Gardels: In the end, your ideas have triumphed over Marx and Keynes. Is this, then, the end of the road for economic thought? Is there anything more to say than free markets are the most efficient way to organize a society? Is it the “end of history,” as Francis Fukuyama put it?
Friedman: Oh no. “Free markets” is a very general term. There are all sorts of problems that will emerge. Free markets work best when the transaction between two individuals affects only those individuals. But that isn’t the fact. The fact is that, most often, a transaction between you and me affects a third party. That is the source of all problems for government. That is the source of all pollution problems, of the inequality problem. This reality ensures that the end of history will never come.
Gee, Milton Friedman was concerned about externalities. I’ve noted on other posts that in my exchanges with Arnold Harberger, I always found him to be very concerned about externalities as well. There, ladies and gentlemen, I believe is the difference between a smart, honest conservative and an idiot: the former recognizes that externalities are a problem and there’s some sort of a role for government in correcting them. The latter talks only about the beauty of the free market and property rights.