Major Themes in “Capitalism and Freedom” by Milton Friedman

by Danny Fenster

This chapter is a free excerpt from Quicklet on Capitalism and Freedom.

The Danger of Concentrated Power

Just about every measure Friedman advocates for can be described as a limit on the control our government has over our economic, social and political lives. Whether it’s education, national parks or trade tariffs, Friedman wants decision-making to occur at the level of the individual and not concentrated in the ever-expanding levels of government. “The power to do good is also the power to do harm,” Friedman writes in the introduction, “those who control power today may not tomorrow; and, more important, what one man regards as good, another may regard as harm.”

The Relation Between Economic and Political Freedom


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The Danger of Concentrated Power

Just about every measure Friedman advocates for can be described as a limit on the control our government has over our economic, social and political lives. Whether it’s education, national parks or trade tariffs, Friedman wants decision-making to occur at the level of the individual and not concentrated in the ever-expanding levels of government. “The power to do good is also the power to do harm,” Friedman writes in the introduction, “those who control power today may not tomorrow; and, more important, what one man regards as good, another may regard as harm.”

The Relation Between Economic and Political Freedom

Though the first chapter is dedicated solely to the thesis that political and economic freedoms are inextricably linked, this theme pervades the entire book as Friedman argues for the dignity of the individual to decide where his children will go to school, at what basis he will employ or be employed, and from whom he will buy from or sell to. “A society which is socialist cannot cannot also be democratic, in the sense of guaranteeing individual freedom.” The freedom to engage in economic activities on one’s own terms is itself an important personal freedom; further, economic freedoms are a check the power of the government, ensuring broader political freedoms.

Instability and the Federal Reserve

Many people believe the Federal Reserve System keeps a check on unemployment and makes otherwise chaotic markets more stable. Friedman disputes this claim in several chapters. Following the Great Depression, the system’s inaction prolonged and deepened the recession; since its establishment in 1913, it has presided over the most unstable period in the economic history of the United States.

Friedman contends that the period between the Civil War and the establishment of the Federal Reserve in 1913 was far less turbulent than the period between between 1913 and the time the book was written. While he admits that the times themselves and events in between--two world wars, globalization--may be a significant factor, he spends much time arguing that Federal reserve policies were far more destabilizing.  

Intention v. Outcome

Aside from the risk to personal freedoms inherent in concentrating power in a central authority, even a beneficent authority, if given too broad a responsibility for decision making, can have disastrous effects; the gap between people’s intentions and the outcomes of their actions is wide. Friedman cites example after example of this throughout the book: price supports and trade restrictions intended to protect domestic jobs raise prices for consumers and tax payers and strain international relationships; licensing doctors and medical workers, intended as a consumer safety measure, raises the price of medical care by limiting the number of practicing doctors and encouraging the poor to seek dangerous back door alternatives; minimum wages raise the price, free individuals would normally agree on, forcing employers to create fewer jobs. "Concentrated power is not rendered harmless by the good intentions of those who create it," Friedman writes in the concluding chapter.

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