Freedom to Choose: How Milton Friedman Saved Capitalism

We look at one of the towering figures of conservativism and explore whether his policies would work today.  

Transcript

Freedom to Choose:  How Milton Friedman Saved Capitalism 

December 2025

“A society that puts equality before freedom will get neither. A society that puts freedom before equality will get a high degree of both.”

“One of the great mistakes is to judge policies and programs by their intentions rather than their results.”

“The record of history is absolutely crystal clear, that there is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by the free-enterprise system.”

All from Milton Friedman

My first years were in WI, but due to family circumstances, I moved to IL when I was 12.  Those were the days of three channels: PBS and a Spanish-language one.  So the few choices available were well known.  One of those was Phil Donahue, whose show took place in Chicago, hence his ubiquity in IL, but was syndicated around the country.  

A few years ago, I came across a Donahue show from 1979 featuring the economist Milton Friedman.  Many things were startling to me.  Even in a pre-Bill Maher, pre-CNN/FOX/MSNBC era where many talk show personalities tried to hide their politics, Donahue carried his progressivism on his sleeve.  Yet, though challenging Friedman, Donahue treated his guest well, like a guest.  He was calm, respectful, thoughtful, and a good listener.  Contrast that with today’s World Wrestling Entertainment fiascos masquerading as news or political insight.  And Friedman was there for the entire show, which provided a platform to explain himself at length.  Today, non-podcast commentators are expected to boil down incredibly complex concepts like foreign policy, the economy, or whether America is a credal nation into a pithy 30-second soundbite.  

Donahue begins by noting that Friedman’s book of that year, Free to Choose, was the number 1 nonfiction best seller.  An economist explaining Capitalism. In contrast to today’s version?  

Titillation, scandal, and conspiracy with Nobody’s Girl described as: The late activist and advocate for sex-trafficking survivors describes her time with Jeffrey Epstein and Ghislaine Maxwell. Ugh. Epstein and Maxwell were and are reprehensible, rotten human beings, but we have millions who want to learn more.

The 2nd best seller is another tome by Michelle Obama, described as a focus on self-realization, including her memoir, her advice book on overcoming adversity, and, this time, a meditation on the power of clothes.  Friedman laid out the power of our economic system.  Obama lays out her wardrobe.  

I have long argued that nostalgia for the before times is not history.  The argument that things were much better in the past often conflicts with the facts.  Yet is there any doubt that, over the past 45 years, our politics, economic discourse, and culture are dumber?  Scholastic studies certainly bear this out, but I digress.  

The most crucial aspect of Friedman, though, was how he explained complex economics in such clear and understandable language.  For example, on the show, he asks a simple question.  “If 40% of income from most Americans (1979 remember) is being spent by the government, presumably for the good of the people, would Americans say they are getting their money’s worth?”  

Writing for the New York Times, Holcombe Noble noted, “Mr. Friedman had a gift for communicating complicated ideas in simple and lucid ways, and it served him well as the author or co-author of more than a dozen books, as a columnist for Newsweek from 1966 to 1983 and even as the star of a public television series.”

The comparison is inapt today because of federal outlays: the much-maligned 1% account for nearly 40% of all federal spending, and the bottom 40% pay no income tax.  So much for the progressive argument that the rich are not paying their fair share, but again, I digress.  

One of the significant problems on the right today is that there is no figure equivalent to a Bernie Sanders, AOC, or even Zoran Mamdani who can articulate the value of Capitalism and free markets with the special mix that Friedman brought, combining vast knowledge with economics made digestible to the minds of non-economists.  Some, like Frank Langone, who provided the money to launch Home Depot, and Kevin Williamson, in his incomparable column, Economics for English Majors, have tried.  But there is no one alive, even the now-aged Thomas Sowell, who does this heavy lifting half as well as Friedman.  

Many on the right today do not even want to try.  They are, at their core, hostile to Capitalism, feeling that free trade has benefitted the world at America’s expense and led to a dearth of manufacturing.  Friedman could have easily refuted this, swatting away these arguments like so many flies.  But he died in 2006, and no one has taken his place. It also helped that Friedman found, after being studiously ignored by large government GOPers, the right political partner in Ronald Reagan.  Yet, as of this writing, there is not one prominent politician whom I can name who would be the political equivalent of Friedman.  

Friedman came along at a time when people increasingly looked to the government for assistance.  He freed the concept of Capitalism from the inevitable bonds imposed by government, beginning with Teddy Roosevelt, Woodrow Wilson, Franklin Roosevelt, and Lyndon Johnson.  Alas, since Reagan, we have fallen back into old habits, but Friedman happened, and he can be our guide to a better economy, a better life, even in this time.  

It was Friedman’s advocacy for free enterprise, limited government intervention, and individual liberty that reshaped both academic economics and real-world policymaking. “A major source of objection to a free economy is precisely that it ... gives people what they want instead of what a particular group thinks they ought to want. Underlying most arguments against the free market is a lack of belief in freedom itself.”

He saw the rise of monetarism and the questioning of Keynesian orthodoxy.  Friedman also supported welfare reform and school choice. “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”

Keep in mind, Friedman reached prominence during the New Deal and also watched the Great Society take over vast swathes of government, from healthcare to education to housing.  Keynes was all the rage.  He changed that, but first let’s look at the man.  

Born to poor Jewish immigrants in Brooklyn, Friedman grew up in an environment where economic security was never guaranteed. His mother worked in a dry goods shop, and his father pursued several unsuccessful business ventures. His father died during his senior year of high school, when Friedman was 15, leaving him and his two older sisters to help support their mother.  “There was probably never a time in their lives when my parents had an income that today would be classified above the poverty level. But we never felt poor,” Stated Friedman.

This early exposure to financial hardship is often cited as a key factor in shaping his later interest in economics. 

Despite the family’s meager income, Friedman’s parents prioritized his education, and he excelled in his public schooling, graduating from high school just before his 16th birthday. He attended Rutgers University on a scholarship, initially focusing on mathematics before a mentor, Arthur Burns, influenced him to pursue economics. 

After graduating from Rutgers, where he initially considered becoming an actuary, Friedman pursued graduate studies at the University of Chicago—an institution that would profoundly influence both his career trajectory and intellectual worldview.

In Chicago, Friedman encountered scholars such as Frank Knight and Henry Simons, proponents of classical liberal economics. Their focus on market efficiency and skepticism of expansive government control deeply resonated with him. After further studies at Columbia University and a stint in federal government service during World War II, Friedman returned to Chicago as a professor. It was here that he would develop his most important theoretical contributions, mentoring a new generation of economists who would spread his ideas across academia and government.

Friedman is known for founding the school of economic thought known as monetarism, an approach that emphasized the role of the money supply in determining inflation and broader financial conditions. During the mid-twentieth century, Keynesian economics dominated public policy and academic discourse. Keynesians believed that government spending and fiscal policy were the primary tools for managing business cycles and reducing unemployment.

Friedman challenged this view by arguing that inflation is always and everywhere a monetary phenomenon—that excessive growth in the money supply is the primary cause of price instability. In his landmark 1963 work A Monetary History of the United States: 1867-1960, co-authored with Anna Schwartz, Friedman presented extensive empirical evidence showing that the Federal Reserve’s mismanagement of the money supply—not inherent failures of Capitalism—was the primary cause of the Great Depression. This claim shook the foundations of established economic thinking.

Friedman’s monetarism argued for a steady, predictable expansion of the money supply instead of discretionary, interventionist policy by central banks. He believed that human judgment in monetary policy was prone to error and political pressure, and that rules-based policy would stabilize markets far more effectively.  Was he wrong?  On the week I am writing this piece, Donald Trump announced he will appoint a new Fed Chair, six months before Jerome Powell is slated to leave the office.  Why would Trump break yet another norm?  As Eleanor Pringle, writing for Fortune Magazine, notes, “He has already threatened to fire Powell before quickly retreating when markets shifted nervously on fears over Fed independence, though questions of central bank autonomy have lingered ever since.” 

And there is history.  Friedman’s critique gained momentum in the 1970s, when the United States and other Western economies faced stagflation—high inflation paired with high unemployment—phenomena that Keynesian theory struggled to explain. Friedman’s predictions about the consequences of loose monetary policy proved remarkably prescient, giving monetarism newfound credibility and opening the door for subsequent reforms.

In addition to monetary theory, Friedman made groundbreaking contributions to microeconomics. His 1957 book, A Theory of the Consumption Function, introduced the Permanent Income Hypothesis, which posits that individuals make consumption decisions based on long-term expected income rather than short-term fluctuations in income. 

This challenged the Keynesian view that current income directly determined consumption levels.

The Permanent Income Hypothesis had far-reaching implications: it suggested that government attempts to stimulate consumer spending through short-term fiscal measures might be far less effective than Keynesians believed. It helped launch the shift in macroeconomics toward microeconomic foundations and influenced later schools of thought such as rational expectations.  Friedman argued that the Phillips curve’s supposed trade-off between inflation and unemployment only exists in the short run and is based on people being “fooled” by unexpected inflation. In the long run, his theory shows a vertical Phillips curve at the “natural rate of unemployment” because people adjust their expectations, demanding higher wages and causing inflation to accelerate without permanently lowering unemployment. This leads to a situation with high inflation and high unemployment (stagflation), as predicted and observed in the 1970s. 

Friedman’s empirical work was characterized by a determination to test economic theories against real-world data. His insistence on evidence over ideology earned him respect across intellectual lines, even among scholars who disagreed with his policy conclusions.

Beyond academia, Friedman became an influential public intellectual advocating for classical liberalism—an ideology centered on limited government and expanded personal freedom. In works such as Capitalism and Freedom (1962) and later Free to Choose (1980, co-authored with his wife, Rose Friedman), he articulated how economic liberty underpins political liberty. And as noted, startlingly, Friedman wrote for Newsweek.  This magazine today is yet another tired publication claiming news but really just progressive opinion.  Friedman, or anyone remotely associated with his views, would not be welcome.  

His arguments rested on several core beliefs: Government often harms more than it helps.

Friedman argued that interventions typically create inefficiencies and distortions that worsen the problems they aim to solve. Individuals, not governments, are best positioned to make economic choices. In his view, decentralized decision-making through free markets maximizes innovation and well-being. Economic freedom is essential to a free society.

Government control over economic life inevitably leads to political control over citizens.

Friedman applied these principles across numerous policy areas. He was a vocal critic of military conscription, contributing to the eventual end of the draft. He supported the legalization of drugs, arguing that prohibition caused more harm than it prevented. And he became one of the earliest and most prominent advocates of school vouchers, proposing that competition between schools would improve education outcomes.

“In the current world, with the skills needed, dropouts [like no secondary education] are condemned to being members of the underclass. In my view, this is a fault of the American school system, which is a government monopoly.” The concept that maybe we need fewer Sociology Majors and more electricians?  Friedman knew this decades ago.  

And in what will be a lengthy quotation from Free to Choose, this:

“Cities, states, and the federal government today spend close to $100 billion a year on elementary and secondary schools (that number is $937 billion today, or $440 billion accounting for inflation, 4X the amount spent in 1979, and we have seen no improvement).   

That sum is a third larger than the total annual spend on food and liquor in restaurants and bars. The smaller sum surely provides an ample variety of restaurants and bars for people in every class and place. The larger sum, or even a fraction of it, would provide an abundant array of schools. It would open a vast market that could attract many entrants, both from public schools and from other occupations … The one prediction is that only those schools that satisfy their customers will survive—just as only those restaurants and bars that satisfy their customers survive. Competition would see to that.”

Friedman also challenged prevailing welfare systems, criticizing them as inefficient, paternalistic, and counterproductive. In place of traditional welfare programs, he proposed the negative income tax (NIT)—a system where people earning below a certain threshold would receive supplemental income from the government. The NIT aimed to simplify welfare, reduce bureaucracy, and avoid disincentives to work. Though never fully implemented, aspects of his proposal influenced later reforms, including the Earned Income Tax Credit (EITC). And in a bit of crossover with the Trump administration, Friedman noted, “You cannot simultaneously have a welfare state and free immigration.” It was not that Friedman was anti-immigrant, far from it. Still, he saw clearly that if an immigrant arrives without paying into the system and then immediately accesses the system’s goods and services, ranging from food to healthcare to education, that will create an unsustainable imbalance.  For why Friedman was right, I give you … California.  

All of Friedman’s beliefs dovetailed with the overriding idea of combining economic efficiency with social compassion. While critics portrayed Friedman as overly laissez-faire, he repeatedly emphasized that market-based solutions could better achieve humane outcomes than sprawling bureaucracies.

Friedman’s ideas spread worldwide in the late twentieth century, influencing economic reforms in the United States, the United Kingdom under Margaret Thatcher, and numerous developing nations. His work was instrumental in shifting from state-centered economic models toward deregulation, privatization, and market-oriented policies.

Perhaps his most controversial global impact was his association with the “Chicago Boys,” Chilean economists trained at the University of Chicago who advised Chile’s military dictatorship on sweeping market reforms. Friedman visited Chile in 1975, urging policies to end hyperinflation. While he always condemned political repression, critics argued that his economic advice indirectly supported an authoritarian regime. This controversy remains one of the most debated aspects of his legacy.  The issue is that, for the most part, it worked.  Despite a large dip in 1982, Chile’s economy grew from 1975 to 2000 at a rate exceeding other nations in South America.   

“The Chilean economy did very well, but more important, in the end the central government, the military junta, was replaced by a democratic society. So the really important thing about the Chilean business is that free markets did work their way in bringing about a free society,” stated Friedman.  Sadly, one of the few times Friedman was straight-up wrong was thinking the same thing could happen to China. “It cannot continue to develop privately and at the same time maintain its authoritarian character politically. It is headed for a clash. Sooner or later, one or the other will give.” So far, China has its quasi-capitalism and authoritarian politics.  Arguably, the one area I would depart from Friedman is that you need the classical liberal politics first, individual liberty, small government, rule of law, etc., before you can have the economics.  

Friedman’s ideas, though influential, remain contested: Critics argue that monetarist policy prescriptions oversimplified real-world conditions and that rigid money supply rules proved impractical. Detractors claim that deregulation and aggressive free-market reforms contributed to financial instability, including the 2008 crisis. Some scholars contend that Friedman underestimated the role of government in addressing inequality and market failures.

Kurt Andersen also discusses Friedman’s 1962 book, Capitalism and Freedom, which he calls a “cri de coeur for pure coldheartedness.” He also claims that Friedman, in his 1970 essay, was telling businesspeople they ought to emulate Ebenezer Scrooge and Mr. Potter, the grasping banker of It’s a Wonderful Life. The obvious problem is that neither of these fictional examples is a corporation but a privately owned business.  And note that it is Scrooge’s personal generosity, not the government, that changes the lives of those around him.  But Capitalism does not run on generosity.  

“Well, first of all, tell me: Is there some society you know that doesn’t run on greed? You think Russia doesn’t run on greed? You think China doesn’t run on greed? What is greed? Of course, none of us is greedy; it’s only the other fellow who’s greedy. The world runs better when individuals pursue their separate interests.” Adds Friedman. And I would add runs better than when the government and the politicians in charge use other people's money to pursue THEIR interests.  

Despite these critiques, even opponents acknowledge his intellectual rigor and his role in diversifying economic thought during an era when Keynesianism dominated.

If you put a Venn Diagram of our two political parties, you would note an alarming amount of overlap.  Both favor big government and ignore our debts and deficits.  Both favor protectionism and the protection of union power.  Both reject free trade.  Both favor a lesser American footprint abroad.  And both harbor influential figures who would abhor Friedman for reasons apart from his beliefs and economics.  No prizes for what I mean here.  

Yet look at just one topic of today, and really every day.  James Carville was right in noting that it’s the economy, stupid, and so today’s discussion about affordability is really just that concept in a new suit.  But where are the pockets of unaffordability?  The cost of a home in a good school district.  The cost of housing itself.  Education, healthcare, and food.  And in every single example, there is a government behind warping the expenses.  Teachers’ unions dominate K-12 education and oppose school choice.  Local, useless environmental regulations prevent the construction of more housing.  Since the Obama administration, the federal takeover of student loans has created a debt bubble.  And healthcare?  The Obama-era Affordable Care Act was supposed to make it less expensive.  It is more expensive than ever, and Congress is proposing MORE subsidies.  And against this, so-called Nationalist Conservatives (the term is half right) are proposing to end all immigration and very little else.  

Even as new economic challenges emerge, Friedman’s core insights—about the power of markets, the dangers of centralized control, and the importance of individual liberty — should guide the solution to all of these problems.  School choice, more housing, re-privatize student loans, and market-based healthcare solutions are all from the Friedman canon, and all would work.  

He was a towering figure, and the start of a true American resurgence can begin with his ideas.