Milton Friedman: Great Classical Liberal Political Economist

On Liberty

Individuals are born with free wills, and, if they so choose, they are able to forge judgments that are conditioned neither by their particular circumstances nor by the environment in which they find themselves. Nevertheless, particular circumstances and environments influence judgments even though, ultimately, they do not shape them. Milton Friedman’s views on the nature and importance of liberty surely were influenced by his particular circumstances and environment.

Friedman is a second-generation Russian immigrant and a Jew, characteristics that were not viewed favorably in the United States during the first half of the twentieth century; characteristics, indeed, that attracted hostile discrimination from public bodies and their agents, themselves protected from the discipline of the competitive market-place. Growing up in such circumstances demonstrated to Friedman in a very personal way the powerful and even-handed protection against prejudice provided by the capitalist system.

Much of Friedman’s scholarly career has been played out against the international backcloth of unequivocal political evil, in the form of totalitarian fascist nightmares epitomized by Adolf Hitler’s Third Reich and in the form of totalitarian socialist nightmares, epitomized by Josef Stalin’s USSR. The ‘days of the devils’ (Johnson 1983) may now be largely over. However, their evil mark is printed indelibly on everything that Friedman writes and says and does.

Domestically in the United States, Friedman’s career has played out against a background of monotonic growth in the size of government and in the reach of its interventionist tentacles. Not for him has there been the privilege of nineteenth century British classical liberals who lived out their lives in environments that largely matched their philosophical beliefs. Circumstances and environments combine, in Friedman’s case, to demand an aggressive classical liberalism, designed to roll back tyranny as well as to preserve and to protect established liberties. That demand has called forth an unwavering supply.

Friedman outlines his special brand of classical liberalism very clearly in the introductory paragraphs of Capitalism and Freedom:

The free man will ask neither what his country can do for him nor what he

can do for his country. He will ask rather “What can I and my compatriots

do through government” to help us discharge our individual responsibilities,

to achieve our several goals and purposes, and above all, to protect our

freedom? And he will accompany this question with another: How

can we keep the government we create from becoming a Frankenstein

that will destroy the very freedom we establish it to protect? Freedom

is a rare and delicate plant. Our minds tell us, and history confirms,

that the great threat to freedom is the concentration of power. 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.

(Friedman 1962, 2)

In three important books – Capitalism and Freedom (Friedman 1962), Free to Choose (Friedman and Friedman 1979) and Tyranny of the Status Quo (Friedman and Friedman 1983)  as well as in many other essays (see Leube 1987 for a representative selection) and in numerous Newsweek columns  Friedman outlined a view of classical liberalism closely related to the philosophy of the young John Stuart Mill.

Friedman’s philosophy, like that of Mill, is one in which freedom is viewed as indivisible, with economic freedoms equally as important as political freedoms. Like Mill, Friedman also holds that government should be as decentralized as possible in order to allow alienated citizens to vote with their feet. Like Mill Friedman also holds that ‘the only purpose for which power can be rightfully exercised over any member of a civilized community against his will, is to prevent harm to others’ (Mill 1865, 6). It is a philosophy like that of Mill in which ‘[O]ver himself, over his own body and mind, the individual is sovereign’ (Mill 1865, 6).

This said, Friedman does not believe that most debates over economic policy are debates over value judgments (Friedman 1967). Disagreements exist, for the most part because economists accept differing tentative hypotheses about the relationship between economic phenomena. Friedman maintains an optimistic perspective that most of these disagreements will disappear over time as competing hypotheses are subjected to empirical testing. He has qualified this optimism, however, with the passage of time recognizing, in the wake of the public choice revolution, that economists and policy-makers are not always driven by considerations of high moral purpose (Friedman 1986).

In Friedman’s normative ideal, government should be strong and yet severely constrained. The major function of government is to protect the freedom of the people from outside and from inside intervention (i.e. to protect negative freedom in the sense most clearly defined by Isaiah Berlin 1969). To achieve this objective, government must be empowered to provide an effective system of defense and to provide internally for the protection of property rights, the enforcement of private contracts and the maintenance of competitive markets. These powers, however, should not be unlimited. Government itself should remain strictly subject to the rule of law.

Unlike modern anarcho-capitalists, Friedman does not believe that private forces are capable of effectively providing these indispensable prerequisites of the free society. Nor is he comfortable with restricting government to the functions of the minimal (or night-watchman) state. Although he expresses a strong preference in favor of voluntary co-operation and private enterprise, he also recognizes that government upon occasion may enable individuals to accomplish jointly arrangements that would be more difficult or more expensive for them to accomplish severally (Friedman 1962, 2). In particular, Friedman is sensitive to the problem of poverty and argues in Capitalism and Freedom (1962) in favor of a negative income tax to set a limit below which no family income could fall.

In contemplating such arrangements, however, Friedman unequivocally focuses on the harmful consequences of institutional arrangements that shield individuals from taking personal responsibility for their own decisions or that reflect paternalistic value judgments imposed by philosopher-kings on their fellow citizens. He is driven in this presumption by a recognition that the great advances in civilization have never come from centralized government, that centralized government can never duplicate the variety and diversity of individual action and that centralized government always substitutes uniform mediocrity for the variety that is essential for successful entrepreneurial innovation (Friedman 1962, 4).

A basic human value that underpins Friedman’s philosophy is tolerance based on humility (Friedman 1991). An individual has no right to coerce someone else, not only because of fundamental principles of classical liberalism, but also because no individual can be sure that he is right and the other person wrong. In this respect, Friedman sets himself aside from Utopian classical liberals such as Ludwig von Mises (Mises 1963) who protect their arguments from empirical criticism on a priori grounds. Friedman rejects praxeology of the kind advanced by Mises on the ground that it converts a body of substantive conclusions into a religion.

Friedman argues that democracy is the appropriate form of government to foster political freedom. However, the prerequisite to democracy is a capitalist economy that separates economic from political power , allowing the one to offset the other (Breit and Ransom 1998, 257). In this regard, Friedman fails to take full account of public choice arguments that there is a predictable tension between democracy and free markets in the absence of self-enforcing constitutional constraints on government authority (Rowley 1999).

Much of Friedman’s normative message is now commonplace in the debate over public policy. For example, several experimentations in the use of school vouchers are currently under way in the United States and many more are under consideration. The 1960’s Great Society programs that attempted to provide a welfare state from cradle to the grave are systematically, if slowly, being dismantled in favor of market-based alternatives. Affirmative-action policies that rely on bureaucratic controls rather than on competitive capitalism are increasingly the subject of criticism, even among those for whom those policies were ostensibly designed. Conscription in the military has given way to the market-based volunteer force. Fixed exchange rate regimes systematically have given way to flexible exchange rate regimes throughout the large majority of the Free World. In all these areas, Friedman’s once controversial ideas have begun to overwhelm the forces of mercantilism, mirroring the success of Adam Smith two centuries earlier.

It should not be forgotten, however, that Friedman’s success was bitterly fought and courageously achieved against powerful forces in a western world then dedicated to the elimination of individual freedom in favor of democratic socialism. Ranged against Friedman in this regard were eminent members of the economics profession (including Paul Samuelson, Kenneth Arrow, John Kenneth Galbraith, James Tobin, Robert Solow and Joan Robinson) who consistently demonstrated anti-free market prejudices combined with a high regard for big government and an easy willingness to sacrifice economic freedoms on the altar of Keynesian macroeconomic policies.

When intellectual battles are won and lost, the victor rarely receives his justly earned accolades. Those whose arguments have failed, and who seek continued academic respect, shift their positions and rely on myopia to protect them from the consequences of their earlier mistakes.

Rest assured, however, that those leopards who argued so confidently in the middle years of the twentieth century for the institutional arrangements of democratic socialism would not have changed their spots to the extent that they have in the absence of Friedman’s firm and convincing voice in defense of economic freedom, a voice that penetrated the citadels of coercion in the West as well as in the East, a voice that gave hope for a freer and more prosperous future during a dangerous half century for those who cherish freedom. Without that clear and convincing voice in favor of capitalism it is doubtful whether the public choice revolution would have made the inroads that it has into the widely held postwar mis-conception that government is the omniscient and impartial servant of the public good.

Charles K. Rowley

Duncan Black Professor of Economics

James M. Buchanan Center for Political Economy

George Mason University

and

The Locke Institute

Fairfax, Virginia

and
Anne Rathbone

Graduate Student in Economics

George Mason University

Acknowledgements
We wish to thank Amanda J. Owens for invaluable collaboration in preparing biographical materials. We are extremely grateful to Milton Friedman for ensuring that the essay is factually correct. We wish to thank also William Breit, James M. Buchanan, Tyler Cowen, David Fand, J. Daniel Hammond, Robert Higgs, Henry G. Manne, Fred McChesney and Andrew Sellgren for helpful suggestions. The Locke Institute is indebted to the Earhart Foundation for financial support.
Selected Works
1945. Income from Independent Professional Practice. (With Simon Kuznets) New York: National Bureau of Economic Research.
1946. Roofs or Ceilings? The Current Housing Problem. (With George J. Stigler). Irvington-on-the-Hudson, New York: Foundation for Economic Education.
1953. Essays in Positive Economics. Chicago: University of Chicago Press.
1956. Studies in the Quantity Theory of Money. (Editor). Chicago: University of Chicago Press.
1957. A Theory of the Consumption Function. Princeton: Princeton University Press.
1962. Capitalism and Freedom. Chicago: University of Chicago Press.
1963. A Monetary History of the United States, 1867-1960. (With Anna J. Schwartz). Princeton: Princeton University Press.
1966. Price Theory: A Provisional Text. (With David I. Fand and Warren J. Gustus). Chicago: Aldine Press.
1967. ‘Value Judgments in Economics’ in Sidney Hook (ed.) Human Values and Economic Policy. New York: New York University Press, 4-8.
1978. Milton Friedman’s Monetary Framework: A Debate with His Critics. (Edited by Robert J. Gordon). Chicago: University of Chicago Press.
1980. Free to Choose. (With Rose D. Friedman). New York: Harcourt Brace Jovanovich.
1984. Tyranny of the Status Quo. (With Rose D. Friedman). San Diego, New York and London: Harcourt Brace Jovanovich.
1986. ‘Economists and Economic Policy’ Economic Inquiry, Vol. XXIV, January: 1-10.
1987. The Essence of Friedman. (Edited by Kurt R. Leub, with a Foreword by W. Glenn Campbell and an Introduction by Anna J. Schwartz). Stanford: Hoover Institution Press.
1991. ‘Say “No” to Intolerance’ Liberty Vol.4, No 6: 17-20.
1998. Two Lucky People. (With Rose D. Friedman). Chicago: University of Chicago Press.
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