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Reflections on Milton Friedman

Celebrating Friedman and Freedom

By Thomas F. Siems

One hundred years ago, on July 31, 1912, Nobel-prize-winning economist Milton Friedman was born. The centennial gives us an opportunity to reflect on some of his great ideas using his own words, and to celebrate his contributions in furthering the values and principles that make free-economies around the world exemplars of progress and wealth creation.

One of Friedman’s most influential books, Capitalism and Freedom, first published in 1962, examines competitive capitalism—a free, private enterprise exchange economy—and the role that government should play in a society dedicated to freedom and open markets. Friedman asks, “How can we keep the government we create from becoming a Frankenstein that will destroy the very freedom we establish it to protect?” And, “How can we benefit from the promise of government while avoiding the threat to freedom?”

Friedman argued persuasively that “the great threat to freedom is the concentration of power.” At the same time, he recognized that “government is necessary to preserve our freedom, it is an instrument through which we can exercise our freedom; yet by concentrating power in political hands, it is also a threat to freedom.”

Recognizing this tension and contrary to public opinion, Friedman advanced the idea that the scope of government must be limited. In his view, “its major function must be to protect our freedom both from the enemies outside our gates and from our fellow-citizens: to preserve law and order, to enforce private contracts, to foster competitive markets. Beyond this major function, government may enable us at times to accomplish jointly what we would find it more difficult or expensive to accomplish severally. However, any such use of government is fraught with danger.”

Indeed, after researching the causes of the Great Depression of the 1930s, Friedman went against conventional wisdom and reasoned that “the Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy.”

In Free to Choose, presented as a ten-part PBS television mini-series and published as a best-selling book in 1980 with Milton’s wife Rose as coauthor, the Friedmans explained how good intentions often produce deplorable results when government is the middleman. The dominant view that the Great Depression was a failure of free market capitalism “led the public to join the intellectuals in a changed view of the relative responsibilities of individuals and government. Emphasis on the responsibility of the individual for his own fate was replaced by emphasis on the individual as a pawn buffeted by forces beyond his control. The view that government’s role is to serve as an umpire to prevent individuals from coercing one another was replaced by the view that government’s role is to serve as a parent charged with the duty of coercing some to aid others.”

Friedman warned, time and time again, that the scope of the government’s involvement in the affairs of men must be limited: “The preservation of freedom is the protective reason for limiting and decentralizing governmental power. But there is also a constructive reason. The great advances of civilization, whether in architecture or painting, in science or literature, in industry or agriculture, have never come from centralized government.”

Professor Friedman was a champion for freedom and opportunity, for individual liberty and for free markets: “By relying primarily on voluntary cooperation and private enterprise, in both economic and other activities, we can insure that the private sector is a check on the powers of the governmental sector and an effective protection of freedom of speech, of religion, and of thought.”

Today, on what would have been Milton Friedman’s 100th birthday, we celebrate the life and ideas of this great man and honor his vision and impact on society. We must continue Milton Friedman’s legacy and keep making the case for freedom. As he once said, “Freedom is not the natural state of mankind. It is a rare and wonderful achievement. It will take an understanding of what freedom is, of where the dangers to freedom come from. It will take the courage to act on that understanding if we are not only to preserve the freedoms that we have, but to realize the full potential of a truly free society.”

As we consider the implications of governments that try to replace the invisible hand of the market, we must never forget the closing words in Free to Choose: “We are as a people still free to choose which way we should go—whether to continue along the road we have been following to ever bigger government, or to call a halt and change direction.”

About the Author

Siems is senior economist and director of economic outreach at the Federal Reserve Bank of Dallas.

 

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