1962 CapitalismandFreedom

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Subject Headings: Economic Freedom, Political Freedom, Civil Freedom, Education Voucher, Capitalism, Liberalism.



  1. 1982 edition preface of Capitalism and freedom, p. xi of the 2002 edition

Cited By


  • Preface to the 1982 Edition
    • "... Second, and more basic, to keep options open until circumstances make change necessary. There is enormous inertia — a tyranny of the status quo — in private and especially governmental arrangements. Only a crisis - actual or perceived - produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes the politically inevitable. … "


Table of Contents

I The Relation Between Economic and Political Freedom 7
II The Role of Government in a Free Society 22
III The Control of Money 37
IV International Financial and Trade Arrangements 56
V Fiscal Policy 75
VI The Role of Government in Education 85
VII Capitalism and Discrimination 108
VIII Monopoly and the Social Responsibility of Business and Labor 119
IX Occupational Licensure 137
X The Distribution of Income 161
XI Social Welfare Measures 177
XII Alleviation of Poverty 190
XIII Conclusion 196

Ch. 1 The Relation Between Economic Freedom and Political Freedom

... 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. The preservation of freedom requires the elimination of such concentration of power to the fullest possible extent and the dispersal and distribution of whatever power cannot be eliminated — a system of checks and balances.

... As liberals, we take freedom of the individual, or perhaps the family, as our ultimate goal in judging social arrangements. Freedom as a value in this sense has to do with the interrelations among people

... The liberal conceives of men as imperfect beings. He regards the problem of social organization to be as much a negative problem of preventing "bad" people from doing harm as of enabling "good" people to do good; and, of course, "bad" and "good"people may be the same people, depending on who is judging them.

... The basic problem of social organization is how to co-ordinate the economic activities of large numbers of people.

... Fundamentally, 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 co-operation of individuals — the technique of the market place.

... 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 “rule of the game” and as an umpire to interpret and enforce the rules decided on.

... A major source of objection to a free economy is precisely that it … gives people what they want instead of what a particular group thinks they ought to want. Underlying most arguments against the free market is a lack of belief in freedom itself.

... The widespread use of the market reduces the strain on the social fabric by rendering conformity unnecessary with respect to any activities it encompasses. The wider the range of activities covered by the market, the fewer are the issues on which explicitly political decisions are required and hence on which it is necessary to achieve agreement. In turn, the fewer the issues on which agreement is necessary, the greater is the likelihood of getting agreement while maintaining a free society.

... The possibility of co-ordination through voluntary co-operation, rests on the elementary — yet frequently denied — proposition that both parties to an economic transaction benefit from it, provided the transaction is bi-laterally voluntary and informed.

Ch. 2 The Role of Government in a Free Society

... The need for government in these respects arises because absolute freedom is impossible. However attractive anarchy may be as a philosophy, it is not feasible in a world of imperfect men.

... 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.

... Freedom is a tenable objective only for responsible individuals. We do not believe in freedom for madmen or children. The necessity of drawing a line between responsible individuals and others is inescapable, yet it means that there is an essential ambiguity in our ultimate objective of freedom. Paternalism is inescapable for those whom we designate as not responsible.

... A government which maintained law and order, defined property rights, served as a means whereby we could modify property rights and other rules of the economic game, adjudicated disputes about the interpretation of the rules, enforced contracts, promoted competition, provided a monetary framework, engaged in activities to counter technical monopolies and to overcome neighborhood effects widely regarded as sufficiently important to justify government intervention, and which supplemented private charity and the private family in protecting the irresponsible, whether madman or child — such a government would clearly have important functions to perform. The consistent liberal is not an anarchist.

... A liberal is fundamentally fearful of concentrated power. His objective is to preserve the maximum degree of freedom for each individual separately that is compatible with one man's freedom not interfering with other men's freedom. He believes that this objective requires that power be dispersed. He is suspicious of assigning to government any functions that can be performed through the market, both because this substitutes coercion for voluntary co-operation in the area in question and because, by giving government an increased role, it threatens freedom in other areas.

Ch. 3 The Control of Money

... The Great Depression in the United States, far frombeing a sign of the inherent instability of the private enterprise system, is a testament to how much harm can be done by mistakes on the part of a few men when they wield vast power over the monetary system of a country.

... To paraphrase Clemenceau, money is much too serious a matter to be left to the Central Bankers.

... With respect to teachers' salaries .... Poor teachers are grossly overpaid and good teachers grossly underpaid. Salary schedules tend to be uniform and determined far more by seniority.

Ch. 6 The Role of Government in Education

... The major disadvantage of the proposed negative income tax is its political implications. It establishes a system under which taxes are imposed on some to pay subsidies to others. And presumably, these others have a vote.

Ch. 12 The Alleviation of Poverty

... The heart of the liberal philosophy is a belief in the dignity of the individual, in his freedom to make the most of his capacities and opportunities according to his own lights, subject only to the proviso that he not interfere with the freedom of other individuals to do the same.

... An income tax intended to reduce inequality and promote the diffusion of wealth has in practice fostered reinvestment of corporate earnings, thereby favoring the growth of large corporations, inhibiting the operation of the capital market, and discouraging the establishment of new enterprises.

Ch. 13 Conclusion

... As Adam Smith once said, "There is much ruin in a nation". Our basic structure of values and the interwoven network of free institutions will withstand much. I believe that we shall be able to preserve and extend freedom despite the size of the military programs and despite the economic powers already concentrated in Washington. But we shall be able to do so only if we awake to the threat that we face, only if we persuade our fellowmen that free institutions offer a surer, if perhaps at times a slower, route to the ends they seek than the coercive power of the state. The glimmerings of change that are already apparent in the intellectual climate are a hopeful augury.



 AuthorvolumeDate ValuetitletypejournaltitleUrldoinoteyear
1962 CapitalismandFreedomMilton Friedman (1912-2006)Capitalism and Freedom1962