Summary Capitalism and Freedom Milton Friedman / Entrire book all chapters
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Course
Capitalism and freedom
Institution
Amsterdam University College (AUC)
Book
Capitalism and Freedom
This is a comprehensive and compact summary of the entire book by Friedman. All chapters are briefly discussed giving you a thorough understanding of the meaning of the book.
Born on July 31, 1912 in New York to Jewish immigrants, Milton Friedman was one of the most
prominent advocates of the free market. He attained a B.A at 20 years, from Rutgers University, an
M.A from the University of Chicago in 1933, and a Ph.D. from Columbia University in 1946. He
received The John Bates Clark achievement which honours economists under 40. In 1967, he served
as an adviser to President Richard Nixon, and was president of the American Economic Association.
In 1976 he was awarded the Nobel Prize in economics for his achievements. He retired from the
University of Chicago in 1977 and became a senior research fellow at the Hoover Institution at
Stanford University (Liberty Fund Inc, 2008). He passed away on November 16 2006 in California.
His most famous words were: “A society that puts equality before freedom will get neither. A society
that puts freedom before equality will get a high degree of both.” He was referred to as ‘the
economist’s economist’.
CHAPTER 1: The Relationship Between Economic Freedom And Political Freedom
Friedman started his book by examining the two major forms of freedom: economic freedom and
political freedom; the relationship between these freedoms; the economic systems that support them
and the contribution of freedom in general to society.
Freedom is the liberty to act as one chooses so long as others are not affected. From this point
of view, economic freedom is the liberty to carry out any transaction as one chooses. Friedman
considered ‘democratic socialism’ as absurd as it was impossible to attain a combination of political
and economic freedom, but equally important and necessary for a good society. He analyses their co-
existence as he thought economic arrangements that supported economic freedom, namely capitalism,
also promoted political freedom since it enabled economic and political powers to offset each other
through separation. Bearing in mind that, the fundamental threat to freedom is the power to coerce, be
it in the hands of a monarch, a dictator or an oligarchy.
However, Friedman concedes that the relationship between economic and political freedoms
is complex and by no means unilateral. This is because history is silent about a largely politically free
nation whose economic system was not something comparable to free market; although fascist Italy,
fascist Spain, tsarist Russia were all fundamentally capitalists, but could not be described as
politically free. Thus, economic freedom is necessary, but not sufficient for political freedom. Again,
political freedom is not always the means to economic freedom as was seen by Bentham and the
classical liberals. 19th century democracies such as England are cited as examples where welfare and
collectivism dominated freedom and individualism.
The fundamental problem of every society is how to coordinate its economic activities to
effectively use its resources. This problem scales up as people increase. The challenge to liberalists is
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ensuring that such widespread interdependencies also preserve individual freedom. The solution is
voluntary exchange between parties as long as it is bi-lateral and informed. However, the government
is essential in determining the rules and enforcing the laws decided upon. Freedom does not means its
abuse though. The contributions of freedom are diversity and advocacy for causes, including
unpopular ones (which may, in the long run benefit society).
CHAPTER II: The Role Of The Government In A Free Society
Chapter 2 begins with challenging the objection to a totalitarian society which regards the end as
justifying the means. This objection is illogical and poses the question that if the end does not justify
the means then what does? Friedman argues that “to deny that the end justifies the means is to assert
that the end in question is not the ultimate end, that the ultimate end is itself the use of proper means”.
To a liberal, the “proper means” involve free discussions and voluntary co-operation. In addition,
Friedman talks about the role of the market in a free society. The market should allow agreement by
all people in a free society without compliance to laws. He however says that agreement on every
issue cannot be achieved thus majority rule. If the minority has no strong feelings about being
overruled then plurality suffices. If the minority has strong feelings about an issue, then the minority
retaliates. Thus, the market is a system of effective proportional representation.
Friedman compares a good society to a good game. In his point of view, just as a good game
requires the gamers to accept the rules of the game, a good society requires members to agree to the
rules that would govern their day to day activities. He claims that in a society, no set of rules can
prevail unless a majority of the society conforms to them without external sanctions. According to
Friedman, the basic roles of the government in a free society are: to provide a means whereby rules
can be modified, to meditate differences among citizens on the meaning of rules and to enforce
compliance of the rules. In a free society, the government is needed for regulation: men’s freedom
can conflict, when they do, one’s freedom must be limited to preserve another’s thus absolute
freedom is impossible.
Friedman also outlines the major problem in declaring appropriate government activities as
being how to resolve conflicts amongst freedoms of different individuals. This is because in a liberal
society individual freedoms and rights are highly regarded and respected. In an economic setting the
problem in declaring government activities arises when conflicts between freedom to combine and
compete arise. He continues to address economic areas that raise difficulties for example the
definition of “free”, what property rights entail and the monetary system. According to USA “free”
means that anyone can set up an enterprise thus existing enterprises cannot keep out competitors other
than lower their prices or sell their products at the same price as those of their competitors.
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