53 pages 1 hour read

Milton Friedman

Capitalism And Freedom

Nonfiction | Book | Adult | Published in 1962

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Summary and Study Guide


First published in 1962, Capitalism and Freedom is a nonfiction book about economics, politics, and government. Author Milton Friedman advocates a classical-liberal approach to economic policy in the United States, one that promotes individual freedom by allowing the free market to function as effectively as possible.

Friedman wrote Capitalism and Freedom while he was an economics scholar at the University of Chicago. He opens the book with a quote by President John F. Kennedy: “Ask not what your country can do for you—ask what you can do for your country.” Friedman uses this quote to introduce his ideas about government’s role and purpose in a capitalist society. He asserts that government is neither a citizen nor a master, as Kennedy suggests, but a tool for achieving goals shared by a consensus of citizens.

Friedman argues that government can work against a society’s most important goal—protecting individual freedom—when used improperly. In particular, he warns against having a central government in which a few people hold the bulk of the power. He characterizes these viewpoints as “liberal,” descending from the classical liberal tradition that pushed for limited, decentralized government and free trade in the 18th and 19th centuries.

In the thirteen chapters following the Introduction, Friedman discusses competitive capitalism’s role in preserving economic freedom and making political freedom possible. He also ponders what role government should play in a society that values freedom, and makes a case for letting the free market drive most economic activities.

Chapter 1 explores the relationship between economic and political freedom. Friedman argues the kind of economic freedom capitalism provides is needed for political freedom to occur. He stresses the importance of voluntary cooperation in a capitalist system, noting that an absence of coercion is a defining characteristic of political freedom.

In Chapter 2, Friedman fleshes out a liberal concept of government’s role in a capitalist society. This role is limited to a handful of functions, such as enforcing laws and contracts, protecting property rights, and managing money. Friedman also discusses how government is useful for resolving situations where two or more individuals’ freedoms come into conflict.

Chapters 3-5 focus on government’s role in fiscal and monetary policy. In Chapter 3, Friedman argues that the severity of the Great Depression was largely due to poor decision-making by the Federal Reserve. Chapter 4 contains a case for instituting floating exchange rates and opening markets to any country interested in trading with the U.S. Friedman decries the use of fiscal policy as an economic-stimulus tool in Chapter 5.

In Chapters 6-7, Friedman discusses the roles of capitalism and government in education and discrimination. He supports a school-voucher system over a government-supported, public-school system in Chapter 6, and argues that capitalism helps decrease racial and religious discrimination in Chapter 7.

Chapters 8, 10, 11, and 12 address a variety of social welfare issues. Friedman takes issue with the concept of corporate social responsibility in Chapter 8, insisting that the only responsibility of corporations is to make as much money as possible for their shareholders. He also examines several types of monopolies a government might seek to remedy. Friedman opposes income redistribution in Chapter 10, in the process highlighting key differences between liberalism and egalitarianism. In Chapter 11, Friedman asserts that many social welfare programs do not meet their goals, in particular those designed for older adults, and in Chapter 12, he proposes replacing social security, public housing, and other safety-net programs with a negative income tax designed to assist all low-income taxpayers.

In Chapter 9, Friedman criticizes occupational licensure requirements, especially those in the medical profession. He then summarizes his main points in Chapter 13, the book’s conclusion. Here, Friedman emphasizes how the free market, and not the government, produces the most economic benefit. He also restates his belief that the government should be small and decentralized, noting that “[c]oncentrated power is not rendered harmless by the good intentions of those who create it” (201).