Capitalism and Freedom

By Milton Friedman

University of Chicago Press. 208 pages. 29S.

PROFESSOR FRIEDMAN has a wide international reputation as a brilliant economist and as an extreme liberal, in the nineteenth century sense. It therefore comes as no surprise that this tract should be so stimulating. It makes ideal reading for politicians of either party in this country, not because it would convince them, but because it challenges the reader to sort out his own ideas more fundamentally.

Few readers will share Professor Friedman's generalised distrust of government. Yet many will accept a good deal of what he has to say about particular types of government action and about other impediments to the working of the price mechanism. His analysis, for example, of the effects of the ability of the American Medical Association to restrict entry to the medical profession is devastating.

Professor Friedman's views on monetary and fiscal policy are extremely challenging. Thus he wishes to deprive the monetary authorities of all discretionary powers and instead to follow, come what may, the simple rule of increasing the stock of money at a constant rate year in and year out. This follows an argument that the blame for the depth, if not the occurrence, of the Great Depression can be laid at the door of the Federal Reserve System. On the international side, he wants a floating exchange rate and free trade.

Where many people part company with Professor Friedman is in his notion that all people who are neither children nor insane are responsible. A little experience of social problems would teach him that the dividing line is blurred. Hence the idea of helping the unfortunate only by a negative income tax is too simple, even if it could be done on a weekly basis (a problem he ignores). Even those liberals who agree with him that one cannot be both a liberal and an egalitarian will feel that prisons, asylums and cash are insufficient to look after the poor and weak. Professor Friedman does not really face this issue. But although this omission mars the book, it does not invalidate what is there; the rest must be judged on its (very considerable) merits.

HISTORICAL NOTE

Writing in the preface to a later edition, Milton Friedman recalled that his book's views “were so far out of the mainstream that it was not reviewed by any major national publication... though it was reviewed by the London Economist and by the major professional journals.” More than 400,000 copies of “Capitalism and Freedom” were sold in the 18 years after it was first published.