The question of whether or not capitalism is a good or bad system requires that we first define our terms. We will use Milton Friedmans basic definition of capitalism as an economic system, where private citizens engage in voluntary exchange and cooperation without compulsion from the state, and where the means of production are primarily owned and operated privately for a profit. Friedman attaches a condition to the nature of the exchange, the essential notion is that both parties to the exchange must benefit, that each individual by separately pursuing their own self-interest, can promote the social interest (Friedman, 2012). This is a reiteration of Smiths invisible hand. We must also take care to be clear about what we mean by a good or bad system, in making this judgement are we comparing our modern capitalist system to an ideal capitalist system (practice to theory), or to alternative economic systems (ex. feudalism or communism)? It seems we must do bot
h, contrast our current capitalist system to alternative economic systems (past and present), and simultaneously hold the market in practice to the standard promised by Friedman, as an organic corrective to social ills (ex. discrimination). Two of Friedmans main arguments from capitalism and freedom will be examined: 1) the necessary relationship between capitalism and democracy, and 2) the corrective effect that capitalism has on discrimination. These will be analyzed in context with two important criticisms of (or caveats to) the capitalist ideal: externalities and the concept of public good. Both of which appear absent from Friedmans ideology. In this context, good will be measured by the degree to which our capitalist system outperforms alternative economic systems insofar as providing a standard of living for a broad cross-section of society, including its most marginalized members. Second, whether capitalism actually delivers on Friedmans utopian ideals.