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Today’s article is a guest post by computer scientist and long-time friend of SASHA, Benjamin Schulz.
In the five decades since its original publication, Milton Friedman’s “Capitalism and Freedom” has become a landmark of libertarian politics and neoliberal economic thought. It is a sign of the book’s tremendous influence that many of its arguments are taken starkly for granted in the political climate today. The broad popularity that “Capitalism and Freedom” has enjoyed masks the challenges presented by the climate in which it was originally composed: in the 1950s and 1960s, Keynesian theories of the economy held considerable sway, and memories of the Great Depression provided a powerful political impetus for many of the initiatives to which Friedman’s argument is opposed. If nothing else, the subsequent changes to the intellectual climate in the following decades give considerable force to Friedman’s retrospective on his own work: “Only a crisis — actual or perceived — produces real change. When that crisis occurs, the actions that are taken depend upon the ideas that are lying around.” “Capitalism and Freedom”, an appeal to the general public, marks Friedman as a public intellectual, and his subsequent success in that role is worthy of note by all intellectuals, regardless of their stance toward Friedman.
Friedman’s main argument is simple and very direct: the principles of classical liberalism entail that individuals should be able to exercise as much personal discretion as possible in the conduct of their own business through market exchanges. As a corollary, government regulation of market exchanges should be as limited as possible. While this argument was not new at the time of Friedman’s work, Friedman’s exposition of the ideas is articulate and clear. The subsequent conclusions of the work, that less regulation is both more conducive to smooth economic development, and better in accordance with the liberal democratic ideal, have since become a standard part of the political discourse. Friedman deserves credit as one of their essential forebears.
What distinguishes “Capitalism and Freedom” from many other expositions of the libertarian argument is its distinctly economic perspective. The book’s strongest portions make simple and fairly convincing arguments, for instance, that occupational licensure prevents and undue barrier to gainful employment without increasing the quality of services offered, and that social welfare programs, such as public housing, are less economically efficient than direct cash giveaways. In particular, the ingenuity displayed in the argument against even the licensing of physicians is impressive and, though certainly controversial, is well worth contemplation. Overall, Friedman shows considerable knowledge of the ways in which state-administered programs may thoroughly fail to achieve their intended ends, and skillfully raises important practical considerations in the pursuit of such goals. The book’s argument also touches upon the elements of monetary policy and currency exchange, which are the lesser-known but more essential foundation of Friedman’s economic career. These would perhaps have enjoyed a lengthier treatment. These subjects nonetheless fit well with the other parts of the book, and serve as interesting introduction to some of the related problems.
“Capitalism and Freedom” is weaker, unfortunately, in its philosophical and theoretical elements. Although the book’s popular audience probably makes it unsuitable for a highly technical discussion of economic theory, many of its further flung generalizations rest on much shakier foundations than its more specific points. To his credit, Friedman does a good job of pointing out those specific economic issues on which he is asserting his professional opinion, but about which could be some considerable debate, e.g. tax policy, and the financing of Social Security. There were other points at which I found justification to be lacking, such as Friedman’s lightly argued assertion that a private monopoly is preferable to a nationalized or government-regulated industry. The greater danger, I fear, is that Friedman’s contemporary fame as an economist may be an invitation to overestimate the sophistication of his stated philosophical positions and their underlying assumptions. A prime example of such simplistic assumptions is found in the Chapter X, “On the Distribution of Income”, in which Friedman asserts that “we are generally much readier to accept inequalities arising from chance than those clearly attributable to merit.” Certainly, there can be some honest debate on such an assumption, but it is by no means self-evident. This lack of self-evidence is illustrated by considering that the precise negation of Friedman’s assumption, namely that we are and should be less, not more, willing to accept inequalities of chance than of merit, is the cornerstone of John Rawl’s highly influential work of political philosophy, “A Theory of Justice.” Similarly, Friedman makes irregular, patchwork use of the notion of “neighborhood effects” (costs to persons not willingly participating in an exchange) without more closely examining why they should be applicable in some cases but not others. While a theory dealing with these issues more thoroughly presents a tremendous challenge, and is well beyond the scope of the book, it is important to separate Friedman’s expert economic observations from his occasional political and philosophical leanings.
Perhaps the most interesting feature of the book is Friedman’s impressively principled stances, which occasionally straddle conventional political lines. For example, Friedman argues controversially against forced desegregation of private businesses, while applying the same reasoning to reject so-called “right to work” laws which prohibit the formation of “closed shops”, wherein union membership is required for employment. Although something of an anachronism today, Friedman’s stance against the draft provides another interesting example.
“Capitalism and Freedom”, is still a fairly short work, and would probably be well supplemented with further reading. An obvious recommendation is Robert Nozick’s classic, “Anarchy, State, and Utopia”, which better develops many of the arguments for libertarian theories of property and exchange that Friedman seems to presume. Interested readers would probably also enjoy Thomas Friedman’s (no relation) “The World Is Flat”, a very popular anecdotal discussion of the future of global capitalism. Naomi Klein’s painstakingly researched expose, “The Shock Doctrine: The Rise of Disaster Capitalism”, directly criticizes Friedman’s position by describing many very serious contemporary problems that free markets seem unable to resolve.
All told, “Capitalism and Freedom” is a worthwhile read for persons of all political persuasions. Conservatives and libertarians will find much to sympathize with, and leftist thinkers will find an engaging examination of some of the practical problems that attend constraints on the free market. While I do not personally agree with many of Friedman’s conclusions, it is nonetheless refreshing to read an opposing viewpoint that retains its force and directness while remaining principled and well-reasoned.
Benjamin Schulz is a computer scientist and long-time friend of SASHA whose regular blog, “Hot, Cold, Sun, Rain: Practical Spirituality, Irregular Philosophy, and Personal Civics” appears here.