Best-Known Quotations and Passages

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Walter Bagehot

For this reason the period under which the Bank of England did not pay gold for its notes—the period from 1797 to 1819—is always called the period of the Bank restriction. As the Bank during that period did not perform, and was not compelled by law to perform, its contract of paying its notes in cash, it might apparently have been well called the period of Bank license.

Lombard Street par. IV.19

Men of business who are used to a high percentage of profit in their own trade despise 3 or 4 per cent., and think that they ought to have much more. In consequence there is no money so often lost as theirs; there is an idea that it is the country clergyman and the ignorant widow who mostly lose by bad loans and bad companies. And no doubt they often do lose. But I believe that it is oftener still men of business, of slight education and of active temperament, who have made money rapidly, and who fancy that the skill and knowledge of a special trade which have enabled them to do so, will also enable them to judge of risks, and measure contingencies out of that trade; whereas, in fact, there are no persons more incompetent, for they think they know everything, when they really know almost nothing out of their little business, and by habit and nature they are eager to be doing.

The Postulates of English Political Economy par. II.8

The state is the great fictitious entity by which everyone seeks to live at the expense of everyone else.

"The State" (in Selected Essays on Political Economy) par. 5.20

It is impossible to introduce into society a greater change and a greater evil than this: the conversion of the law into an instrument of plunder.

The Law par. L.31

When law and morality contradict each other, the citizen has the cruel alternative of either losing his moral sense or losing his respect for the law.

The Law par. L.34

Life, liberty, and property do not exist because men have made laws. On the contrary, it was the fact that life, liberty, and property existed beforehand that caused men to make laws in the first place.

The Law par. L.6

No legal plunder: This is the principle of justice, peace, order, stability, harmony, and logic. Until the day of my death, I shall proclaim this principle with all the force of my lungs (which alas! is all too inadequate).

The Law par. L.77

By virtue of exchange, one man's prosperity is beneficial to all others.

Economic Harmonies par. 4.110

Men are never so likely to settle a question rightly as when they discuss it freely.

"Southey's Colloquies on Society" par. SC.64

The maxim, that governments ought to train the people in the way in which they should go, sounds well. But is there any reason for believing that a government is more likely to lead the people in the right way than the people to fall into the right way of themselves?

"Southey's Colloquies on Society" par. SC.60

And to say that society ought to be governed by the opinion of the wisest and best, though true, is useless. Whose opinion is to decide who are the wisest and best?

"Southey's Colloquies on Society" par. SC.60

There is surely no contradiction in saying that a certain section of the community may be quite competent to protect the persons and property of the rest, yet quite unfit to direct our opinions, or to superintend our private habits.

"Southey's Colloquies on Society" par. SC.61

None of the modes by which a magistrate is appointed, popular election, the accident of the lot, or the accident of birth, affords, as far as we can perceive, much security for his being wiser than any of his neighbours. The chance of his being wiser than all his neighbours together is still smaller.

"Southey's Colloquies on Society" par. SC.62

Nothing is so galling to a people not broken in from the birth as a paternal, or, in other words, a meddling government, a government which tells them what to read, and say, and eat, and drink and wear.

"Southey's Colloquies on Society" par. SC.69

"There's no such thing as a free lunch." (Also known by the acronym TNSTAAFL or TANSTAAFL.)

From a custom in San Francisco saloons in the 19th century, often attributed to sci-fi writer Robert Heinlein from his 1966 novel, The Moon is a Free Mistress, this phrase was picked up and popularized by Friedman in economics classrooms. He highlighted the underlying economic principle that even when something looks as if it's free, it's usually not. Whether the supplier is a friend, a business, or the government, we ultimately pay for what we get. See the discussion in this EconTalk podcast, Chris Anderson on Free.


"Inflation is everywhere and always a monetary phenomenon."
This phrase appears to have been first used by Friedman in a conference paper presented in India. [Reference to be supplied.]

The phrase captures the economic principle that inflation, hyperinflation, and all ongoing rises in the price level are simply the result of basic economics--supply and demand for money. When it comes to money, the supplier is the printer or coiner of that money—the government, in modern times, which prints or coins at will. That is, to understand inflation, every time and in every country or region, look for a rapid, excessive supply of money by the country's Central Bank and you'll find your answer.



"Free to choose"
From the 1980 book title and TV series Free to Choose, with Rose Friedman


"General, would you rather command an army of slaves?"
Retort by Milton Friedman to Gen. William Westmoreland's claim that he did not want to command "an army of mercenaries" during a heated discussion on the costs and benefits of endorsing a volunteer army vs. the draft in the 1960s. Private conversation per Bill and Becky Meckling, via David Henderson.


"We're all Keynesians now."

The original source for the phrase, probably ironic when it was first made, was headlined and attributed to Friedman in Time Magazine, in a 1965 article containing following paragraph:

As Keynes might have put it: Keynesianism + the theory of growth = The New Economics. Says Gardner Ackley, chairman of the Council of Economic Advisers: "The new economics is based on Keynes. The fiscal revolution stems from him." Adds the University of Chicago's Milton Friedman, the nation's leading conservative economist, who was Presidential Candidate Barry Goldwater's adviser on economics: "We are all Keynesians now." [Time Magazine, Friday, Dec. 31, 1965]

Was the remark presented out of context?

By 1965, Friedman was already renowned for taking on the Keynesian model. He'd already published in 1963 with Anna Schwartz the Monetary History of the United States, and other works that suggested flaws in both the consumption and monetary sides of the Keynesian model. So if Friedman made this remark to a Time Magazine reporter, perhaps in response to a statement of Ackley's while Ackley chaired the Council under Lyndon Johnson, what could it have meant other than being an ironic summary of the state of current affairs?

The Keynesian model, for all its initial fanfare, failed dramatically. In academic circles the Keynesian model was already under fire by the mid-1960s, and was fully discredited after the mid-1970s.

The ultimate irony, and possibly what Friedman was alluding to, was that even when the pervasively popular Keynesian model was failing and under fire, its opponents still had to frame their objections in the language and simplistic mathematics dictated by the Keynesians. Even the opponents of the Keynesian model had to become Keynesians themselves in order to express their objections convincingly.

Even today, right down to current high school, AP, and even many freshman college economics classes, the framework in which macroeconomics is often expressed is still the discredited but graphically- and journalistically-simplistic Keynesian model. Even when speaking amongst themselves, academic economists sometimes fall back on the vocabulary and simplistic functions of the Keynesian model when talking to each other, particularly across fields or schools.

Yet another irony branched off when adherents of the Keynesian model sometimes waved this very phrase as a banner suggesting that their support was uniformly subscribed to throughout the academic world. Attributing the phrase to Friedman also appeared to suggest ambivalence in his thought over time, particularly after his skepticism of the Keynesian model's monetary and expectations sides became more prounouncedly public in the 1970s.

Who first spoke the phrase?! There's yet another question! Was it Friedman, or was he alluding to a phrase already in common academic use?

Everywhere the power of capital in its more concentrated forms is better organised than the power of labour, and has reached a further stage in its development; while labour has talked of international co-operation, capital has been achieving it.

Imperialism: A Study par. II.V.38

Knowledge is more a matter of learning than of the exercise of absolute judgment. Learning requires time, and in time the situation dealt with, as well as the learner, undergoes change.

Risk, Uncertainty, and Profit par. III.VIII.15

On "supply creates its own demand":

A glut, as it is supposed in this doctrine, namely an excess of production in the aggregate, can take place only by a continued increase of production. Let us imagine that we have just come to the supposed point, when, the supply being full, any additional production will be so much of glut. The additional production takes place, and comes to market. What is the consequence? This new product seeks an equivalent. That is to say, it is a new demand. How then is it possible to say that every new supply is a glut, when a new demand is created equal to it? It is obviously nugatory to say, that this new supply may not find purchasers, or the new demand may not find the commodities to which it is directed; for this is only to say that in particular instances there may, from miscalculation, be superabundance or defect. The natural effects, in such a case, may be easily traced, and they afford decisive evidence. The commodities, of which the additional production consists, may be naturally supposed to consist of some of the sorts which are previously in the market. By supposition, the goods previously in the market were accommodated to one another, no species being either in defective, or superabundant supply....
Elements of Political Economy, Chapter IV, par. IV.III.33.
For additional context on James Mill's famous summary of Jean-Baptiste Say, we also recommend: James Mill on supply and demand; and the works of his son, John Stuart Mill. James Mill's famous quote, harking to a developing understanding of national budget constraints as aggregates of individual transactions, is often taken out of context.

We say, the production and distribution, not, as is usual with writers on this science, the production, distribution, and consumption. For we contend that Political Economy, as conceived by those very writers, has nothing to do with the consumption of wealth, further than as the consideration of it is inseparable from that of production, or from that of distribution. We know not of any laws of the consumption of wealth as the subject of a distinct science: they can be no other than the laws of human enjoyment.

Essays on Some Unsettled Questions of Political Economy, Essay V, nn. 8.

Once it has been perceived that the division of labour is the essence of society, nothing remains of the antithesis between individual and society. The contradiction between individual principle and social principle disappears.

Socialism par. III.18.23

This, then, is freedom in the external life of man—that he is independent of the arbitrary power of his fellows.

Socialism par. II.9.26

On comparative advantage:

To produce the wine in Portugal, might require only the labour of 80 men for one year, and to produce the cloth in the same country, might require the labour of 90 men for the same time. It would therefore be advantageous for her to export wine in exchange for cloth. This exchange might even take place, notwithstanding that the commodity imported by Portugal could be produced there with less labour than in England. Though she could make the cloth with the labour of 90 men, she would import it from a country where it required the labour of 100 men to produce it, because it would be advantageous to her rather to employ her capital in the production of wine, for which she would obtain more cloth from England, than she could produce by diverting a portion of her capital from the cultivation of vines to the manufacture of cloth.
On the Principles of Political Economy and Taxation par. 7.16 (See also pars. 7.13-7.15)
A great manufacturing country is peculiarly exposed to temporary reverses and contingencies, produced by the removal of capital from one employment to another. The demands for the produce of agriculture are uniform, they are not under the influence of fashion, prejudice, or caprice. To sustain life, food is necessary, and the demand for food must continue in all ages, and in all countries. It is different with manufactures; the demand for any particular manufactured commodity, is subject not only to the wants, but to the tastes and caprice of the purchasers. A new tax too may destroy the comparative advantage which a country before possessed in the manufacture of a particular commodity; or the effects of war may so raise the freight and insurance on its conveyance, that it can no longer enter into competition with the home manufacture of the country to which it was before exported. In all such cases, considerable distress, and no doubt some loss, will be experienced by those who are engaged in the manufacture of such commodities; and it will be felt not only at the time of the change, but through the whole interval during which they are removing their capitals, and the labour which they can command, from one employment to another.
On the Principles of Political Economy and Taxation par. 19.1

On Ricardian equivalence (comparative effects of different methods of government finance for a given expenditure):

In this latter objection I cannot agree with M. Say. The State, we will suppose, wants to raise immediately £1,000 and levies it on a manufacturer, who will not, for a twelvemonth, be able to charge it to the consumer on his finished commodity. In consequence of such delay, he is obliged to charge for his commodity an additional price, not only of £1,000, the amount of the tax, but probably of £1,100, £100 being for interest on the £1,000 advanced. But in return for this additional £100 paid by the consumer, he has a real benefit, inasmuch as his payment of the tax which Government required immediately, and which he must finally pay, has been postponed for a year; an opportunity, therefore, has been afforded to him of lending to the manufacturer, who had occasion for it, the £1,000 at 10 per cent, or at any other rate of interest which might be agreed upon. Eleven hundred pounds payable at the end of one year, when money is at 10 per cent interest, is of no more value than £1,000 to be paid immediately. If Government delayed receiving the tax for one year till the manufacture of the commodity was completed, it would, perhaps, be obliged to issue an Exchequer bill bearing interest, and it would pay as much for interest as the consumer would save in price, excepting, indeed, that portion of the price which the manufacturer might be enabled in consequence of the tax, to add to his own real gains. If for the interest of the Exchequer bill, Government would have paid 5 per cent, a tax of £50 is saved by not issuing it. If the manufacturer borrowed the additional capital at 5 per cent, and charged the consumer 10 per cent, he also will have gained 5 per cent on his advance over and above his usual profits, so that the manufacturer and Government together gain, or save, precisely the sum which the consumer pays.
On the Principles of Political Economy and Taxation par. 29.3

It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.

An Inquiry into the Nature and Causes of the Wealth of Nations par. I.2.2

On the division of labor:

Those ten persons, therefore, could make among them upwards of forty-eight thousand pins in a day. Each person, therefore, making a tenth part of forty-eight thousand pins, might be considered as making four thousand eight hundred pins in a day. But if they had all wrought separately and independently, and without any of them having been educated to this peculiar business, they certainly could not each of them have made twenty, perhaps not one pin in a day; that is, certainly, not the two hundred and fortieth, perhaps not the four thousand eight hundredth part of what they are at present capable of performing, in consequence of a proper division and combination of their different operations.
An Inquiry into the Nature and Causes of the Wealth of Nations par. I.I.3

Smith uses the term "invisible hand" only twice in his writings:
As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.
An Inquiry into the Nature and Causes of the Wealth of Nations par. IV.2.9

The produce of the soil maintains at all times nearly that number of inhabitants which it is capable of maintaining. The rich only select from the heap what is most precious and agreeable. They consume little more than the poor, and in spite of their natural selfishness and rapacity, though they mean only their own conveniency, though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species.

The Theory of Moral Sentiments par. IV.I.10

The natural effort of every individual to better his own condition, when suffered to exert itself with freedom and security is so powerful a principle that it is alone, and without any assistance, not only capable of carrying on the society to wealth and prosperity, but of surmounting a hundred impertinent obstructions with which the folly of human laws too often incumbers its operations; though the effect of these obstructions is always more or less either to encroach upon its freedom, or to diminish its security.

An Inquiry into the Nature and Causes of the Wealth of Nations par. IV.5.82

Men desire to have some share in the management of public affairs chiefly on account of the importance which it gives them.

An Inquiry into the Nature and Causes of the Wealth of Nations par. IV.7.160

All systems either of preference or of restraint, therefore, being thus completely taken away, the obvious and simple system of natural liberty establishes itself of its own accord. Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man, or order of men.

An Inquiry into the Nature and Causes of the Wealth of Nations par. IV.9.51

It is the highest impertinence and presumption, therefore, in kings and ministers, to pretend to watch over the œconomy of private people, and to restrain their expence, either by sumptuary laws, or by prohibiting the importation of foreign luxuries. They are themselves always, and without any exception, the greatest spendthrifts in the society. Let them look well after their own expence, and they may safely trust private people with theirs. If their own extravagance does not ruin the state, that of their subjects never will.

An Inquiry into the Nature and Causes of the Wealth of Nations par. II.3.36

Nobody but a beggar chuses to depend chiefly upon the benevolence of his fellow-citizens.

An Inquiry into the Nature and Causes of the Wealth of Nations par. I.2.2

How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.

The Theory of Moral Sentiments par. I.1.1

The man of system, on the contrary, is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests, or to the strong prejudices which may oppose it. He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder.

The Theory of Moral Sentiments par. VI.II.42

There is not a negro from the coast of Africa who does not, in this respect, possess a degree of magnanimity which the soul of his sordid master is too often scarce capable of conceiving. Fortune never exerted more cruelly her empire over mankind, than when she subjected those nations of heroes to the refuse of the jails of Europe, to wretches who possess the virtues neither of the countries which they come from, nor of those which they go to, and whose levity, brutality, and baseness, so justly expose them to the contempt of the vanquished.

The Theory of Moral Sentiments par. V.I.19

It is then, in the last dregs of life, his body wasted with toil and diseases, his mind galled and ruffled by the memory of a thousand injuries and disappointments which he imagines he has met with from the injustice of his enemies, or from the perfidy and ingratitude of his friends, that he begins at last to find that wealth and greatness are mere trinkets of frivolous utility, no more adapted for procuring ease of body or tranquillity of mind than the tweezer-cases of the lover of toys; and like them too, more troublesome to the person who carries them about with him than all the advantages they can afford him are commodious. There is no other real difference between them, except that the conveniencies of the one are somewhat more observable than those of the other. The palaces, the gardens, the equipage, the retinue of the great, are objects of which the obvious conveniency strikes every body. They do not require that their masters should point out to us wherein consists their utility. Of our own accord we readily enter into it, and by sympathy enjoy and thereby applaud the satisfaction which they are fitted to afford him. But the curiosity of a tooth-pick, of an ear-picker, of a machine for cutting the nails, or of any other trinket of the same kind, is not so obvious. Their conveniency may perhaps be equally great, but it is not so striking, and we do not so readily enter into the satisfaction of the man who possesses them.

The Theory of Moral Sentiments par. IV.I.8

The great pleasure of conversation and society, besides, arises from a certain correspondence of sentiments and opinions, from a certain harmony of minds, which like so many musical instruments coincide and keep time with one another. But this most delightful harmony cannot be obtained unless there is a free communication of sentiments and opinions. We all desire, upon this account, to feel how each other is affected, to penetrate into each other's bosoms, and to observe the sentiments and affections which really subsist there. The man who indulges us in this natural passion, who invites us into his heart, who, as it were, sets open the gates of his breast to us, seems to exercise a species of hospitality more delightful than any other. No man, who is in ordinary good temper, can fail of pleasing, if he has the courage to utter his real sentiments as he feels them, and because he feels them.

The Theory of Moral Sentiments par. VII.IV.28

Regard to our own private happiness and interest, too, appear upon many occasions very laudable principles of action.

The Theory of Moral Sentiments par. VII.II.87

The first are those whining and melancholy moralists, who are perpetually reproaching us with our happiness, while so many of our brethren are in misery, who regard as impious the natural joy of prosperity, which does not think of the many wretches that are at every instant labouring under all sorts of calamities, in the languor of poverty, in the agony of disease, in the horrors of death, under the insults and oppression of their enemies.

The Theory of Moral Sentiments par. III.I.51

Let us suppose that the great empire of China, with all its myriads of inhabitants, was suddenly swallowed up by an earthquake, and let us consider how a man of humanity in Europe, who had no sort of connexion with that part of the world, would be affected upon receiving intelligence of this dreadful calamity. He would, I imagine, first of all, express very strongly his sorrow for the misfortune of that unhappy people, he would make many melancholy reflections upon the precariousness of human life, and the vanity of all the labours of man, which could thus be annihilated in a moment. He would too, perhaps, if he was a man of speculation, enter into many reasonings concerning the effects which this disaster might produce upon the commerce of Europe, and the trade and business of the world in general. And when all this fine philosophy was over, when all these humane sentiments had been once fairly expressed, he would pursue his business or his pleasure, take his repose or his diversion, with the same ease and tranquillity, as if no such accident had happened. The most frivolous disaster which could befal himself would occasion a more real disturbance.

The Theory of Moral Sentiments par. III.I.46

A true party-man hates and despises candour....

The Theory of Moral Sentiments par. III.I.85

Every man is, no doubt, by nature, first and principally recommended to his own care; and as he is fitter to take care of himself than of any other person, it is fit and right that it should be so.

The Theory of Moral Sentiments par. III.I.85

The natural course of things cannot be entirely controlled by the impotent endeavours of man: the current is too rapid and too strong for him to stop it; and though the rules which direct it appear to have been established for the wisest and best purposes, they sometimes produce effects which shock all his natural sentiments.

The Theory of Moral Sentiments par. III.I.109

One who is master of all his exercises has no aversion to measure his strength and activity with the strongest.

The Theory of Moral Sentiments par. VII.II.27

Men of no more than ordinary discernment never rate any person higher than he appears to rate himself.

The Theory of Moral Sentiments par. VI.III.487

No benevolent man ever lost altogether the fruits of his benevolence. If he does not always gather them from the persons from whom he ought to have gathered them, he seldom fails to gather them, and with a tenfold increase, from other people. Kindness is the parent of kindness; and if to be beloved by our brethren be the great object of our ambition, the surest way of obtaining it is, by our conduct to show that we really love them.

The Theory of Moral Sentiments par. VI.II.22

Before we can feel much for others, we must in some measure be at ease ourselves. If our own misery pinches us very severely, we have no leisure to attend to that of our neighbour: and all savages are too much occupied with their own wants and necessities, to give much attention to those of another person.

The Theory of Moral Sentiments par. V.I.19

The whole world proves that there is no fellowship between overflowing treasuries and the happiness of the people; and that there is an invariable concurrency between such treasuries and their oppression. They are the strongest evidence in a civilized nation of a tyrannical government. But need we travel abroad in search of this evidence? Have we not at home a proof that national distress grows so inevitably with the growth of treasuries, as to render even peace and plenty unable to withstand their blighting effects?

Tyranny Unmasked par. 1.11

It is with a view to put you on your guard against prejudices thus created, (and you will meet probably with many instances of persons influenced by them,) that I have stated my objections to the name of Political-Economy. It is now, I conceive, too late to think of changing it. A. Smith, indeed, has designated his work a treatise on the "Wealth of Nations;" but this supplies a name only for the subject-matter, not for the science itself. The name I should have preferred as the most descriptive, and on the whole least objectionable, is that of CATALLACTICS, or the "Science of Exchanges."

Introductory Lectures on Political Economy par. I.9

The pulsations of the heart, the ramifications of vessels in the lungs—the direction of the arteries and of the veins—the valves which prevent the retrograde motion of the blood—all these, exhibit a wonderful combination of mechanical means towards the end manifestly designed, the circulating system. But I know not whether it does not even still more excite our admiration of the beneficent wisdom of Providence, to contemplate, not corporeal particles, but rational free agents, cooperating in systems no less manifestly indicating design, yet no design of theirs; and though acted on, not by gravitation and impulse, like inert matter, but by motives addressed to the will, yet advancing as regularly and as effectually the accomplishment of an object they never contemplated, as if they were merely the passive wheels of a machine.

Introductory Lectures on Political Economy par. IV.15

It is not that pearls fetch a high price because men have dived for them; but on the contrary, men dive for them because they fetch a high price.

Introductory Lectures on Political Economy par. IX.47