

SuperSummary, a modern alternative to SparkNotes and CliffsNotes, offers high-quality study guides that feature detailed chapter summaries and analysis of major themes, characters, quotes, and essay topics.  This one-page guide includes a plot summary and brief analysis of Capitalism and Freedom by Milton Friedman.

Milton Friedman’s Capitalism and Freedom deals with one of the most divisive issues in contemporary politics: the proper role of government in a nation’s economy. On one extreme, there are those who believe that the government should play a large role in the economy, e.g. establishing a minimum wage, collecting more taxes from the wealthy, taxing and regulating imported goods, and using tax revenue to provide shelter and other necessities to lower income individuals. Those in favor of having the government perform such functions believe that this is the best way to redress problems of social inequality and to ensure that each citizen can meet his or her basic needs. They also see the government as playing a key role in ensuring that markets remain stable, acting as a safeguard against economic collapses, such as the Great Depression last century and the Great Recession of 2008.  On the other extreme, there are those who believe that the government’s role in a nation’s economy should be much more limited. While both sides believe in protecting the rights of their fellow nationals and in having stable markets, they differ over whether the best means towards these ends is through governmental regulation and involvement in the economy.

During the time that Milton Friedman was writing Capitalism and Freedom (1962) most economists and politicians were in support of an increase in governmental involvement in the economy; for example, most were in favor of an increase in government spending and had enthusiastic support for programs such as the New Deal. Friedman was one of the few voices of dissent calling for a decrease in the government’s involvement in economic affairs. According to Friedman, the ideals that motivated policy makers to support the aforementioned measures could not be achieved in the way that most at that time believed it could. In fact, Friedman argues, governmental involvement in economic affairs has precisely the opposite effect: it promotes concentration of wealth in the hands of a small minority, takes away opportunities that would otherwise be available to the less affluent, and makes it more difficult to keep markets stable. For Friedman, freedom and prosperity result from the government stepping back and allowing markets to operate freely.

Friedman’s work served to undermine the once popular view that political freedom consists in a (roughly) equal distribution of wealth amongst the citizens of a nation. Rather, Friedman insisted, political freedom consists in everyone having access to the same opportunities, which can only happen when the market is allowed to function without interference from the government. When the government seeks to provide goods such as housing to its citizens, Friedman says, the result is fewer options from which its citizens may choose, e.g. fewer choices of where to live. Thus government action leads to a curtailing of the freedoms that the citizens of a nation would enjoy if the market were allowed to operate freely. Similarly, government regulation and taxation on imports inevitably raises the price of imported goods, resulting in fewer citizens being able to afford imported goods. Once again, government involvement in the economy takes away a certain range of freedoms – i.e. the freedom to choose to purchase imported goods – from a certain cross section of its citizens.

Friedman provides numerous examples from history illustrating a link between free markets and social prosperity, on the one hand, and examples illustrating a link between governmental regulation of markets and social inequality, on the other.

The views he articulated were enormously influential. With the publishing of Capitalism and Freedom, Friedman was able not only to convince many policy makers that their support for such programs would have undesirable consequences, but also brought many of the central ideas of economic theory to the attention of the general public. Suddenly, ordinary Americans without prior training or education in economics were becoming highly opinionated concerning matters of economic policy. Whether or not one agrees with all of Friedman’s views concerning politics and economics, one must give him credit for educating the general public on these topics and in shaping the way these topics are discussed and debated today.

It is important to point out that Friedman did not advocate for an end to all forms of governmental activity in the economy. For example, Friedman held that taxation was necessary to provide for a few basic public goods, including infrastructure such as highways and services such as public schools. However, Friedman favored the idea of a flat tax – that is, he believed that everyone should pay the same percentage in taxes, regardless of his or her income – as opposed to a progressive tax, in which the more affluent are expected to pay higher taxes. Friedman also held that the Fed should play a role in keeping markets stable by increasing the money supply according to a small, constant rate. It is also important to note that Friedman does not lay down absolute principles concerning when and to what extent the government should intervene in the economy, but rather promotes the idea that the government’s role should reflect the particular needs of the nation at the present time.