If you are a proponent of free markets, you owe it to yourself to understand the science of economics. Knowledge is power and learning economics will allow you to succeed in business and investment well into the future.
Most people subscribe to ideologies and make financial choices based on little more than gut feeling. By arming yourself with real facts from some of the greatest economic thinkers in history, you can sharpen your financial instincts, and never be caught with your pants down in a debate.
The following is a list of our top 5 free-market economists: where they came from, what they believed, and links to their works. Those who believe in economic freedom and free markets know that the economy is driven not by consumption, but by savings and investments.
By making the choice to read these books, you are investing in the strongest of all assets: your knowledge and human capital. No other investment is as low-risk with such high returns. Without further ado…
It is only fitting to begin our list with one of the originators of free market thinking. Born in Scotland in 1723, Smith began his formal education at the age of 14 at the University of Glasgow. There he studied moral philosophy, which undoubtedly influenced his broader economic theories. Smith found a career in teaching and public lectures, and throughout his travels he rubbed shoulders with the likes of David Hume and Benjamin Franklin.
When Smith was in Paris he came into contact with the school of physiocracy. Physiocracy was an alternative to the dominant economic theory of the time, which was Mercantilism. Mercantilism requires protectionism through tariffs and colonialism, while Physiocracy emphasized the power of the free market, and the necessity for strong individual property rights.
Smith’s great mind eventually codified his theories in, “The Wealth of Nations.” In it he coined the term “the invisible hand” to describe how free-market forces respond to input automatically. Originally broken into five books, “The Wealth of Nations” is a foundational work for understanding the emergence of free trade and capitalist principles in the 18th century.
Born at the close of the century in 1899, Friedrich Hayek was one of the originators of the Austrian school of economics. Born at the close of the century in 1899, Friedrich Hayek was one of the originators of the Austrian school of economics.
Hayek fought in the First World War and later said that his interest in economics was driven by a desire to understand and avoid the grave policy errors that helped cause the conflict.
His work built off of the efforts of Ludwig Von Mises to show that centrally planned economies could never accurately respond to perceived problems. He argued that the quantitative easing carried out by centralized banks actually incentivized bad behavior and worsened the boom-bust business cycle.
Hayek was considered a champion of classical liberalism, in a time when many public intellectuals were staunch proponents of socialist policy. An excellent starting point to understanding his work is his book, “The Road to Serfdom,” which describes how central planning inevitably leads to a tyranny over the people.
Milton Friedman is a titan of economic thought. His career started in 1940, and he was still actively working until his death in 2006! He is perhaps best known for his opposition to Keynesian economics, which he described as “naïve.”
In its place he advocated “Monetarism.” Monetarism calls for a steady, predictable rate of currency creation by central banks instead of misguided quantitative easing.
In truth, Friedman would have preferred that central banks not exist to begin with, but as a realist he proposed the next best alternative. Monetary policy is central to Friedman’s career, but his work encompasses so much more.
Friedman was a tireless advocate for liberty on every level. He spoke against conscription, social security, the war on drugs, and even state requirements for medical licenses! In 1962 he published his book “Capitalism and Freedom,” an explanation of his economic theories, and advocacy for free market economies in general.
Thomas Sowell is a black man born in Gastonia, North Carolina, who spent most of his childhood in Harlem, New York. Sowell is a fascinating man because he grew up in communities that are often specifically targeted by welfare and affirmative action programs, but he is very critical of their real impact.
Sowell is difficult to put in a box, and one suspects he likes it that way. He typically leans libertarian-conservative, but his true inclination might best be labeled as “common sense.”
Many of his books directly address economic issues in minority communities and the unintended consequences of government aid, but his foundational work is probably his book, “Basic Economics.”
Far from a dull textbook, Sowell explains economic principles in terms that anyone can grasp in a conversational tone. “Basic Economics” is a great starting point to enjoy Sowell’s work.
Rothbard’s career earned him the nickname, “the state’s greatest living enemy,” and he is considered by many to be the founder of the anarcho-capitalist movement in American society. He is almost certainly the most extreme free market supporter on this list. His strong beliefs often caused him to clash with others in libertarian circles.
He was particularly scathing in his opinion of none other than Adam Smith, claiming that Smith’s faulty ideas led to the rise of Marxism! You’ll have to read the works of both men to determine if he was right.
Rothbard’s book, “The Anatomy of the State” is a powerful introduction to his anarcho-capitalist point of view. He constructed the book as a comprehensive explanation of statism and its shortcomings.
Even if you consider yourself a political moderate, you will benefit from an understanding of where the anarcho-capitalist movement originated.
These books will provide you with a bedrock education on the science of economic systems and the philosophy of liberty. By choosing to deepen your knowledge you will become a more effective decision-maker in the economic landscape, and a more articulate advocate for the personal liberty of all.