Quick Summary: Milton Friedman and his wife, Rose Friedman discuss the dangers of increasing government power in Free to Choose (1980), covering a wide range of issues such as inflation, education, equal opportunity, welfare, consumer protection, and labor unions. In every case, they argue that Americans should believe in the power of the free market to preserve people’s sovereignty.
You do not have to read the entire book if you don’t have time. This book summary provides an overview of everything you can learn from it.
Let’s get started without further ado.
Free to Choose Book Summary
Free Market at Risk
Economic liberty necessitates political liberty. Individuals are allowed to collaborate without being forced to do so by a centralized authority, which limits the scope of political control. Furthermore, the free market acts as a check on any potential concentration of political power. Tyranny is virtually unavoidable when economic and political power are concentrated in the same individuals, but it becomes less likely as power is dispersed.
The government’s role in a free market is to act as an arbitrator to prevent people from taking advantage of or abusing one another. However, there has been a trend of wanting more government involvement in the economy since the Great Depression. Many people now regard it as a parent, entrusted with the responsibility of enforcing some people’s will and stomping on others’. Instead of emphasizing the individual’s agency in shaping his own destiny, he was reduced to a pawn in a larger game over which he had no control. This violates the very foundation of America by removing individual autonomy and freedom.
The good news is that things are beginning to improve. Dissatisfaction with large-government programs and the problems they cause is growing. Rather than promoting total collectivism, we should encourage more entrepreneurialism and voluntary cooperation.
The Roles of Prices and Governments
A voluntary exchange can only take place if both parties believe they will benefit from it. The most common economic fallacies stem from a failure to recognize this fundamental truth and from the assumption that one party can only benefit at the expense of another.
In reality, people all over the world can collaborate to achieve their own goals, and they can do so through the price system. The price system allows millions of individuals, all acting in their own self-interest, to coordinate their activities in a free market that benefits all parties involved. As a result, economic order can emerge from the actions of many people, each looking out for their own interests.
Prices have a significant impact on economic activity in three ways. First and foremost, they communicate information; second, they encourage businesses to use their resources as efficiently as possible; and third, they decide how much money each individual receives – income distribution.
Similar to how prices evolve through free market transactions and spontaneous collaboration, social norms and values emerge in the context of a society through trial and error, acceptance and rejection, and certainly not through governmental decree. The government plays an important role in society, but its duties do not include market control. Instead, it should protect society from violence and invasion, as well as individuals from those who wish to harm them, because there would be no true freedom or free market without this protection.
The government appears to be everywhere in today’s society. Many argue that, while laissez-faire government policy was possible in a sparsely populated nineteenth-century America, today’s urbanized and industrialized society necessitates a far greater, if not domineering, role for government. As a result, the government’s role in the economy has expanded rapidly over the last half-century.
This intervention has been costly in terms of money. Restrictions on our economic liberty have the potential to halt the economic progress we’ve made over the last two centuries. We, on the other hand, are the architects of our own civilization. We have the ability to influence the institutions in which we live. Nothing stands in the way of us building a society that protects and develops human freedom while keeping government in its proper role as a servant rather than a ruler.
The Root Cause of Depression
The Great Depression, which began in 1929, was an unprecedented disaster in the United States. Before the economy hit rock bottom in 1933, the country’s dollar income had been cut in half, and unemployment had reached a previously unheard-of 25% of the working population. However, the terrible economic collapse did not affect only Americans. Unemployment, hunger, and despair spread throughout the world.
The Great Depression convinced the public that capitalism was a fragile system prone to devastating crises. People were convinced that the government should intervene to counteract the instability caused by the private sector, and that it should act as a balancing wheel to ensure security.
This shift in public opinion was a critical driver for the rapid development of government, particularly central government. This shift, however, was based on a complete misinterpretation of what had occurred. In reality, the failure of the United States government to “coin money, regulate the value thereof, and of foreign Coin,” as stated in the United States Constitution, was the root cause of the Great Depression. It was not a failure of the private sector. How can capitalism be blamed for the Depression if the government was in charge of regulating the value of money and failed to do so? Furthermore, it is unfortunate that government failures in money management are not just a historical curiosity, but a present-day reality.
Not So Well-fare
Welfare is ripping the fabric of American civilization apart. These programs, in addition to weakening families, limit our freedom by decreasing our desire to work, save, and create.
Every year, the US Department of Health, Education, and Welfare spends more of our money, but the results worsen. To begin with, billions of dollars are spent to improve our health. Prices have risen, but there has been no discernible improvement in treatment and service quality. Second, education spending has increased while quality has decreased. The amount of pressure placed on us to promote racial integration has increased, but society appears to be becoming more fractured rather than more homogeneous and diverse. Third, while the average American’s standard of living is higher than it has ever been, the number of people eligible for or receiving state welfare continues to rise, as do the vast sums of money spent on it.
Most of today’s social programs were never necessary to begin with. Many of those who are currently reliant on them would have grown independent and would no longer be considered wards of the state if they had not been enacted.
Opportunity Equality, Not Outcome Equality
What do the words “equality” and “liberty” mean in the Declaration of Independence? At the time, equality meant equality before God, and freedom meant the freedom to live one’s own life as one saw fit. Eventually, the concept of “equality of opportunity” came to mean that no one should be barred from using their abilities to achieve their goals because of arbitrary barriers. For the vast majority of Americans, this is still its primary meaning. The freedom to make one’s own decisions did not conflict with equality before God or equal opportunity. Contrary to popular belief, liberty and equality were two sides of the same coin.
In the twentieth century, the United States developed a completely new theory of equality: equality of outcome. It states that regardless of what they do, everyone is entitled to the same level of wealth and to live the same life. However, the principle of equality of outcomes clearly contradicts liberty. Its promotion has been a primary cause of ever-increasing government and limitations on our freedom.
A society will never achieve either freedom or equality as long as it prioritizes equal outcomes over freedom. There will be no freedom if equality is achieved through force, which will fall into the hands of those who use it to further their own interests. Increased freedom and equality, on the other hand, are pleasant byproducts of societies that place a high value on individual liberties.
Individuals in a free society can use their own resources and skills to achieve their goals. People in positions of privilege are not barred from exercising them; however, freedom ensures that those positions are not institutionalized and thus vulnerable to challenge by others who are equally capable and ambitious. Freedom entails a variety of options as well as the ability to move around. It may benefit everyone, from the wealthy to the poor, because it keeps the doors open for those who are currently disadvantaged to become tomorrow’s advantaged.
Our educational system is one of the most heinous examples of how things can go horribly wrong in our society. Despite increased funding, the quality of public schools has steadily declined over the last several decades. The lack of local authority over education, as well as government centralization, are to blame for the decline in quality. The growing role of the government in funding and managing education has resulted in a significantly weaker system than would have been the case if voluntary cooperation had played a larger role.
Although public education was not mandated in the United States until the early 1800s, it was almost universal at the time. The vast majority of funds came from private sources. This changed in the 1800s, when the government began programs to introduce taxpayer-funded public schools. This movement was sparked by teacher demands, not those of parents. Governments intervened not only in the “public interest,” but also because they recognized that regulation would give them more power over students and parents.
The more schools that become public, and the more money that is poured into addressing educational issues, the worse they become. When it comes to teachers, administrators, and employees, their numbers have exploded in recent decades, raising concerns given that the number of students has not increased significantly. Worse, the poor pay the same amount of tax for education as the wealthy, but their children receive a much lower quality education than rich children, who can attend private school or live in wealthy areas where public schools are much better.
Prohibition, which began in 1920 and lasted until 1933, made it illegal in the United States to produce or sell alcohol. Prohibition was enacted in an act of moral righteousness following World War I. Its history is a stark warning of the dangers of the recent moral outpouring that proclaims that we humans require the government to protect us from ourselves and tell us what we can and cannot consume.
To protect the public interest, prohibition was enacted. After all, alcohol is a potentially lethal chemical. Each year, alcohol kills more people than all of the harmful chemicals regulated by the FDA combined. But what was the outcome of Prohibition? To accommodate the newly created criminals, new jails and prisons had to be built. Previously law-abiding citizens who would never have broken the law otherwise became criminals overnight simply because they wanted a drink.
In the end, Prohibition did not prevent people from drinking, but it did turn many of them into lawbreakers. That is where we are right now. The government is attempting to over-regulate what we can consume. There is already a gray market for pharmaceuticals that are prohibited by the FDA. People travel to Canada or Mexico to buy medicines that they are not permitted to buy in the United States, just as they did during Prohibition.
There’s no denying where this will lead if we continue down this path. If the government is in charge of protecting us from dangerous drugs, alcohol and cigarettes should be prohibited, but they would never make this mistake again. As a result, the government should stop attempting to regulate what we consume and instead allow us to make our own decisions.
Working conditions for the average person in the United States and other economically successful countries have vastly improved over the previous two centuries. Labor hours have been reduced, and holidays and other benefits have become commonplace. Earnings have increased, and working conditions have improved. However, contrary to popular belief, this is due to the nature of the free market, not the rise in power of labor unions. Labor unions, in fact, do not protect all workers and, in fact, harm many of them. A union limits the number of people who can enter a particular profession in order to raise wages for its members. And when the government raises the pay of its employees, taxpayers foot the bill.
In contrast, when companies and employees compete in a free market for the best workers and positions, people benefit from higher wages and better working conditions at no cost to themselves, the companies, or the employees – no one bears the brunt.
Greater productivity, increased capital investment, and more widely disseminated skills become the only paths to higher pay. The pie is bigger for everyone – the worker gets more, but so do the employer, investor, and consumer. In a free market society, economic growth is shared equally by all. That is the key to the vast improvement in working conditions over the last two centuries.
Inflation is a monetary phenomenon that occurs when the amount of money in circulation increases faster than the supply of goods and services. The government determines the amount of money available in today’s world. Inflation in the United States today is the result of the Federal Reserve’s incorrect monetary policy and rapid expansion of government spending. It is in the government’s interest to create money in order to finance programs supported by politicians. Furthermore, the government controls the Federal Reserve, allowing it to continue printing and creating money without the need for a democratic referendum.
In order to control inflation, the rate at which money is created must be reduced. Inflation takes years to build, not months to repair. Competent governments understand this and ride out the storm while managing the cure’s negative side effects. We overreacted to recessions in the United States, however, and as a result, we triggered another wave of inflation and are now doomed to higher inflation and higher unemployment. We’ve been duped into believing that we must choose between inflation and unemployment. In reality, there is no dichotomy. The real question is whether we have increased unemployment as a result of higher inflation or as a short-term side effect of inflation control. Unfortunately, we’ve decided on the former.
In the United States, the two pillars of human and economic freedom have collaborated to the greatest extent possible. Those pillars are still standing. They are a part of every single one of us. They are inextricably linked to our very existence. However, we have deviated from their path. We’ve lost sight of the fundamental reality that the accumulation of power, whether in the hands of government or anyone else, is the greatest threat to human freedom. We’ve convinced ourselves that giving power to those who claim to have good intentions is safe.
Thankfully, we’ve begun to see the light. The inability of Western governments to achieve their stated goals has sparked widespread anti-government sentiment. We’re becoming more aware of the drawbacks of excessive centralization and the importance of relying on individuals’ ability to make their own decisions in order to realize the full potential of a great society. The good news is that as a people, we still have the option of continuing down the path of ever-increasing government or stopping and swinging the pendulum in the opposite direction.
Free to Choose Review
Because the book was published in 1980, Milton and Rose Friedman’s writing style is dated and contains some obsolete phrasing and terms; however, critics at the time noted that the writing was noticeably more readable and approachable than Milton Friedman’s other works. The chapters are well-organized, and the book contains appendices and notes.
About The Authors
Milton Friedman (1912–2006) was an American economist who received the Nobel Prize in Economics in 1976 for his work on consumption analysis, monetary history and theory, and the complexities of stabilization policy. He was regarded as a conservative economics intellectual leader. Rose Friedman (1910-2009), his wife and co-author, was also an economist who founded the Milton and Rose D. Friedman Foundation for Educational Choice.
Free to Choose Quotes
“The price system transmits only the important information and only to the people who need to know.”
“The Wall Street Journal does not provide this information out of altruism or because it recognizes how important it is for the operation of the economy. Rather, it is led to provide this information by the very price system whose functioning it facilitates.”
“One of the major adverse effects of erratic inflation is the introduction of static, as it were, into the transmission of information through prices.”
“The prices that bring the information also provide both an incentive to react to the information and the means to do so.”
“The higher wage gives workers an incentive to act on that information.”
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