Fundamentally, there are only two ways of coordinating the economic activities of millions. One is central direction involving the use of coercion - the technique of the army and of the modern totalitarian state. The other is voluntary cooperation of individuals - the technique of the marketplace.
Interpretation
The quote contrasts two methods of organizing economic activities: coercion through central authority and voluntary cooperation in a free market.
Milton Friedman highlights the fundamental distinction between two approaches to managing the economy: one that relies on centralized control and coercion typical of authoritarian regimes, and another that fosters voluntary cooperation among individuals, as seen in a free market. This reflects Friedman's belief in the superiority of market-driven economies, where individual freedoms and choices lead to better outcomes than those imposed by a centralized authority.
In practice
In a debate about economic policy, one could reference this quote to argue for free-market principles.
The economic miracle that has been the United States was not produced by socialized enterprises, by government-unon-industry cartels or by centralized economic planning. It was produced by private enterprises in a profit-and-loss system. And losses were at least as important in weeding out failures, as profits in fostering successes. Let government succor failures, and we shall be headed for stagnation and decline.
Universities exist to transmit knowledge and understanding of ideas and values to students not to provide entertainment for spectators or employment for athletes.
There is no place for government to prohibit consumers from buying products the effect of which will be to harm themselves.
There is one and only one social responsibility of business - to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.
The great danger to the consumer is the monopoly -whether private or governmental. His most effective protection is free competition at home and free trade throughout the world. The consumer is protected from being exploited by one seller by the existence of another seller from whom he can buy and who is eager to sell to him. Alternative sources of supply protect the consumer far more effectively than all the Ralph Naders of the world.
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.
If Europe today accounts for just over 7 per cent of the world's population, produces around 25 per cent of global GDP and has to finance 50 per cent of global social spending, then it's obvious that it will have to work very hard to maintain its prosperity and way of life.
All money is a matter of belief.
Trade and commerce, if they were not made of Indian rubber, would never manage to bounce over the obstacles which legislators are continually putting in their way.
To get back to the kind of shared prosperity and upward mobility we once considered normal will require another era of fundamental reform, of both our economy and our democracy.
I'm quite worried about the fiscal imbalances that we've got and what that might mean in terms of financial crisis ahead.
Economy consists in a due and proper application of the means afforded according to the ability of the employer and the situation chosen; care being taken that the expenditure is prudently conducted.
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