What Is Capitalism?

This is Ayn Rand’s flagship talk on capitalism. In this 1967 lecture, Rand gives an in-depth explanation of what capitalism is, why it is often misunderstood, and why it is the only social system consonant with man’s nature. She discusses the philosophical and ethical roots of capitalism, and contrasts them with the moral-philosophic doctrines that sanction ruling men by force. She then discusses progress under capitalism and how it is fundamentally different from the so-called progress of a statist society. Along the way, Rand takes up questions such as:

  • What is the essence of man’s nature?
  • What is the fundamental basis for the concept of individual rights?
  • How is capitalism consonant with man’s nature? Why are other social systems not consonant with it?
  • Why is serving “the common good” not a sound principle for governing a free society?
  • What are the different perspectives on “the good” and how do they inform people’s views on what constitutes a proper social system?
  • What has been the ethical basis of all tyrannies in history?
  • Who prospers on a free market?
  • How does a free market unleash man’s creative abilities?
  • What is so often misunderstood about progress under capitalism?

This talk is excerpted from an essay of the same name that is substantially longer and covers more issues. Students interested in mastering Ayn Rand’s views on capitalism are highly encouraged to study the full essay in addition to enjoying this course. The essay can be found here.


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Note: Sections are delineated according to paragraph numbers in the transcript.

  1. Man’s Nature (1–8)
  2. Individual Rights (9–11)
  3. What Is a Proper Social System? (12–17)
  4. Capitalism: What It Is (18–22)
  5. “The Common Good” (23–27)
  6. Three Theories of “The Good” (28–32)
  7. Rule by Force: Philosophical Roots (33–36)
  8. Capitalism and Objective Values (37–40)
  9. Objectivity of Free Market Values (41–47)
  10. Success on a Free Market (48–54)
  11. Progress Without Sacrifice (55–61)
  12. Need for a Proper Moral Base (62–70)

Essays for Further Reading

"What Is Capitalism?” in Capitalism: The Unknown Ideal

The essay version of this talk is substantially longer and covers many more issues. Students interested in mastering Ayn Rand’s views on capitalism are especially encouraged to study it closely, in addition to enjoying this course.

“Man’s Rights” in Capitalism: The Unknown Ideal

To understand Ayn Rand’s views on capitalism, it is crucial to understand her views on man’s rights. This is the best essay to read on the topic, and it explains why the right to property is inseparable from the right to life.

“The Nature of Government” in Capitalism: The Unknown Ideal

To understand Ayn Rand’s views on capitalism, it is crucial to understand her views on the nature and purpose of government. This is the best essay to read on the topic, and it explains why the purpose of government should be limited to protecting individual rights.

“The Objectivist Ethics” in The Virtue of Selfishness

Ayn Rand said that every theory of politics rests on a theory of ethics, and this essay contains a detailed presentation of her ethics of rational egoism. This is crucial reading for understanding why Rand views ethics to be as objective as a physical science.

“Collectivized Ethics” in The Virtue of Selfishness

This is an important essay to read to understand Ayn Rand’s view of the corrupt nature of central planning, and how central planning invariably treats individual men as disposable.

“The Money Speech” in For the New Intellectual

In this excerpt from Atlas Shrugged, an Ayn Rand hero argues why we should embrace a society ruled by money and decry the alternative.

“From Each According to His Ability, to Each According to His Need” in For the New Intellectual

In this excerpt from Atlas Shrugged, a character describes how a once-thriving factory town drove itself into poverty, misery, and resentment by trying to live according to this principle.

“The Moral Meaning of Capitalism” in For the New Intellectual

In this excerpt from Atlas Shrugged, a heroic steel magnate defends his moral right to run his business on his own terms.

“America’s Persecuted Minority: Big Business” in Capitalism: The Unknown Ideal

For those intrigued by Ayn Rand’s views on economic topics, this essay should also be of interest. In it, she argues that businessmen are unjustly vilified and regularly persecuted in American culture and law.

“The Pull Peddlers” in Capitalism: The Unknown Ideal

This is another crucial essay by Ayn Rand on economic topics. Here, she argues why today’s present economic system, which she calls a mixed economy to denote the mixture of economic freedom and economic controls, is highly unstable and inevitably breeds escalating corruption and pressure-group warfare.

“Conservatism: An Obituary” in Capitalism: The Unknown Ideal

This essay explains why Ayn Rand did not think of herself as a conservative, and why she thought that conservatives were either uninterested in or hopeless at defending free market capitalism.

“Egalitarianism and Inflation” in Philosophy: Who Needs It

This is another of Ayn Rand’s main essays on economic topics. In it, she not only discusses the how rampant inflationary policy can devastate an economy, she also discusses how anti-conceptual thinking and corrupt moral ideas give rise to inflationary policy.

"What Is Capitalism?" Essay Contest

"What Is Capitalism?" Essay Contest - 1st Place Winning Essay

By Mona Stoicescu

Capitalism is under attack. It is blamed for a litany of sins - from the financial crisis to income inequality, from declining manufacturing jobs to rising healthcare costs. But there are many who defend capitalism by saying that it is the best system for achieving the common good. Ayn Rand contended that this attempt to make the common good the moral justification for capitalism was fundamentally wrong.

In her essay "What is Capitalism?" Rand analyzes and rejects the concept of the "common good."1 She argues that just as there is no such thing as society above and apart from individuals, there is no such thing as the common good above and apart from the good of the individuals in a society. The primary is the good of the individual, without which there can be no such thing as the "common good." What people really intend when they reference the "common good" is the good of some at the expense of others, of the majority at the expense of a minority, of some group at the expense of the individual.

Moreover, if one takes "the common good" as the guiding principle in devising a political system, capitalism will not be the result. The common good is a collectivist notion and leads naturally to collectivism and totalitarianism. If there exists a common good apart from and more important than what is good for an individual, the individual has no grounds to complain when the government forces him to work for the common good at his own expense. This is the premise behind every totalitarian system - it cannot be used to justify capitalism.

However, this does not stop people from trying. We see the results today in the weakness of the supposed proponents of capitalism - witness the capitulation of Congressional Republicans over the recent government shutdown, their passage of compromise after compromise that inexorably expands the reach of government, and their complete failure to defend individual rights in medicine. George W. Bush was fond of exhortations like "America needs men and women...who sacrifice for a greater good."2 When capitalism's detractors announce, as Hillary Clinton did, that "we're going to take things away from you on behalf of the common good,"3 capitalism's so-called defenders are helpless to respond because they accept the common good as the moral standard. They are reduced to arguing about methods and tactics - about software glitches at healthcare.gov, about premiums and deductibles - ceding the moral high ground to those who would sacrifice the individual to the group.

What then, according to Rand, is the moral justification of capitalism? She argues that "The moral justification of capitalism lies in the fact that it is the only system consonant with man's rational nature, that it protects man's survival qua man, and that its ruling principle is: justice."1 Her justification for capitalism is rooted in philosophy: in metaphysics, epistemology, and ethics. She explains that to know what kind of social system is good for man, one has to first understand morality and the nature of man.

Rand identifies that man is a volitional being: unlike other animals, who instinctively act to preserve their lives, he has free will to choose life-promoting actions or otherwise. Also in contrast to other animals, man's tool of survival is reason - he must use his mind to figure out how best to sustain his life. The reasoning mind cannot function under coercion. Therefore, in order to live as a rational being, man must be free of coercion, of force. This means that his individual rights must be protected from thugs and thieves. The only system that protects individual rights and extracts force from human relationships, leaving the individual free to think and to pursue his own life and happiness, is capitalism.

Justice is the act of giving to each man what he deserves. This is what capitalism does. Under capitalism, each individual is free to produce and to trade with others to mutual advantage. If an individual creates something valuable to another, both will benefit from exchanging the products of their efforts - the higher the value, the greater the benefit. If instead he chooses not to work, he will not be able to force his neighbor to support him. Capitalism allows men to profit to the extent their rationality and productiveness allow. It is justice applied to a social context.

If capitalism is to survive, it must be defended on solid moral and philosophical grounds. This will require rejecting the "common good" and discovering a moral code grounded in man's rational nature that promotes the good of the individual. Fortunately, Ayn Rand's philosophy of Objectivism provides just that.

1 Rand, Ayn. "What Is Capitalism?," Capitalism: The Unknown Ideal, 1967.

2 U.S. Government Printing Office. "Commencement Address at Ohio State University in Columbus, Ohio, June 14, 2002," Public Papers of the Presidents of the United States: George W. Bush (2002, Book I), page 988.

3 Fouhy, Beth. "San Francisco rolls out the red carpet for the Clintons", Associated Press. Retrieved January 19, 2014.

The "What Is Capitalism?" essay contest deadline has passed. Thank you to all those who entered!

Essay Prompt

Why does Ayn Rand argue that the moral justification of capitalism does not lie in the claim that it is the best way to achieve the "common good"?


  • First Place$500
  • Second Place$250
  • Third Place
    • A set of nonfiction works by Ayn Rand including:
      • For the New Intellectual
      • Capitalism: The Unknown Ideal
      • The Virtue of Selfishness
      • The Romantic Manifesto
    • A $50 gift certificate to the Ayn Rand Institute eStore

Contest Rules

Essays will be judged on both style and content. Judges will look for writing that is clear, articulate and logically organized. Winning essays must demonstrate an outstanding grasp of the philosophic meaning of "What Is Capitalism?"


  • No application is required.
  • Entrant must be a student on Ayn Rand Institute Campus who has completed the "What Is Capitalism?" course.
  • Essay must be no fewer than 600 and no more than 800 words in length, and double-spaced.
  • One entry per person.
  • Essay must be submitted by January 19, 2014, no later than 11:59 PM, Pacific Time.
  • Essays must be submitted by email. Mailed in submissions will not be accepted.
  • The Ayn Rand Institute has the right to provide contest deadline extensions when deemed appropriate.
  • Essay must be solely the work of the entrant. Plagiarism will result in disqualification.
  • Decisions of the judges are final.
  • Employees of the Ayn Rand Institute, its board of directors and their immediate family members are not eligible for this contest.
  • All entries become the property of the Ayn Rand Institute and will not be returned.
  • Winners and all other participants will be notified via e-mail by February 28, 2014.
  • Contest winners agree to allow the Ayn Rand Institute to post their names on any of ARI's affiliated websites. The winning first place essay may be posted in its entirety on any of these websites with full credit given to the author.
  • Winners will be solely responsible for any federal, state or local taxes.

To Enter

Email your essay to aricampus@aynrand.org. Include in the body of your email your name, field or profession (grade level through grad school if you are a student), mailing address, email address and phone number. Attach your essay to the email in one of the following formats: pdf, doc, docx, rtf, txt. Remove any information from your essay that would reveal your identity. Your submission must be sent to aricampus@aynrand.org no later than 11:59 p.m. Pacific Time January 19, 2014.

The "What Is Capitalism?" essay contest deadline has passed. Thank you to all those who entered!