Upon hearing an argument for capitalism, many respond, “That is good in theory, but it would never work in real life.” Such a statement is wrong in both theory and in practice. (And it is actually an example of a fundamental philosophical error–the mind/body dichotomy.)

What is a theory? Merriam-Webster defines a theory as “a belief, policy, or procedure proposed or followed as the basis of action.” And how to we judge whether a theory is good or bad, practical or impractical? By the results that we attain when/if we act on that belief, policy, or procedure. A theory is good if it achieves the predicted results. (In this context, “good” does not mean that the results are proper or moral.) A theory that achieves something different from its stated objective is not a very good theory.

For example, Marxists have long theorized that “from each according to his ability, to each according to his need” would lead to a worker’s paradise. In reality, the results have been economic regression, misery, and death on unimaginable scales. Marxism, in any of its variants, doesn’t work in practice because it is flawed in theory.

Unfortunately, capitalism as I advocate has never existed. Capitalism means a complete separation of government and economics. It means no public roads, no government schools, no FDA, and no IRS. It means no regulations, no coercive taxation, and no government “entitlement” programs.

In a capitalist society, government is limited to the protection of individual rights—the freedom of each individual to act as he judges best, as long as he recognizes the mutual rights of others.

Since such a society has never existed, though America came closest in the nineteenth century, how do we know that it will work? How can we determine if capitalism really is good in theory?

The answer is: by looking at isolated segments of the economy. We can look at education prior to the Civil War and see that Americans were well educated without government schools. We can examine the private mail companies of the 1840s and 1850s and learn that they delivered the mail more efficiently than the postal service. We can look at the oil industry in the late nineteenth century and discover that, free from government intervention, oil companies made everyone’s life better and became fabulously wealthy in the process.

We can look at those companies today, such as those in technology industries, and witness the amazing new gadgets that enhance our lives—smart phones, flat screen televisions, and the Internet. And the examples do not stop there. There are thousands of examples of free individuals producing the products and services that others want and need. These examples span centuries, they cross international borders, and they occur in virtually every field of production. (My book provides dozens of such examples.)

Capitalism and freedom work in every realm of human life. Capitalism is good in practice because it is good in theory.

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Brian Phillips has been actively defending individual rights for the past twenty-five years. He has successfully helped defeat attempts to implement zoning in Houston, Texas, and Hobbs, New Mexico. His writing has appeared in The Freeman, Reason, The Orange County Register, The Houston Chronicle, The Objective Standard, Capitalism Magazine, and dozens of other publications. He is the author of Individual Rights and Government Wrongs

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