Uncle Miltie’s Never-Ending Show

April 7, 2021   •   By Andrew Stark

Capitalism and Freedom

Milton Friedman

ONE DAY IN THE 1980s, a friend of mine noticed an undergraduate nervously approaching the economist John Kenneth Galbraith in the lobby of Harvard’s Littauer Center. In his hand was a book for Galbraith to autograph, but it wasn’t one Galbraith had written over his long career as a popular advocate of progressive programs and policies. Instead, it was a textbook by Paul Samuelson, who at the time stood at the summit of the economics profession as its most groundbreaking theorist; the student had confused the two. Galbraith took the book, glanced at it, and — with a faint smile on his face — handed it back. “This book,” he said, “was written by a far greater economist than I.”

Had the book instead been written by Milton Friedman, Galbraith’s longtime personal friend and intellectual sparring partner, it’s a fair bet that Galbraith wouldn’t have made the same comment. Friedman, who taught at the University of Chicago from 1946 to 1977 before decamping to Stanford’s Hoover Institution, spent much of that period crafting conservative economic theories. Principal among them was the doctrine of monetarism, which claims that government spending never generates any permanent increases in gross national product. Only manipulations of the money supply can accomplish that goal — so the state has little reason to involve itself in the active management of the economy, beyond controlling the supply of money. After Friedman’s death in 2006, Samuelson noted acidly: “I think that it is a tragedy when somebody really takes the wrong train in life.”

But if he exerted considerably less influence than Samuelson as a theorist, Friedman enjoyed unparalleled success as a popularizing promoter of the unfettered market. Galbraith tipped his hat to Friedman’s superior abilities as a debater. Guru to Ronald Reagan and Margaret Thatcher (“We had learned at Friedman’s knee,” Thatcher said in 1992) and a major influence on other leaders, from Augusto Pinochet to Václav Klaus, Friedman became the world’s most prominent cheerleader for the rollback of the state, which had begun to envelop the globe in the last decades of the 20th century. And the greatest weapon in Friedman’s rhetorical arsenal was his 1962 book, Capitalism and Freedom.


The popular influence of Capitalism and Freedom can be measured in part by the best-of lists it has appeared on: the Times Literary Supplement named it one of the “Hundred Most Influential Books Since the War,” and Time has deemed it an “All-TIME Best Nonfiction Book.” Already reissued several times, Capitalism and Freedom has been rereleased yet again in a new edition by the University of Chicago Press, this time with an engaging foreword by The New York Times editorial board member Binyamin Appelbaum, author of the recent book The Economists’ Hour.

What has given Capitalism and Freedom its staying power with both policy-makers and the general public, Appelbaum notes, is its novel defense of the free market system. While most market boosters focus on its economic merits as a generator of wealth, Friedman went further. He vindicated the market on the basis of what he saw as its even more profound political merits — two in particular. First, the market protects and fosters political expression. And second, it discourages and inhibits unfair discrimination. Friedman makes these general arguments in the book’s opening chapters and then applies them to various policy domains. Government meddling in areas from pensions to education to housing always impedes our freedom and erodes our capital, he insists, while the market, left to its own devices, optimizes them.

The two arguments proceed rather simplistically. How does the market protect political expression? By lowering its costs, Friedman says. If you want to advance controversial political views and your employer makes your work life difficult — think of the recent claims made by journalists Andrew Sullivan or Bari Weiss — then the market will ensure that you can always find another source of livelihood. If, as a consumer, you want to express your opposition to a company’s politics — consider the boycott of Goya Foods after its CEO defended Donald Trump — then the market provides many other comparable products. A market system, Friedman says, renders the “cost” of expression “not prohibitive.” Market freedom thus promotes political expression.

And how does the market discourage discrimination? By raising its costs, according to Friedman. “A businessman or an entrepreneur who expresses preferences in his business activities that are not related to productive efficiency,” he writes, “is at a disadvantage compared to other individuals who do not. Such an individual is in effect imposing higher costs on himself than are other individuals who do not have such preferences.” Consequently, “in a free market they will tend to drive him out.” If a racist employer chooses unqualified white applicants over qualified Black applicants, its costs of production will increase, leaving it uncompetitive. If bigoted consumers prefer not to buy from a Black-owned business, its white-owned competitors can charge them a premium. In short, bigotry is expensive, so the desire not to waste one’s money will eliminate it. The profit motive thus penalizes discrimination.

But does the market really work this way? Even the armchair argument is not totally clear. Suppose the market does ensure that if one employer doesn’t like your partisan activity, you can always find work with a competitor. Then why wouldn’t the market make racial discrimination less costly by ensuring that if one business partner abhors your bigotry, you can always find a competitor to deal with you? If Facebook bans white supremacists, for example, won’t the market simply furnish hate groups with an alternative such as the right-wing social media outlet Parler? Or if a writer like Meghan Murphy gets banned from Twitter for opposing gender-identity rights, won’t she always be able to find readers elsewhere — say, Quillette? “People tried to cancel me,” Murphy declared, but “I was un-cancelable. It backfired, and I gained a bigger profile.” Jonathan Kay, Quillette’s senior editor, has admitted, “I’m an ambulance chaser for the canceled.”

On the other hand, suppose that the market inhibits discrimination by making business costly for bigoted employers who refuse to hire talented Black applicants. Then wouldn’t the market often make political expression costly as well? The writer Angie Thomas, for example, has sometimes had to suppress her provocative outspokenness on social justice — outspokenness that some employers don’t like — because it would have been too costly for her not to be hired, losing a job to competitors. Even Michael Jordan once refused to endorse a Democratic Senate candidate because he didn’t want to jeopardize his advertising contract with Nike. “Republicans buy sneakers, too,” Jordan explained.

Friedman’s readers over the years took him to have decisively shown how capitalism and freedom happily cohabit in the marketplace. But look more closely, and you see that he exposes a rift between the two. If freedom means the capacity to use the market for whatever purposes we wish, then we are free to use it to advance vicious discrimination as well as virtuous political views. If capitalism means the impetus to use the market to generate as much wealth for ourselves as we can, then we will subordinate our vicious prejudices should they stand in the way of our making money — but we will also mute our own political expression for the same reason. Why did Friedman fail to recognize that if freedom means the unfettered latitude to express oneself, then it also includes the leeway to discriminate — and if capitalism disincentivizes discrimination, then it also does the same for expression? Why did his approving audiences believe that Capitalism and Freedom had reconciled the two in the marketplace, when in fact the book laid bare a fundamental tension between them?

The answer is that freedom and capitalism, at least as Friedman and his readers have always understood them, possess a common enemy: the state. As the political scientist Charles Lindblom argued, liberal freedoms originated in a fight against state authority in the form of monarchy, just as capitalist imperatives originated in a struggle against state control in the form of mercantilism. In other words, the two shared a spirit and a joie de combat that saw them through centuries and that Friedman, in spending much of his life arguing for government retrenchment, certainly exploited. But while freedom and capitalism might ally in their attempt to shrink the public sphere, they then turn out to squabble over the growing market sphere left in its wake.

Friedman never saw this, and the blind spot is ironic. Friedman’s great predecessors Friedrich Hayek and Joseph Schumpeter also skewered government interference in the marketplace — but they honestly confronted the tension that Friedman glossed over. Hayek’s 1944 book, The Road to Serfdom, praised the market, as Friedman did, for endowing us with the freedom to express ourselves politically. But unlike Friedman, Hayek specifically acknowledged that this same freedom would also allow us, when we so choose, to govern our market behavior by whatever animus we harbor against “national or racial minorities.” It’s just that Hayek believed that the virtues of free expression were so vital that they outweighed the vices of discrimination, while Friedman was unable to confront the fact that freedom in the market comes with vices as well as virtues.

Schumpeter’s Capitalism, Socialism and Democracy (1942), meanwhile, vaunted capitalism precisely because it imposes deterrent costs on those who would deploy it to advance their materially wasteful “prejudices” and “discrimination.” Like Friedman, Schumpeter claimed that the capitalist imperative to make money would steer us, in our market behavior, to suppress whatever bigotry we harbor in order to hire the most talented employees and cater to the widest possible consumer base. But unlike Friedman, he also realized that those same capitalist incentives would discourage us from using the market to express our political views. It’s just that Schumpeter actually had little use for the political opinions of ordinary people, so he liked this aspect of the market too. Because its capitalist incentives induce us to keep quiet and go about our wealth-generating business, Schumpeter concluded, we will leave politics and policy-making to those who know what they’re doing. And that’s a good thing.

Friedman’s enthusiastic readers thought that Capitalism and Freedom had taken Hayek and Schumpeter to the next level. They believed Friedman had doubled down on the market, showing it to furnish us with both the pro-expressive virtues of freedom and the anti-discriminatory virtues of capitalism without extending rope to the pro-discriminatory features of freedom and the anti-expressive aspects of capitalism. But all that he actually accomplished was to expose, inadvertently of course, a deep incompatibility between capitalism and freedom in the marketplace, leaving it unresolved.


The problems go even deeper. Friedman, writing in the early 60s, knew that capitalist principles of wealth maximization had not eliminated discrimination. Nor had the freedom that the market supposedly supplies to find other work successfully protected dissenting expression during the McCarthy era.

Friedman thus felt compelled to rationalize persisting discrimination as an exercise of the capitalist prerogatives of bigots. To the extent that bigots feel they get more value from a white service provider than a Black one — and are willing to pay the higher costs that their bigotry imposes on them — they actually are behaving according to capitalist principles. “We do not,” he writes, “regard it as ‘discrimination’ — or at least not in the same invidious sense — if an individual is willing to pay a higher price to listen to one singer than to another.”

So why do so “if he is willing to pay a higher price to have services rendered to him by a person of one color than by a person of another”? Many of us deplore that “taste,” Friedman acknowledges. saying he deplores it himself, but then many of us don’t share the taste for opera either. For Friedman, the only “appropriate recourse is for me to seek to persuade them that their tastes are bad and that they should change their views and their behavior, not to use coercive power to enforce my tastes and my attitudes on others.” Capitalist principles provide no rationale for doing so.

Likewise, Friedman felt obliged to rationalize McCarthy-era blacklisting as an exercise of the free association of anticommunists. Yes, a left-wing actor’s “freedom includes his freedom to promote communism,” Friedman wrote, but “freedom also, of course, includes the freedom of others not to deal with him under those circumstances.” Each line of argument, though, was a dodge, witting or unwitting, that prevented Friedman from acknowledging the conflict between capitalism and freedom as they pull against each other in the market.

Indeed, any attempt to rationalize racial discrimination by the capitalist’s own principles is destined to fail. Even the Civil Rights Act of 1964, which Friedman opposed, acknowledges as much; it recognizes that sex, in certain limited circumstances, can be a “bona fide occupational qualification,” while race never can. The difference is instructive.

Being a woman, as courts have recognized, can provide market value as a prison guard. After all, a female guard could have certain inner abilities, such as the capacity to empathize with sexually abused female inmates, in a way that few male prison guards could. Likewise, courts have ruled, being a woman can add market value in professions such as modeling, retail sales, or even waitressing, for reasons having to do with external appearance, in ways that being a man cannot. In making such rulings, courts are not denying that such sex discrimination can be objectifying and demeaning. Their concern is only with whether or not it can ever deliver market value to a consumer — in terms of aesthetic or physical attractiveness — in return for the cost incurred.

At one point in Capitalism and Freedom, Friedman denies any difference between the taste for an attractive service provider and the taste for a white service provider. But, as the Civil Rights Act and 50 years of jurisprudence and social science suggest, he was mistaken. What the bigoted consumer believes, falsely, is that external appearance betokens inner ability, or character, or reliability.

Racial discrimination thus violates capitalist principles not just by imposing extra costs but also by delivering no productive value in return. Discrimination, then, exists only because of that other principle, freedom. To the extent that the market is unregulated, market actors will command the freedom to engage, if they so choose, in transactions that violate capitalist principles — bloody-mindedly exercising their bigotry by selecting white service providers even if the costs outweigh any value received. In the unfettered market, freedom and capitalism once again are at loggerheads.

What about freedom of expression? Friedman says the erosion of one party’s expressive liberty is sometimes unavoidable if the market is to facilitate another’s. He is not entirely wrong. Even those who disagree with Citizens United — who believe that corporations should not have expansive free speech rights — can acknowledge a corporation’s minimal expressive right, which courts have upheld, not to have to be associated with views that it deplores or have those views attributed to it. When Fox News forced employee Blake Neff to resign for his racist tweets, for example, it was exercising its expressive rights even as it was curtailing his. And just as corporations like Fox are associated with the views of their employees, consumers are associated with — and express themselves through — the brands they consume. When consumers boycotted companies like CVS for donating to Trump’s re-election campaign, they were advancing their own political expression, even as they were putting the squeeze on the company’s.

Yet many boycotts and firings inhibit freedom of expression without simultaneously advancing it; they amount simply to using the market to bully others. Corporations, for example, are not associated with the views of their ex-employees. When a company terminates an employee and then requires her to sign a non-disclosure agreement — withholding severance unless she agrees not to call out the company’s racially harmful work practices — it is not in any way advancing its own political expression. But it is, as the writer Nicole Taylor says, barring “Black people” from “shar[ing] their stories of feeling sidelined, ignored, and racially discriminated against.” Nor are consumers associated with the views of a company’s individual employees. Those Times readers who boycotted the paper unless it fired Bari Weiss were not advancing their own political expression, but they were undermining hers.

If, as capitalist principles suggest, we should be able to engage in any market acts that deliver us more benefit than cost — if companies are willing to use their wealth to inhibit a former employee’s speech, or if customers are willing to forgo a premium news service in order to inhibit a columnist’s speech — then such capitalist principles must extend even to acts that violate the principle of free expression. But what that means, contra Friedman, is that capitalism and freedom are yet again at loggerheads.


The political theorist Judith Shklar once wrote that the two ideals of liberalism and democracy are married “monogamously, faithfully, and permanently,” but it is a marriage of convenience, not love. Perhaps the lesson of Capitalism and Freedom, viewed with the wisdom of 60 passing years, is that capitalism and freedom enjoy a passionate, glorious marriage whenever they joust with the state, but it becomes a rocky one whenever they squabble over what to do with the market.

Well-intentioned liberals might try to palliate the marriage by discouraging the bigotry and bullying that aggravate it. Conservatives will do so by distracting the bickering parties with the need to do battle against the state. But in the end, Capitalism and Freedom did not defend the unfettered market so much as it exposed the many ways that freedom and capitalism use it to roil and provoke each other. Like Friedman’s monetarism itself, the book’s relevance has faded. Perhaps it is time to stop reissuing Capitalism and Freedom and let it recede into history.


Andrew Stark is a professor of strategic management at the University of Toronto and author of The Consolations of Mortality: Making Sense of Death (Yale University Press, 2016). His work has appeared in The Atlantic, The New York Times, The New York Review of Books, and other publications.