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Milton Friedman on free markets and the price system

What Friedman said about how prices coordinate the plans of millions of strangers without anyone directing them.

32 passages in the archive19 checked against the source13 not yet checked
  1. At any rate, simple slogans like “The market will take care of it” or “noninterventionism” do not resolve the hard problems. We may very well agree on the direction we want to go in, but just how we’re going to go there and how far we’re going to go, that’s a much more difficult problem.
    Say 'No' to Intolerance
    Speech, 1991, Liberty, vol. 4, no. 6 (July 1991), p. 20
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  2. Before there were airplanes, nobody thought of the problem of trespass through air. So simply saying “private property” is a mantra, not an answer. Simply saying “use the market” is not an answer.
    Say 'No' to Intolerance
    Speech, 1991, Liberty, vol. 4, no. 6 (July 1991), p. 20
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  3. The big difference between government coercion and private markets is that government can use coercion to make an exchange in which A benefits and B loses. But in the market, if A and B come to a voluntary agreement, it's because both of them are better off.
    Commanding Heights: Milton Friedman interview
    Interview, 2000, PBS, “The Economic Logic Behind Black Markets,” interview conducted October 1, 2000
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  4. The broader and more influential organisations of businessmen have acted to undermine the basic foundation of the free market system they purport to represent and defend.
    The Suicidal Impulse of the Business Community
    Lecture, 1983
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  5. The emphasis of that talk was that free markets would undermine political centralization and political control. And incidentally, I should say that I was not in Chile as a guest of the government. I was in Chile as the guest of a private organization.
    Commanding Heights: Milton Friedman interview
    Interview, 2000, PBS, “On His Role in Chile Under Pinochet,” interview conducted October 1, 2000
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  6. The Chilean economy did very well, but more important, in the end the central government, the military junta, was replaced by a democratic society. So the really important thing about the Chilean business is that free markets did work their way in bringing about a free society.
    Commanding Heights: Milton Friedman interview
    Interview, 2000, PBS, “On His Role in Chile Under Pinochet,” interview conducted October 1, 2000
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  7. The existence of a free market does not of course eliminate the need for government. On the contrary, government is essential both as a forum for determining the 'rule of the game' and as an umpire to interpret and enforce the rules decided on.
    Capitalism and Freedom
    Book, 1962, Ch. 1 The Relation Between Economic Freedom and Political Freedom, 2002 edition, p. 15
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  8. The fault is not with the people who run the system, but with the system itself. More fundamentally, the fault is with those of us who are responsible for replacing the economic market with the political market.
    Gammon’s “Black Holes”
    Column, 1977, Newsweek (1977); reprinted in the Congressional Record, Extensions of Remarks, November 30, 1977, p. 38195, introduced by Representative John Ashbrook of Ohio as “Mr. Friedman’s article on Gammon’s theory of bureaucratic displacement as it appeared in Newsweek.” The reprint gives no issue date, Congressional Record, November 30, 1977, p. 38195
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  9. The free market has been around for thousands and thousands of years. The theory of the free market in a systematic, organized way dates back to Adam Smith in 1776, but the free market doesn’t.
    The Open Mind
    Interview, 1977, The Open Mind, hosted by Richard Heffner, Episode “A Nobel Laureate on the American Economy” (May 3, 1977)
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  10. There is one simple way to end the energy crisis and the gasoline shortage tomorrow—and I mean tomorrow and not six months from now, not six years from now. Eliminate all controls on the price of crude oil and other petroleum products. The gasoline lines would melt faster than the snows of winter.
    Blaming the Obstetrician
    Column, 1979, Newsweek (June 4, 1979); reprinted in the Congressional Record, Extensions of Remarks, June 7, 1979, pp. 14007 to 14008, introduced by Representative G. William Whitehurst of Virginia, who describes it as “an article by Milton Friedman, which appeared in the June 4, 1979, issue of Newsweek”, Congressional Record, June 7, 1979, pp. 14007 to 14008
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  11. A government which maintained law and order, defined property rights, served as a means whereby we could modify property rights and other rules of the economic game, adjudicated disputes about the interpretation of the rules, enforced contracts, promoted competition, provided a monetary framework, engaged in activities to counter technical monopolies and to overcome neighborhood effects widely regarded as sufficiently important to justify government intervention, and which supplemented private charity and the private family in protecting the irresponsible, whether madman or child—such a government would clearly have important functions to perform. The consistent liberal is not an anarchist.
    Capitalism and Freedom
    Book, 1962, Ch. 2 The Role of Government in a Free Society, p. 34
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  12. The great virtue of a free market system is that it does not care what color people are; it does not care what their religion is; it only cares whether they can produce something you want to buy. It is the most effective system we have discovered to enable people who hate one another to deal with one another and help one another.
    Why Government Is the Problem
    Journal article, 1993, Hoover Institution Press, Essays in Public Policy no. 39, p. 18
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  13. The difficulty of exercising “social responsibility” illustrates, of course, the great virtue of private competitive enterprise—it forces people to be responsible for their own actions and makes it difficult for them to “exploit” other people for either selfish or unselfish purposes. They can do good—but only at their own expense.
    A Friedman Doctrine—The Social Responsibility of Business Is to Increase Its Profits
    Column, 1970, The New York Times Magazine, September 13, 1970, Section SM, p. 17
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  14. I've asked people who were in favor of free markets and free enterprise, people who formerly had been of a different view, what caused them to change their mind. I'm talking particularly not about economists, not about professionals, but generally ordinary people, most of whom had been socialist or in favor of government control at one time and had come over to free markets. And two names have come up over and over again: Hayek on the one hand, The Road to Serfdom from Hayek, and Ayn Rand on the other, Atlas Shrugged and her other books.
    Commanding Heights: Milton Friedman interview
    Interview, 2000, PBS, “On Friedrich Hayek and the Mont Pelerin meeting,” interview conducted October 1, 2000
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  15. On interest rates, the desirable policy is to permit interest rates to be determined completely by free markets. ( … ) A free competitive market in loanable funds is no less desirable than a free and competitive market in other goods and services.
    Statement to the House Subcommittee on Domestic Finance
    Testimony, 1968, Compendium on Monetary Policy Guidelines and Federal Reserve Structure, Subcommittee on Domestic Finance, House Committee on Banking and Currency, 90th Congress, 2nd Session (December 1968), p. 204
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  16. Setting a target range for the Federal Funds interest rate should be ended. That rate, and all other interest rates, should be determined entirely by the market and abandoned as instruments of policy. The Fed’s task, as it now recognizes, is to control the quantity of money, not interest rates.
    Improving Monetary Policy
    Column, 1980, Newsweek, July 28, 1980; reprinted in the Congressional Record, Extensions of Remarks, July 28, 1980, p. 20026, introduced by Representative Robert Dornan of California, who gives the column as appearing in the Newsweek issue “dated July 28, 1980”, Congressional Record, July 28, 1980, p. 20026
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  17. The answer to “Why now?” is straightforward—yet I know from bitter experience how hard it is to persuade anyone other than an economist that so simple an answer can be correct. Nineteen seventy-three is different from other peacetime years because, for the first time since World War II, the U.S. has had extensive price and wage controls. The key to today’s shortages is the price freeze ordered by President Nixon on Aug. 15, 1971.
    Why Now?
    Column, 1973, Newsweek (December 31, 1973); reprinted in full in the Congressional Record, Extensions of Remarks, January 24, 1974, p. 801, introduced by Representative John M. Ashbrook, who gives the issue as “the December 31, 1973 issue of Newsweek”, and reprinted again the same day at pp. 807 to 808 by Representative Earl F. Landgrebe, Congressional Record, January 24, 1974, p. 801
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  18. A major source of objection to a free economy is precisely that it … gives people what they want instead of what a particular group thinks they ought to want. Underlying most arguments against the free market is a lack of belief in freedom itself.
    Capitalism and Freedom
    Book, 1962, Ch. 1 The Relation Between Economic Freedom and Political Freedom, 2002 edition, page 15
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  19. The most important single central fact about a free market is that no exchange takes place unless both parties benefit.
    Commanding Heights: Milton Friedman interview
    Interview, 2000, PBS, “The Economic Logic Behind Black Markets,” interview conducted October 1, 2000
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  20. But as a matter of practical experience, no complicated society can be run solely on the command principle. It’s just impossible. And therefore, in one sense, the market is essential. There’s no way of avoiding it.
    The Open Mind
    Interview, 1977, The Open Mind, hosted by Richard Heffner, Episode “A Nobel Laureate on the American Economy” (May 3, 1977)
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  21. The only way that has ever been discovered to have a lot of people cooperate together voluntarily is through the free market. And that’s why it’s so essential to preserving individual freedom.
    Commanding Heights: Milton Friedman interview
    Interview, 2000, PBS, “On Freedom and Free Markets,” interview conducted October 1, 2000
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  22. In the past century a myth has grown up that free market capitalism—equality of opportunity as we have interpreted that term—increases such inequalities, that it is a system under which the rich exploit the poor. Nothing could be further from the truth. Wherever the free market has been permitted to operate, wherever anything approaching equality of opportunity has existed, the ordinary man has been able to attain levels of living never dreamed of before. Nowhere is the gap between rich and poor wider, nowhere are the rich richer and the poor poorer, than in those societies that do not permit the free market to operate.
    Free to Choose
    Book, 1980, Ch. 5 “Created Equal”, p. 146
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  23. Perfect competition is a theoretical concept like the Euclidian line, which has no width or depth. Just as we’ve never seen that line there has never been truly free enterprise.
    Interview with Milton Friedman
    Interview, 1973, Playboy
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  24. The price system transmits only the important information and only to the people who need to know.
    Free to Choose
    Book, 1980, Ch. 1 "The Power of the Market", 15
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  25. The price system works so well, so efficiently, that we are not aware of it most of the time. We never realize how well it functions until it is prevented from functioning, and even then we seldom recognize the source of the trouble.
    Free to Choose
    Book, 1980, Ch. 1 "The Power of the Market", p. 14
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  26. I am not enough of an expert—no one is—to know the million and one places where prices fixed by bureaucrats on the basis of arbitrary rules and accidental starting points have created distortions and shortages. … They are hidden in the interstices of an incredibly complex production system that cannot operate without the enormous efficiency of a market-price system to adapt changing demands to changing supplies. And many have been overcome by millions of citizens who found ways to avoid or evade the price controls.
    Why Now?
    Column, 1973, Newsweek (December 31, 1973); reprinted in full in the Congressional Record, Extensions of Remarks, January 24, 1974, p. 801, introduced by Representative John M. Ashbrook, who gives the issue as “the December 31, 1973 issue of Newsweek”, and reprinted again the same day at pp. 807 to 808 by Representative Earl F. Landgrebe, Congressional Record, January 24, 1974, p. 801
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  27. With some notable exceptions, businessmen favor free enterprise in general but are opposed to it when it comes to themselves.
    The Suicidal Impulse of the Business Community
    Lecture, 1983
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  28. Fundamentally, the Soviet Union is a market economy, but it’s a distorted market economy, because the extraordinarily great role of government forces the market into channels which are not efficient and not effective, and so much of its power is wasted in simply overcoming the bureaucratic mess of the government. That’s why the Soviet Union has such a low standard of life.
    The Open Mind
    Interview, 1977, The Open Mind, hosted by Richard Heffner, Episode “A Nobel Laureate on the American Economy” (May 3, 1977)
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  29. "The strongest argument for free enterprise is that it prevents anybody from having too much power. Whether that person is a government official, a trade union official, or a business executive. If forces them to put up or shut up. They either have to deliver the goods, produce something that people are willing to pay for, are willing to buy, or else they have to go into a different business."
    The Tyranny of Control
    Television, 1980, PBS, vol. 2
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  30. There is an invisible hand in politics that operates in the opposite direction to the invisible hand in the market.
    An Economist's Protest: Columns in Political Economy
    Book, 1966, p. 143
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  31. I think it is only because capitalism has proved so enormously more efficient than alternative methods that it has survived at all. ( … ) I'm not sure capitalism is the right word. There is a sense in which every society is capitalist. The Soviet Union was capitalist, but it was state capitalism. Latin American societies in the past have been capitalist, but it has been oligarchic capitalism. So what we really need to talk about is not capitalism but free market or competitive capitalism which is the system that we would like to have adopted, not just capitalism.
    Reflections on the Great Depression
    Interview, 2002
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  32. The threat to public schools arises from their defects, not their accomplishments. In small, closely knit communities where public schools, particularly elementary schools, are now reasonably satisfactory, not even the most comprehensive voucher plan would have much effect. The public schools would remain dominant, perhaps somewhat improved by the threat of potential competition. But elsewhere, and particularly in the urban slums where the public schools are doing such a poor job, most parents would undoubtedly try to send their children to nonpublic schools.
    Free to Choose
    Book, 1980, Ch. 6 “What’s Wrong with Our Schools”, p. 170
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