Free to Choose: A steel-man of Milton Friedman
I recently read Milton and Rose Friedman’s excellent Free To Choose1.
Its been on my wish-list for years, ever since a former colleague first introduced Milton Friedman to me through some grainy YouTube clips2.
In those scratchy recordings I vividly remember Friedman — an elderly gentleman brimming with the energy and passion of someone decades younger — effortlessly explain economic theories to a captive studio audience. With his trademark blend of academic expertise and friendly charm, he made challenging concepts accessible.
But what most impressed me was the way he handled a question from a socialist audience member who disagreed with him3.
It would have been easy for Milton to tear that poor man down by barraging him with statistics and counterarguments honed over a long career.
But that’s not what Milton did. That would have been a missed opportunity for deeper connection and learning.
Instead, Milton did something remarkable.
He took the audience member’s argument and steel manned4 it: broke it down, reassembled it into something even stronger, and responded to the strongest version of it.
This is how I wanted to learn everything!
I didn’t simply want a knee-jerk rebuttal, or the offering of another viewpoint. A list of pros and cons. I wanted to see the limits of my argument, to understand where it stands on firm ground, and where it’d fall. I wanted to first nurture it like like a sapling, before letting it grow into a magnificent sturdy oak.
So, with that in mind, I thought it’d be fun to steel-man Friedman’s argument in Free to Choose.
Enjoy!
In Free To Choose, Milton Friedman posits that individual freedom in economic choices delivers both individual prosperity and personal liberty. This is stark opposition to socialism, which sometimes occasionally deliveries the first, but rarely the second.
Let’s break down the points Milton makes and re-phrase them as their strongest version.
Individuals have skin in the game 🙋
Letting individuals make the choice for themselves leads to better outcomes because individuals have skin in the game5.
When people make decisions for themselves they experience the consequences themselves, incentivising them to choose what's best for their needs.
In contrast, centralised governments make decisions on behalf of others without fully empathising with their needs — there’s a barrier between decision and effect.
Secondly, these bureaucrats treat large groups of people uniformly, as a homogenous block. People are, of course, non-homogenous, and vary greatly.
Finally, bureaucrats are easily swayed between the competing interests of politicians, lobbyists, and public opinion — the wrong atmosphere for improving individual livelihoods.
A prime example is education. Rather than government providing a costly, ineffective, one-size-fits-all public system, Friedman proposes giving parents vouchers to choose among competing private schools tailored to their children's needs.
This harnesses the power of market competition to improve outcomes, but crucially gives the power to make decisions to those who understand the needs most acutely: the parents of those students.
That government is best which governs least 🤏
Friedman believes that government power should be limited to what is absolutely necessary and no more. His rationale is straight-forward:
The larger the scope of government, the less accountable and more inefficient it becomes6.
Private, non-governmental organisations frequently meet societal needs more effectively than government entities by fostering greater diversity and competition. This is the power of the market.
Conversely, government services, often devoid of competition and an impetus to innovate, risk stagnation. He offers the excellent example of a private school in Harlem: created by and for parents, it was able to rise from the bottom of the local rankings to the top within a year:
Expanding government is easy, but reducing it is difficult due to inertia and special interests. This is the ratchet effect in action7: once government grows, it can never shrink.
Finally, government programs are inequitable. They primarily benefit the middle class but are financed disproportionately by the upper and lower classes — an example of Director’s Law8.
Elite universities are primarily populated by the children of the middle class for a similar reason: the demographic is able to promote their needs most effectively, at the expense of the poor.
Friedman believes government should focus on securing rights and freedoms, and not overly regulate and or try to protect people from themselves. This is an affront to individual liberty and individual prosperity.
Local government 🏛️
If government must exist — for defence, maintenance of public infrastructure, or some other reason — it should be as localised as possible.
This is a corollary from the previous two points. Local governments more effectively address community needs, as they witness the direct impact of their work. They are also more accountable to their local citizens and can adapt faster and more easily than larger government.
Proportionality ∝
One of the most profound concepts Friedman presents is that of proportionality. This is a broad, overarching philosophical principle that extends beyond his book, Free To Choose.
In essence, he suggests that both benefits and burdens should be distributed in alignment with one's economic standing.
This might seem obvious, but it's not how the world works today.
Take taxation, for instance. Friedman argues that taxes should scale with income. Those with insufficient earnings should be exempt from taxation. And those with even lower incomes should receive a negative income tax9 — they should get paid. This system could serve as a simpler and more effective alternative to the social security program — well known for being costly to operate, challenging to navigate, and ineffective for meeting it’s goals.
Likewise, trade tariffs shouldn’t exist. Such tariffs are anti-market, anti-competition, and artificially inflate the prices of foreign goods. Worst of all, they harm consumers the most by increasing costs and reducing choice.
Finally, let’s take an example of a business. If you manufacture a product with negative externalities10, such as water pollution, then you should bear the cost of mitigating that impact. This could be by purifying the polluted water, or perhaps by paying proportional fees to an agency charged with cleanup.
These costs should then be passed onto your customers as higher prices. And if your business can't sustain itself under these conditions, it arguably should not exist. But crucially, production should not be outright banned just because you produce some pollution — if you’re able to pay to address it, then you should be able to proceed.
So, where is Milton wrong?
Now that we’ve built up the strongest version of Milton’s argument, here are a few reasons where I think his reasoning falls short:
Information asymmetry: Friedman often glossed over the fact that perfect information doesn’t exist in markets. People do not know the pros or cons of one approach or another, and this knowledge may not be well distributed across society. Without perfect information, individuals can’t make perfect decisions.
Human decision-making: Contrary to his implicit assumption, evidence suggests that people don't always make rational choices, which undermines the model of the free-market and skin-in-the-game. Even if individuals had perfect information, they may still make the ‘wrong’ decision, due to behavioural biases.
Global geopolitics: His viewpoints may appear outdated in the age of global interconnectivity, where trade restrictions serve larger geopolitical purposes. The US, for example, uses trade tariffs and rules to maintain technological superiority in AI and semiconductors.
Social costs: Externalities, both seen and unseen, are often not known or accounted for, raising good questions on the free market's ability to self-regulate effectively.
Despite this pushback, I believe Milton’s viewpoints are worthy of attention, and I am curious of what he’d think of the US political and economic landscape today.
Perhaps my biggest takeaway is that, like Friedman, we should strive not just to tear down opposing arguments, but to understand, strengthen, and engage with them.
That’s the true spirit of learning, and the essence of a 'steel-man' argument.
If you found this exploration interesting, I highly recommend spending some time with Friedman's own words or watching his engaging lectures. You might not agree with everything he says, but I guarantee you'll walk away with a richer understanding of the world of economics.
Happy reading, or should I say, happy steel-manning!
Here’s a relevant and surprising statistic: there are over 10 million federal employees in the US government — that’s nearly 1 in 30 citizens 😮! And it doesn’t account for state employees: https://www.brookings.edu/articles/the-true-size-of-government-is-nearing-a-record-high