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Milton Friedman Debunks Myths on Free Enterprise and Government

Milton Friedman Debunks Myths on Free Enterprise and Government

Apr 6, 2024

Milton Friedman Debunks Myths on Free Enterprise and Government

In a clip from the Free To Choose Network (1978), Milton Friedman was asked a series of thought-provoking questions, delving into the dynamics between free enterprise and government intervention in the economy. The questions and subsequent discussion offered a vivid exploration of the philosophical and practical considerations that underpin economic systems.

Is there an economic system that has allowed free enterprise alone to determine the direction of the economy?

Friedman's response to this question was both historical and contemporary in scope. He suggested that, while no society is entirely devoid of government influence, there have been periods where free enterprise has played a dominant role in economic decision-making. Citing the example of 19th-century Britain during the zenith of its empire, he noted that government spending was once as low as 10% of the national income. This, according to Friedman, was a time when free enterprise largely determined the economic direction. Further, he pointed out that even in the present day, a significant portion of economic activity is directed by free enterprise, as government waste implies that more resources are effectively allocated by private decision-makers than it might initially appear.

Does the allocation of resources involve value judgments, and is a combination of government and free enterprise the best alternative?

Friedman advanced the notion that value judgments are inherently personal and cannot be made by abstract entities such as resources or governments; they can only be made by individuals. The crux of the matter, then, is to determine the most effective means by which people can collectively express their values. He advocated a diverse approach, incorporating individual actions, voluntary organizations, business enterprises, and, yes, government – but with a critical caveat. The government must remain a servant of the people and not become a master, implying a delicate balance that respects individual freedoms while allowing for collective decisions where appropriate.

Is there a benefit to having the government "steal" our money?

Addressing the provocative third question, Friedman vehemently dismissed the notion that government taxation and subsequent spending by government employees could be inherently beneficial due to the resulting economic activity. He countered this argument by emphasizing the distinction between mere spending and productive activity. The wealth of a nation, Friedman argued, consists not in the money that is circulated, but in the goods and services produced and consumed. Thus, if government employees were engaged in productive activities, the economy would benefit from both their production and their consumption, resulting in a net increase in the wealth available to the entire society.

In conclusion, Milton Friedman’s responses underscored his deeply held belief in the power of free enterprise and the limited but necessary role of government. He held firm to the conviction that individuals are the best judges of value and that the fruits of economic activity are borne from production, not consumption. In his view, the true measure of a society's economic health lies not in how much money is spent, but in the quality and quantity of its goods and services, as well as the freedom its citizens enjoy in creating and consuming them.


  1. "Spending isn't good. What's good is producing. What we want to have is more goods and services."
  2. "But when it comes to the federal government, you tend to think that you are spending somebody else's money, and you are in a way, but he's spending yours."
  3. "The great wisdom of the founding fathers of this country, of the people who wrote the constitution, was designed to limit governments powers in order to preserve the freedom of the individuals."
  4. "We have broadened enormously the conception of what is a governmental power and what is not, and have departed from that limited government until we have created a Frankenstein, an unlimited government that threatens to destroy us."


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