Book Review: Capitalism & Freedom

It’s been a couple weeks since I finished Capitalism and Freedom by Milton Friedman which I found initially to be an easy read. It took some time towards the end though as I got to the later parts of the book and reading late at night led to some good dozings off. With that being said I was determined to get through it as Milton Friedman is Nobel Prize winner in Economics, thus his ideas must be good.

As you can guess from the title Milton Friedman is a big proponent of capitalism and the historical context of the writing is initially during the early decades of the cold war and thus there is a lot of references and comparisons to Communism. I found the ideas to be much more pure capitalism rather than what we tend to think of capitalism as I write this in 2017. I mean very much market dominated and allowing individuals more freedom. Specifically what stood out to me are the ways in which society has grown accustomed to governments not abiding by capitalistic principles. Mainly subsidies for certain industries or how even well-intentioned regulatory agencies have gone from promoting competition (Friedman uses the rail industry as an example) to now promoting the survival of failing industry. Rather than allowing the rail system to fully flounder at which point the principles of capitalism dictate someone will swoop in and innovate or resources and greater competition will be redirected to the other means of transportation.

I found this concept interesting and highlight one of the key flaws that governments often fail to incorporate into laws which is the evaluation of the policies at a future date. It seems that we do not tend to proactively put into place a time to evaluate the effects of policies on the economic and political effects. I read a lot of real estate books and a consistent theme with successful investors is having multiple exit strategies should things go well or not go well… before you buy a deal. It seems that this principle should be applied to government as well where we have contingencies and a review period in place to formally review new policies. This would allow more transparency and accountability as lawmakers would now be held accountable 5-10-15 years after a regulation and to see if the indicators point to success or failure.

Another key concept that I found interesting was how social programs are distributed to the poor. In our current society, there is a tendency for a negative connotation to lower-income Americans and this is reflected in the prescriptive distribution of tax credits and social programs. My interpretation is Friedman argues that in a truly capitalistic society government should not dictate how people receive or spend funds. Lower-income Americans should be given money to spend as they please rather than have government control how much is to be spent where or under what circumstances they do or do not receive the funds. The result will be more beneficial to those individuals and a better representation of how Capitalism should work. I see the other side of the argument as well in that while we do live in a capitalist economic environment the role of the government can be interpreted to further society and thus has a duty to incentivize the behaviors that benefit society. Think of tax subsidies for buying homes or purchasing electric vehicles. These subsidies exist because we as a society have deemed those activities valuable to society.

Again it has been a couple of weeks since I read the book but looking back on what I recall and key points the above is thought-provoking and I’ve barely scratched the surface. I can see his points being leveraged to the advantage of both political parties in the US and find it interesting how we selectively apply the principles that support our beliefs in politics. I realize I am guilty of this at times when I apply my own beliefs on certain topics to the principles outlined by Milton Friedman. It helps me evaluate what I find most important and why. I challenge you to objectively apply principles to the beliefs you have on various topics to see where the inconsistencies are. More importantly though, is to evaluate why that is and how you rationalize the times when you choose not to follow abide what the principle would say. It is merely an exercise in more deeply understanding your values.

Other Book Reviews:

The Ascent of Money – Book Review

Book Review: The E-Myth

Book Review: Superforecasting


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