53 pages • 1 hour read
Milton FriedmanCapitalism And Freedom
Nonfiction | Book | Adult | Published in 1962A modern alternative to SparkNotes and CliffsNotes, SuperSummary offers high-quality Study Guides with detailed chapter summaries and analysis of major themes, characters, and more.
Chapters 9-10Chapter Summaries & Analyses
Chapter 9 Summary: “Occupational Licensure”
Friedman notes that the demise of the medieval guild system contributed to an expansion of freedom in Western society. In the United States of the mid-19th century, people could pursue any profession, a fact Friedman attributes to the “triumph of liberal ideals” (137). He sees modern-day occupational licensure as a step backward.
Like guilds and castes, licensure keeps employers from hiring certain people for an occupation. Unlike guilds and castes, licensure is enforced by the government. Friedman argues that the impetus for creating licensing rules and bodies usually comes from the wrong source: individuals in the profession seeking licensure. Licensure provides them with a clear economic benefit. Friedman says it “frequently establishes the medieval guild kind of regulation in which the state assigns power to members of the profession” and worries that this setup allows arbitrary factors to enter the decision-making process (141). He also complains that licensure proponents invoke paternalistic claims that individuals outside the profession need to be shielded from their own ignorance. Friedman thinks people are capable of choosing professionals to meet their needs and that subpar practitioners will be edged out of the market by better alternatives.
Friedman argues that “producer groups will invariably have a much stronger influence on legislative action [...] than will the diverse, widely spread consumer interest” (143). Producers tend to push for licensure, which maximizes their power to dictate the rules (educational requirements, for example) and imposes the greatest penalties on rulebreakers. Other options include certification, which involves an authority vouching that someone has a particular skill set, and registration, which involves making a list of people who practice a certain profession. All three of these measures can be used to create monopolies. Registration is the least offensive to the liberal because it does little to restrict entry. Certification is tougher to justify since the need it seeks to meet can be met by the market. However, it’s not as offensive as licensure because it doesn’t prevent anyone from entering the profession.
When members of a profession take charge of licensing it, they can “enforce a wage rate higher than would otherwise prevail” by reducing the supply of people doing the kind of work they do (150). Friedman says this is what’s happening in the medical profession and argues against licensing physicians. He argues that medical trade unions rarely frame the issue in terms of forcing income skyward, instead insisting that having too many physicians makes wages improperly low and pushes people in the profession to “resort to unethical practices in order to earn a ‘proper’ income” (152).
Friedman then attacks the argument that restricting entry into the medical profession increases the competence of the physician population and, by extension, the quality of medical care. He says that having a limited number of doctors limits the amount of care available to patients, which actually decreases quality. Friedman suggests widening the pool of providers to include skilled technicians who don’t have the specialized knowledge of a physician but could perform basic health care services. This, he argues, could increase the overall quality of care and the range of choices available to patients. He also says that as long as an incompetent doctor doesn’t unleash an epidemic, a medical-care misstep that harms one individual is “a question of voluntary contract and exchange between the patient and his physician” that needs no government intervention (147).
Chapter 10 Summary: “The Distribution of Income”
Friedman sees a move toward collectivism in the West over the last century, which has manifested itself in the notions that income equality is desirable and government is an appropriate way to achieve it. Friedman says it’s important to consider if it’s truly justified for the state to intervene to promote equality, and evaluate how measures to promote equality have fared.
Many people think equal income is a reflection of equal treatment, but Friedman doesn’t see a relationship between these two things. He says the free market assigns income to a person based on what he produces. Differences in income may reflect choices people make about risk and reward. Friedman explains that someone chasing the dream of becoming a movie star has a higher tolerance of risk than someone who’s chosen a more traditional job in public service. The probability of failure is much higher for the aspiring movie star, but if she succeeds, the rewards could be substantial.
For the most part, though, differences in income reflect differences in ability. This includes the ability to produce something others want to acquire and the ability to produce this item with the resources one has. Insisting that everyone receive an equal income reduces the incentive to compete, Friedman says. Mandating equality of income also makes inequality worse, in the sense that some people are not being properly compensated for the value their goods bring to society. Differences in resources such as property give rise to thorny issues, especially when these resources are inherited, rather than earned. However, Friedman doesn’t see a way of erasing these differences that doesn’t resort to authoritarian methods.
Friedman explains that the free market allocates income without relying on coercion, and that economic systems that rely on the free market encourage people to develop their talents. He says this encouragement, not the accumulation of property, is “the great achievement of capitalism” (169). And while capitalism may not provide everyone with the same income, it has been an equalizing force in the sense that it has freed most people from exhausting, time-consuming physical labor and given people of modest means access to the types of products only the rich could obtain in eras past.
The chapter also includes some facts about income distribution. Friedman recognizes that a capitalist system is likely to have “considerable inequality of income and wealth” (168). However, this doesn’t mean that capitalist systems have more inequality than other types of systems. Friedman says it’s quite the opposite: capitalism leads to less inequality than other types of systems, and the extent of inequality decreases when a society adopts capitalism. He adds that it’s hard to measure income inequality because it’s difficult to separate short-run differences in income from differences in income status over the long term. That said, he suspects that inequality in non-capitalist societies tends to be permanent, while capitalism introduces social mobility. Friedman concludes the chapter by arguing that graduated income taxation is unwarranted since it redistributes income, thereby restricting freedom. He proposes replacing this system with a flat tax, which he thinks would result in an equal amount of revenue for the government, with the added benefit of being more freedom-friendly.
Chapters 9-10 Analysis
Chapters 9 and 10 both call attention to the issue of freedom restriction. In Chapter 9, Friedman argues that occupational licensure requirements restrict freedom because it prevents people from pursuing any profession they’d like. In Chapter 10, he mentions how income distribution is a form of coercion and a violation of freedom. In both cases, Friedman returns to a point he makes throughout the book: reducing government intervention will restore freedom and solve the problem.
Though Friedman consistently states key points about government and freedom, there are some holes in his arguments in both of these chapters. At the start of Chapter 9, he claims that people could pursue any profession in the United States during the 19th century, which may have been true in the sense that there were no official restrictions on who could become a plumber or a doctor. However, many people couldn’t afford to do the kind of work they wanted to do; some people who wanted to become doctors were too poor to complete even a basic education, and some were barred from the profession because of their race or gender. When discussing sources of innovation in Chapter 10, Friedman fails to acknowledge the role that government has played in advances such as improved sanitation and medical research, instead giving the private sector credit for central heating, modern plumbing, cars, television, and much more. While private industry certainly played a role in developing such products, Friedman also doesn’t mention that access to some of these advances, especially those pertaining to housing, has been aided by government regulations. Finally, he doesn’t discuss the types of products that were almost exclusively available to the wealthy when the book was written, for example private jets and personal computers. Doing so would undermine his argument that capitalism has made the same products available to both the rich and the poor.
