Ayn Rand’s case for capitalism stands in marked contrast to what might be termed the classical defense of capitalism. Throughout the past 250 years, proponents of capitalism predominantly have sought to justify it on purely politico-economic grounds—or by arguing that free, unregulated markets result in “the greatest good for the greatest number.” Ayn Rand regarded both as losing strategies.

“The classical economists attempted a tribal justification of capitalism on the ground that it provides the best ‘allocation’ of a community’s ‘resources,’” Rand wrote.1 On her view, this approach is not only insufficient to defend capitalism, it ultimately undermines the quest for liberty.

The crucial problem with the classical economists’ defense, Rand argued, is that they either ignored moral questions altogether or attempted to defend capitalism on the same moral basis as collectivist social systems: altruism. “The basic principle of altruism,” she wrote, “is that man has no right to exist for his own sake, that service to others is the only justification of his existence, and that self-sacrifice is his highest moral duty, virtue and value.”2 Although she agreed that laissez-faire capitalism is the most efficient politico-economic system—effectively ensuring “the greatest good for the greatest number”—Rand held that effective advocates of capitalism must emphasize that “capitalism is not merely the ‘practical,’ but the only moral system in history.”3

One example of the classical defense of capitalism is the work of Ludwig von Mises. Throughout the 1920s, von Mises resisted the advance of socialism by challenging its adherents, such as Oskar R. Lange and Abba P. Lerner, on politico-economic grounds. Even before publishing some of his most important works, such as Socialism, Liberalism, and Interventionism, von Mises powerfully critiqued key economic premises of statist systems in his 1920 article “Economic Calculation in the Socialist Commonwealth.”

In this paper, von Mises convincingly demonstrated that central planning is incompatible with rational economic calculation: The absence of price signals renders rational economic activity impossible and leads to the misallocation of resources. In a free-market economy, prices are determined by the law of supply and demand, and they fulfill two essential functions. First, prices convey information. If a certain material or good becomes scarcer, whether due to decreased supply or increased demand, its price rises, thereby providing entrepreneurs with information vital to making rational economic calculations and running their businesses successfully. Second, prices serve as incentives. Guided by the profit motive, rational entrepreneurs are incentivized to look continuously for investments that yield the highest returns.4 . . .


1. Ayn Rand, “What Is Capitalism?,” Capitalism: The Unknown Ideal, 2nd ed. (New York: Signet, [1966] 1967), 26.

2. Ayn Rand, “Faith and Force: The Destroyers of the Modern World,” Philosophy: Who Needs It (New York: Signet, [1982] 1984), 83.

3. Rand, “Introduction,” Capitalism, ix [emphasis in the original].

4. Cf. Ludwig von Mises, “Economic Calculation in the Socialist Commonwealth,” Economic Calculation in the Socialist Commonwealth, trans. S. Adler (Auburn, AL: Mises Institute, [1920] 2012), 8–23.

5. Cf. von Mises, “Economic Calculation in the Socialist Commonwealth,” 24–30.

6. Cf. von Mises, “Economic Calculation in the Socialist Commonwealth,” 31–37.

7. von Mises, “Economic Calculation in the Socialist Commonwealth,” 35–36.

8. von Mises, “Economic Calculation in the Socialist Commonwealth,” 35.

9. von Mises, “Economic Calculation in the Socialist Commonwealth,” 48.

10. Ayn Rand, Letters of Ayn Rand, ed. Michael S. Berliner (New York: Plume, [1995] 1997), 260 [emphasis in the original]. Rand repeats this conclusion in another letter written the same year, stressing, “As an example of the kind of ‘almost’ I would tolerate, I’d name Ludwig von Mises. His book, Omnipotent Government, had some bad flaws, in that he attempted to divorce economics from morality, which is impossible; but with the exception of his last chapter, which simply didn’t make sense, his book was good, and did not betray our cause. The flaws in his argument merely weakened his own effectiveness, but did not help the other side” (308).

11. Rand, Letters, 331 [emphasis added].

12. Rand, “Introduction,” Capitalism, viii.

13. Cf. Henry Hazlitt, Economics in One Lesson (New York: Harper & Brothers, 1946), ix; Claude F. Bastiat, “That Which Is Seen, and That Which Is Not Seen,” The Bastiat Collection, 2nd ed. (Auburn, AL: Mises Institute, [1850] 2011), 41.

14. Bastiat, “That Which Is Seen, and That Which Is Not Seen,” 41, 43.

15. Bastiat, “That Which Is Seen, and That Which Is Not Seen,” 43–44.

16. I do not mean to suggest that economists such as von Mises and Hazlitt were not concerned with ethical questions. Von Mises’s 1956 treatise The Anti-Capitalistic Mentality and Hazlitt’s 1964 monograph The Foundations of Morality prove that both of these economists held clearly defined moral convictions. Yet, both clearly separated their economic ideas from their ethical views.

17. Ayn Rand, “For the New Intellectual,” For the New Intellectual: The Philosophy of Ayn Rand (New York: Signet, [1961] 1963), 54.

18. Cf. Hazlitt, Economics in One Lesson, 190–94.

19. Hazlitt, Economics in One Lesson, 190, 192.

20. Hazlitt, Economics in One Lesson, 192.

21. Rand, Letters, 331 [emphasis added].

22. Ayn Rand, “Textbook of Americanism,” The Ayn Rand Column, 2nd ed., ed. Peter Schwartz (Irvine, CA: Ayn Rand Institute Press, [1991] 1998), 91.

23. Rand, “What Is Capitalism?,” 10.

24. Rand, “What Is Capitalism?,” 5.

25. Rand, “What Is Capitalism?,” 5 [emphasis in the original].

26. Rand, “What Is Capitalism?,” 5 [emphasis in the original].

27. Ayn Rand, The Fountainhead (London: Penguin, [1943] 2007), 711.

28. Ayn Rand, “Introduction,” The Virtue of Selfishness: A New Concept of Egoism (New York: Signet, [1964] 2014), vii.

29. Rand, “Introduction,” Virtue of Selfishness, vii [emphasis in the original].

30. Rand, “Introduction,” Virtue of Selfishness, viii.

31. Rand, “Faith and Force,” 83–84 [emphasis in the original].

32. Rand, The Fountainhead, 713.

33. Rand, “Introduction,” The Virtue of Selfishness: A New Concept of Egoism, x [emphasis in the original].

34. Ayn Rand, “Introducing Objectivism,” The Voice of Reason: Essays in Objectivist Thought, ed. Leonard Peikoff (New York: Meridian, 1990), 4.

35. Rand, “Man’s Rights,” The Virtue of Selfishness, 108.

36. Rand, “What Is Capitalism?,” 9 [emphasis in the original].

37. Rand, “What Is Capitalism?,” 10.

38. Rand, “The Nature of Government,” The Virtue of Selfishness, 126.

39. Rand, “The Objectivist Ethics,” The Virtue of Selfishness, 36 [emphasis in the original].

40. Rand, “The Nature of Government,” 126.

41. Rand, “Man’s Rights,” 110.

42. Rand, “What Is Capitalism?,” 10 [statement emphasized in the original].

43. Rand, “Man’s Rights,” 112.

44. Rand, “Textbook of Americanism,” 90.

45. Ayn Rand, Atlas Shrugged (London: Penguin, [1957] 2007), 1061 [emphasis in the original].

46. Ayn Rand, “The Anti-Industrial Revolution,” Return of the Primitive: The Anti-Industrial Revolution, ed. Peter Schwartz (New York: Meridian, [1971] 1999), 281.

47. Rand, “Introduction,” Capitalism, ix [emphasis in the original].

48. Bastiat, “That Which Is Seen, and That Which Is Not Seen,” 43.

49. Rand, Atlas Shrugged, 1053.

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