On Capitalism and Freedom

No, George W. Bush has not hijacked my blog, this is about a book I recently finished, referred to me (rather indirectly) by a Harvard economics professor. It's called "Capitalism and Freedom", by Milton Friedman - a rather influential economist who unfortunately passed away not too long ago. I would have liked to have met him.

It is an excellent book, which really makes you think about the way things are run in the Western world (while most of the examples are for America, they usually apply to other Western nations as well, like Canada, where I live). It flies in the face of the "modern" welfare state that has been around since the Great Depression, saying how most of the problematic effects of the free market are the product of the government (ie. the Great Depression) meddling with things, usually making things worse than they normally would have been.

After reading this, I wonder, where are the classical liberals in modern politics? It seems like the name "liberal" is now synonymous with "socialist" and "free market" is now associated with "conservative". However, if you look at the American political parties, we have the Democrats (the "left wing" party) who don't seem to understand the concept behind an economy; and on the other hand the Republicans (the "right wing" party) who can't seem to shut up about Jesus or gay marriage. There is no liberalism here. Same goes for Canada, although there is considerably less bible-thumping from our Conservative party which would probably put them the closest to classical liberalism compared to the other political parties here. I would guess the lack of classical liberalism in modern politics would be due to the fact that classical liberalism demands limited government intervention, quite against what any politician would like. Not to mention the general public would rather have the government take care of them than take care of themselves.

There are a few points that I disagree with, I find Friedman falls into the standard trap that economists generally fall into, of optimistic assumptions of altruism and rationality. He seems to think that people will not exploit the system, and they will act rationally with perfect information. Under this scenario, I fully agree that a perfectly free market will yield the best outcome for mankind, however unfortunately not everybody has perfect information, and therefore others will exploit that ability, leading to all sorts of nasty things like monopolies and price discrimination.

Some education in economics is required, and some patience as it is fairly dry at points, but I would recommend this one to anybody with an interest in economics or politics.