Capitalism and Freedom was published in 1962 without much fanfare, though it has since stood the test of time. But Free to Choose was an international sensation when it was published in 1980. Among economists of a certain generation, they find Capitalism and Freedom the more tightly reasoned book, and explain the impact difference on a general shift of the climate of opinion. One way to make this claim is to suggest that Capitalism and Freedom was so successful at influencing thought leaders that by the time Free to Choose was published the intellectual elite was more receptive to the ideas. This might even be Friedman’s preferred explanation as it is consistent with the “tide of ideas” approach to social change. I am not going to dispute the vital importance of the climate of opinion and how politics is shaped within the constraints of the prevailing ideological climate to a considerable extent. Instead, I want to ask readers to think of a different question.
See I grew into a classical liberal/libertarian movement where all my elders were influenced either by The Road to Serfdom (1944), or Capitalism and Freedom (1962) well before they ever read Free to Choose (1980). I always disagreed with the assessment that Capitalism and Freedom was the superior book from an academic perspective. I agree it is a powerful book, I just think Free to Choose is one of the best books I ever read in economics. Since all of my teachers and mentors in classical liberalism came to their position well before 1980, they did not see Free to Choose as a transformational work, but instead as at best a popularization of ideas they had already come to accept. But that was then, and this is now, so there probably are some readers of BHL (like me) for whom Free to Choose was in fact a pivotal text in their introduction to free market ideas and the philosophy of limited government. I am putting aside the great impact that Ayn Rand had, or that of Murray Rothbard, Robert Nozick, Richard Epstein, etc. I just want to ask about the economic argument, and ask about the subtle differences between Capitalism and Freedom and Free to Choose. In my reading, rather than a water-downed and more popular treatment of the material from Capitalism and Freedom, Free to Choose reflects a slightly different perspective. That perspective is one much closer to the Hayekian focus on knowledge acquisition and utilization through the competitive market, and the Buchanan focus on constitutional level of analysis and the importance of the institutional framework. On the public choice elements, Friedman is explicit about the “fresh approach to political science” that informs the effort in Free to Choose (ix-x).
Whereas Friedman sees Capitalism and Freedom as more theoretical, and Free to Choose as more concrete, I think the introduction into the analysis of the issues of (1) the quantity of information that must be processed and utilized in the economy, as well as the quality of information that must be assessed by economic participants to produce the coordination of economic activities through time, and (2) the role of interest groups, political structure, and the constitutional level of analysis, make Free to Choose a more subtle and ultimately a more persuasive text about the case for the free market economy and the problems of political intervention into the market economy. To use Deirdre McCloskey’s recent terminology, the prudence only economics of Capitalism and Freedom gives way to a more nuanced understanding of the operation of a free economy and free society that must account for prudence + many other virtues, history, and institutional analysis. As that intellectual move is made, the argument becomes not just about efficiency, but also about knowledge mobilization, the civilizing impact of commerce, the creative powers of a free economy, and the liberal plea for cosmopolitanism, toleration, and peace.
What happened intellectually and historically between 1962 and 1980, that the leading US exponent in the public imagination for the free market economy and limited government would shift his argument in such a subtle direction?