Friedman’s economic model has worked everywhere it has been tried. The idea that this history of consistent success is now outdated is at odds with both history and logic

See Milton Friedman Lives! by Michael Munger. Excerpts:

"I think it is fair to divide the current anti-Friedman wave into three elements with one recurrent element. 

Laissez-faire Is Obsolete 

Vice President J.D. Vance and the broader national-conservative or “new right” movement voiced by Oren Cass (both Vance and Cass, by the way, have the same economics qualifications as Robert Reich) say that the idea of self-organizing commerce is “old-fashioned” and needs to be consigned to the scrap heap of history. In a , Vance argued that the Republican Party’s economic center of gravity has shifted “from Milton Friedman to Alexander Hamilton.” What he meant was that the “new” economic policy should predate the development of economic theory. The shift from laissez-faire toward economic nationalism, tariffs, and state-assisted industrial policy is far from new; it is, in fact, exactly the outdated mercantilist view that Adam Smith demolished in Wealth of Nations."  

Business Profits 

In 1970, Friedman published a now-famous The core claim was simply that shareholders’ goals are diverse and possibly contradictory. No single management strategy focused on social goals could possibly optimize that set of objectives. Consequently, the most responsible thing for business to do would be to pursue profit, honestly and within the law, and then let shareholders do with those profits as they will.  

Bizarre distortions and outright misrepresentations of this simple argument have recently bubbled up from some deep, noisome pit. Examples include a November 2025 SAPIR Journal piece, “What Milton Friedman Got Wrong,” and constant refrains of scorn from such commenters as Nobel laureate Joseph Stiglitz to Salesforce C.E.O. Marc Benioff. Bizarrely, the Stigler Center, named after Friedman’s friend and intellectual supporter George Stigler, published an entirely incoherent set of comments in “.” 

They blame Friedman’s essay for launching “shareholder primacy,” which is the doctrine that a corporation’s only social responsibility is profit maximization for shareholders, full stop. Critics argue this legitimized decades of short-termism, hostile takeovers, junk-bond financing, and disregard for employees, communities, and the environment. But this whole argument misreads (or I suspect, never read) the 1970 essay. Friedman never used the terms “shareholder value” or “shareholder primacy,” and he never implies that ethical constraints should be suspended. What he does claim is that managers should not impose their own ethical goals, which is a different proposition entirely. The shareholder-first ethos of the 1980s–90s arose instead from hostile-takeover pressure and executive stock-based compensation, not from Friedman’s essay itself.  

Globalization and Deindustrialization 

A cross-ideological populist coalition, ranging from economic-nationalist conservatives to progressive never-traders, draws (loosely) on academic work from labor economists David Autor, David Dorn, and Gordon Hanson (). It is true that Friedman was among the most prominent 20th-century advocates of unilateral free trade grounded in comparative advantage. Critics argue that the trade liberalization his ideas underwrote, especially normalizing trade with China (“permanent” normal trade relations in 2000, World Trade Organization membership from 2001), destroyed roughly 2.4 million U.S. manufacturing jobs between 1999 and 2011. The ripple effects contributed to the social and economic decline of manufacturing communities and fed today’s populism on both left and right.  

To be honest, this is less a critique of a specific Friedman idea than an indictment of the free-trade consensus he symbolized. In the podcast series I did last summer and fall on the , I found it striking that the arguments that Smith considered, took apart, and corrected in his industrial policy and trade discussion are so resilient. But there is something different this time: the relationship among nations no longer satisfies liberalism’s (potentially) optimistic premises. If we are not at or considering war with another country, the argument for free trade is straightforwardly unilateral. But as , if one nation operates under liberal assumptions but another nation is trying to maximize relative gains for purposes of military dominance, then another world view may be necessary. 

It is wrong to believe that Friedman did not understand that. Blaming Friedman for China is like blaming . Like Adam Smith, Friedman was analyzing a situation where people were trading for commercial reasons, and as equals. It is anachronistic to believe that Friedman, a thorough-going empirical realist, would not have recognized China’s profound exceptionalism.  

The Recurring Refrain: Consorting with Dictators 

In March 1975, Friedman spent two weeks in Chile; he met with dictator Augusto Pinochet exactly once, for forty-five minutes. Pinochet said little but asked Friedman to put his recommendations in writing. They had met at 5:30 p.m., the end of a long day, so it’s not surprising that Pinochet would ask such a thing.  

Friedman did so about a month later, in an eight-point letter recommending sharp cuts to money-supply growth, spending cuts, and trade liberalization. It was the same style of advice he gave to many other governments. In fact, it was the exact same advice he gave on other trips at about the same time to the governments of Taiwan, Israel, Japan, West Germany, the U.K., Iceland, Estonia, about twenty other nations, and, importantly, China.  

The Chile visit was a few weeks in 1975; the China engagement was deeper and longer, including two extended trips (1980, 1988) and a personal two-hour meeting with Zhao Ziyang in the Great Hall of the People. Yet “Friedman and Pinochet” is a stock phrase, while “Friedman and Zhao Ziyang” is not really a thing.  

One must ask, though: which was the more authoritarian, murderous, repressive regime? If China was your answer, you are correct. Friedman was an enthusiastic proponent of the market order and honestly believed that it was better to live in a prosperous dictatorship than in a poor one. If either China’s or Chile’s dictators had asked about political freedom, Friedman would have advocated for individual rights and liberty. But that subject was not on the table. Instead, Friedman advised the Chinese, exactly as he had all the other nations he visited, on how to open their economy and increase commercial activity.  

There is one more twist worth mentioning on this final point. It is true that because Chile adopted the recommendations of “los Chicagos,” especially Arnold Harberger, it became by far South America’s wealthiest large economy. They have universal health care and a pension system that provides a more robust social safety net than any of their neighbors, and the comparison is not close. That is because they immediately adopted Friedman’s recommendations for reforming their economy. 

But China has also become wealthy. The open market resulted in an enormous increase in China’s prosperity. That is because China adopted, though belatedly, Friedman’s economic reform recommendations. 

Friedman’s economic model has worked everywhere it has been tried. The idea that this history of consistent success is now outdated is at odds with both history and logic." 

The self-defeating trade policy affecting memory chips

By DJ Hatch of CEI. Excerpt:

"Federal policy from the Biden administration’s CHIPS and Science Act to the current Trump administration’s trade policy demonstrates an overarching desire to reshore American semiconductor manufacturing. Putting aside any merits this form of industrial policy may have, successive presidential administrations have made clear their intentions to build upon and expand the productive and manufacturing capabilities of the US semiconductor industry. Unfortunately, the current administration’s trade policy undermines this goal.

Much of the relevant tariff regime relies on Section 232 of the Trade Expansion Act of 1962, which authorizes the Commerce Department to investigate whether imports of a given product threaten national security and empowers the president to impose tariffs in response. Crucially, Section 232 is an ongoing statutory authority rather than a one-time policy. The Trump administration has invoked it in separate proceedings covering different products, each with its own investigation and tariff schedule. Two of those proceedings have implications for American memory chip production, with one targeting semiconductors and the other targeting metals (such as steel, aluminum, and copper).

The rationale behind the semiconductor proclamation is what makes the tariffs on metals difficult to reconcile. The Commerce Department found that the United States manufactures only about 10 percent of the chips it needs and treated that dependence on foreign supply as a national security risk (the very risk reshoring is meant to address). Yet the same Section 232 authority, invoked against steel, aluminum, and copper, raises the cost of the domestic production that the semiconductor finding says the country needs.

Semiconductor fabrication plants (“fabs”) are particularly metal-intensive industrial structures, built with heavy steel frames, extensive copper wiring, and large cooling systems. Micron, the only major American manufacturer of memory chips, reports that its Idaho fab has a structural backbone framed with some 70,000 tons of steel. The recent Section 232 metals tariff raises the cost of that material across the board. As of April, those tariffs bite harder as the duties are now assessed on the full customs value of covered steel, aluminum, and copper articles and their derivatives, rather than only the value of the metal content. Thus, the tariff falls on fabricated components and finished structural inputs, not just raw metal. Even when sourcing domestic material, fab developers face inflated prices. Micron is building new DRAM fabs in Idaho and New York under precisely these conditions. If the goal is to expand domestic memory chip production, taxing the plants that produce those chips is counterproductive.

The tariff regime itself all but acknowledges the problem. The same proclamation carves out metal-intensive industrial and electrical-grid equipment, capping the combined duty on those goods at 15 percent through the end of 2027, well below the 50 and 25 percent rates that fall on other covered goods. It is hard to explain the existence of a special, lower tier for exactly the equipment a domestic buildout requires as anything other than a tacit admission that these tariffs raise the cost of building American industrial capacity.

Both the Biden and Trump administrations have made reshoring American chip production a national priority. But current trade policy runs counter to that goal. It raises the cost of building the fabs that reshoring requires, under the same statutory authority invoked to protect the industry (a contradiction the administration effectively concedes by capping the tariff on the equipment those fabs need). By taxing the construction needed to expand domestic memory chip production, this tariff regime delays the very supply increases needed to ease the shortage."

Don Boudreaux vs. Peter Navarro on transshipments

See Peter Navarro Is to Economics What Trofim Lysenko Is to Genetics by Don Boudreaux.

"This letter was sent ten days ago to the New York Times; it was not published there.

Editor:

Trump administration trade official Peter Navarro’s attempt to justify the White House’s crackdown on transshipments fails on several counts (“It Was a Great Scam While It Lasted,” August 13). First, these transshipments are the inevitable result of a trade regime – such as Trump’s – that, by rejecting the largely uniform tariffs that arise under a policy of most-favored-nation status, imposes wildly different tariff rates across different countries.

Second, while Navarro is correct that transshipping reduces U.S. customs revenues, he neglects to mention that these revenues are paid overwhelmingly by Americans. His complaint about transshipping, therefore, is really a complaint that transshippers are successfully easing Americans’ tax burden.

Third, Navarro is also correct – trivially so – that all motors, pumps, and other goods that Americans import are goods that Americans don’t produce. Yet he’s incorrect to imply that this reality indicts U.S. trade. Trade of course allows us Americans to acquire these goods at costs lower than we’d incur were we to produce these goods ourselves. But by releasing resources in the U.S. from the production of the goods that we import, trade also allows us to produce other goods that, were we to import less, we’d be unable to produce. Like all protectionists, Navarro is utterly blind to the production and jobs that are made possible in the domestic economy only by trade."

Taxing the Rich Can’t Close the Federal Deficit

By Adam N. Michel of Cato. 

"It’s not just the Democratic Socialists who believe in “taxing the hell out of millionaires.” The belief that Washington can finance itself by taxing a relatively small group of wealthy Americans has become increasingly mainstream and bipartisan. 

Senators Elizabeth Warren (D‑MA) and Bernie Moreno (R‑OH) propose removing the Social Security payroll tax cap, subjecting earnings above $184,500 to the 12.4 percent combined employer-employee payroll tax. Senators Chris Van Hollen (D‑MD) and Cory Booker (D‑NJ) each propose exempting more wages from income taxes at the bottom while raising taxes on higher earners. President Trump has pursued a similar strategy of expanding tax exemptions, while President Joe Biden and Vice President Kamala Harris both pledged not to raise taxes on anyone earning less than $400,000.

Each approach shifts more of the tax burden toward the top. One problem with this approach is that there are not enough high-income Americans to finance the current federal budget deficit, let alone fund additional spending or tax cuts. 

One simple way to illustrate the mathematical impossibility of raising taxes only on rich people is to ask an intentionally extreme question: How much income is actually left to tax at the top? Not as much as popular proposals usually assume. 

Using IRS data, the post below shows an upper bound for income-tax increases on high earners. In 2023, if the government had confiscated every dollar earned over half a million dollars, it still would have run a budget deficit. 

What’s left to tax?

Using IRS data from the 2023 tax year (the most recent available), we can illustrate the difficulty of raising a lot more revenue from a narrow segment of the population.

In 2023, taxpayers filed 161 million individual income tax returns, reporting $15.3 trillion in adjusted gross income (AGI). AGI includes wages, capital gains, personal business income, and other forms of income, minus adjustments for things like student loan interest and retirement contributions. 

The IRS reports this information by different income groups, separating taxpayers into buckets with AGIs above and below $200,000, $500,000, $1 million, and $10 million, among others. Table 1 shows the total AGI and income taxes paid, including federal taxes and an estimate of state-level taxes, by each group. 

 

In 2023, taxpayers earning over $1 million reported $2.5 trillion in total AGI and paid $747 billion in federal and state income taxes. To estimate state income taxes, we apply average rates by income group from the Institute on Taxation and Economic Policy. The 799,094 tax returns in the $1 million+ group accounted for 0.5 percent of all returns and paid an average federal and state income tax rate of 29.5 percent.

In theory, Congress could devise a way to reach every dollar of untaxed millionaire income. But most proposals to raise taxes on high earners instead start by increasing marginal tax rates. Under a graduated income tax, a higher rate imposed above $1 million applies only to income exceeding that threshold, which exempts the taxpayer’s first $1 million from additional taxes.

The IRS data show that for the $1‑million-and-above group, there is $1.7 trillion in AGI above the threshold. Applying the group’s average tax rate implies they have already paid roughly $512 billion in taxes on their above-threshold income. That leaves $1.2 trillion after taxes. 

If Congress confiscated every one of the remaining $1.2 trillion after-tax dollars earned above $1 million, the resulting revenue would have fallen nearly $600 billion short of covering the cost of the 2023 $1.8 trillion calendar-year deficit. Dropping the taxable income threshold to $500,000 would also have fallen just short of covering the same year’s deficit. And these estimates make the wildly unrealistic assumption that a 100 percent marginal tax rate would have no behavioral or other economic effects. 

Figure 1 extends the improbable assumption over 10 years, assuming that high-income Americans would continue to earn income when facing 100 percent income tax rates. It adjusts the 2023 data by projected income and household growth to show untaxed income over the next 10 years. Confiscating all income earned over $1 million would cover only about 80 percent of the Congressional Budget Office’s (CBO) projected $24.4 trillion federal deficit over the same period. 

 

The Committee for a Responsible Federal Budget produces a more realistic projection of future deficits that assumes Congress extends many expiring tax and spending programs (which the CBO is required to assume are not renewed). At the more likely deficit figure of $29.4 trillion, even lowering the income threshold to $500,000 does not cover the next decade’s budget shortfall.

Lowering the taxable income threshold further to $200,000 expands the pool of untaxed income, but it does not make confiscatory tax rates economically plausible. 

Common sense and economic incentives make clear that Congress cannot raise marginal income tax rates anywhere close to 100 percent and expect taxpayers to continue earning and reporting the same income. A recent report by economists at the Joint Committee on Taxation estimates that combined state and federal income tax rates are already near their revenue-maximizing level. Raising top income tax rates further would result in revenue gains of about 0.1 percent of GDP, equivalent to at most $400 billion over the next decade. 

Conclusion 

Taxing incomes at 100 percent marginal rates is not a realistic policy proposal. Taxes significantly higher than what we have today would radically change how much people work, invest, and realize as income, as well as how much income they report to the government. The point of this exercise is to show that “just tax the rich” proposals fail, even under arithmetic that is the most favorable possible."

1 in 5 Americans Still Need Government Permission To Work

Occupational licensing raises costs and limits mobility without improving safety.

By J.D. Tuccille of Reason. 

"Last week, an article in Governing noted that despite years of reform efforts, roughly one in five jobs in the United States requires government permission in the form of occupational licensing. In a world that is more potentially mobile and flexible than ever, licensing requirements can keep people fixed in place or pose high barriers to entering new trades and professions. The Archbridge Institute's 2026 State Occupational Licensing Index reveals which states are most burdensome, and which make it relatively easy to earn a living.

22 Percent of Americans Need Licenses To Work

"Too often, the occupational licensure laws on the books do not reflect the world we actually live in," Alanna Wilson cautioned in Governing. "American workers wishing to launch a career, build their own business or re-enter the workforce in one of 102 lower-income occupations must on average give up nearly a year to education and on-the-job training, pass at least one exam and pay nearly $300 in fees."

No Rhyme or Reason to Licensing Requirements

According to Archbridge's report, the five most burdensome states in the union are Oregon, Texas, Tennessee, Arkansas, and New Jersey. The five states that put the fewest bureaucratic hurdles in the way of work are Missouri, Kansas, New York, Indiana, and Colorado.

As the report points out, medical doctors are licensed in every state. Nail technicians, for unclear reasons, also need licenses in every state. Most regulated jobs, like the electricians and nutritionists mentioned above, are licensed in some states but not others. Master gas fitters face barriers of some kind in 44 states, including licensing requirements in 11. Dental radiographers face similar burdens in 33 states. Security guards are licensed in half of states, as are fuel piping contractors. Medical assistants and animal breeders are licensed in 10 states. Mold remediation workers need licenses only in Texas.

In other words, while some heavily regulated jobs arguably pose safety concerns, others that might raise similar issues are intermittently licensed. That offers an opportunity to assess whether licensing offers benefits.

---

'Occupational Licensing Does Not Improve Public Health'

"A broad ideological spectrum of analysts and economists mostly agrees—occupational licensing does not improve public health in any scientifically rigorous or statistically significant manner," Spence Purnell, then of the Reason Foundation, which publishes Reason, wrote in 2018. He added that a study of dental hygienists found "the stricter the licensing requirements, the poorer the health outcomes. The study found this is because the more stringent regulations led to higher prices, which led to low income-earners foregoing routine dental work, which eventually led to more oral diseases, more pain and more costs to the patients."

Rather than safety worries, the 2025 Minneapolis Fed report observed that state licensing requirements seem driven by the policies of neighboring states, lobbying by professional associations for barriers to entry, and competition for jobs from immigrants. "Licensing disproportionately reduces employment of foreign-born workers," researchers found.

Instead of benefits, licensing requirements raise costs to consumers by limiting competition: "Shifting an occupation from unlicensed to licensed reduces employment in the licensed occupation by 29 percent," according to Chris Edwards of the Cato Institute. "Such barriers also discourage hiring across state lines, and thus limit workers' interstate mobility."

While, as the Minneapolis Fed cautioned, eliminating licensing requirements is very rare, states have moved to recognize other states' licenses. "As of 2026, 28 states have adopted some form of universal licensing recognition—the same as last year," according to Archbridge. "Universal" recognition isn't always universal—some states specify that the licenses they recognize be subject to "substantially similar" rules as those issued locally, while others recognize only the licenses of state residents. But 11 states earn Archbridge's gold medal for universally recognizing occupational licenses without restrictions.

Universal license recognition isn't an entirely satisfactory substitute for eliminating requirements that people get government permission to work.

But eliminating licensing would be a difficult ask of lawmakers who sold the public on the idea that pointless and expensive burdens improve public safety. In that sense, universal recognition is a positive reform to regulations that hurdles in the way of jobs of prosperity."

Wealth Tax 2.0

By John H. Cochrane. Excerpts:

"If you invest an extra dollar today, how much extra do you get in a year? A 5% wealth tax drags down the rate of return by 5 percentage points. If you earn 10% on your investments, but then pay a 5% wealth tax, you only get a 5% after-tax rate of return. Starting from a 10% return, a 5% wealth tax is the same as a 50% tax on interest, dividends, and capital gains."

"The wealth tax applies on top of corporate taxes, property taxes, and taxes on dividends, interest, and capital gains. Inflation acts as another wealth tax, running 3% a year now. My guesstimate is that the government takes all the return and more."

"Should they (billionaires)  bet the farm on a new venture, investing time and effort as well as their money? Should young Elon Musk take his $175 million PayPal payout and retire on it, or plow it all into electric cars and rockets? We often think of saving vs. consumption here, but I think we underestimate the disincentive to take risk and invest effort that comes from progressive taxation. If the government taxes away the upside to investing, people take less risk." 

"Billionaires do not have a pot of gold that can be costlessly handed out. Billionaires’ wealth stays re-invested in companies. Redirecting their wealth to social spending lowers national investment and raises national consumption, dollar for dollar. That’s not even hidden; it’s the point. But less investment mechanically means less capital for the future, fewer businesses, less productivity, lower wages."

"less investment also drives up interest rates as people with profitable ventures look for investors. Companies could finance investment with foreign money, but that raises the trade deficit"

"Structuring businesses to avoid taxes rather than generate profit might be the most insidious effect of high taxation."

"We have a wealth tax, the estate tax. It tries to charge 40% of wealth once in a generation, or about 1% a year. (You pay double if you pass it to grandkids, so really about once every 30 years.) The estate tax attracts a beehive of perfectly legal avoidance. (Avoidance, not evasion. “Tough enforcement” and audits do nothing here.) Though the estate tax applies above a lowly $11 million, the CBO reports that it yields only $18 billion, or 0.1 percent of GDP. A recent study—by wealth tax backers—reports that the estate tax collects only three to four hundredths of a percent (0.03%–0.04%) annually of the Forbes 400 wealth, not 1% or so."

[the bill] includes “a $3,000 direct payment to every man, woman and child living in a household making $150,000 or less.” $1.1 trillion for Medicaid and Obamacare subsidies. Free dental, vision and hearing. $856 billion of government-provided homes to “abolish homelessness.” A childcare entitlement. A minimum salary for teachers. And so on. This is proudly a bill to turn investment into consumption."

"Free market wealth did not install Putin, nor did it create US crony capitalism under the regulatory state."

"What’s the right question? There is only one question — long run growth. Redistributing Rockefeller’s wealth would not have made your family better off. We’re all immensely better off because of long-run growth. Even if your concern is entirely at the lower end of the economic spectrum, long-run growth is the question. Ask of any policy, what does this do to long-run growth? For the wealth tax, not much!"  

Did UBI make people happier? (only in the short run)

From Tyler Cowen.

"Eh, only in the short run:

We study the causal impacts of income on a rich array of employment outcomes, leveraging an experiment in which 1,000 low-income individuals were randomized into receiving $1,000 per month unconditionally for three years, with a control group of 2,000 participants receiving $50/month. We gather detailed survey data, administrative records, and data from a mobile phone app. The transfer caused total individual income excluding the transfers to fall by about $1,900/year relative to the control group and a 4.2 percentage point decrease in labor market participation. Participants reduced their work hours as a result of the transfers by 1-2 hours/week and participants’ partners reduced their work hours by a comparable amount. Among other categories of time use, the greatest increase generated by the transfer was in time spent on leisure. Despite asking detailed questions about amenities, we find no impact on quality of employment, and our confidence intervals can rule out even small improvements. Treated participants broadly increase expenditures, led by spending on non-durable goods and services, with smaller increases in spending on durable goods and human capital. We observe no significant effects on degree attainment, though the magnitudes of the estimated effects generally appear larger among younger participants. Measures of subjective well-being are higher among treated participants in the first year of the transfers but then revert to control group levels. Overall, our results suggest a moderate labor supply effect that does not appear offset by other productive activities.

That is from the QJE by Eva Vivalt, Elizabeth Rhodes, Alexander Bartik, David Broockman, Patrick Krause, and Sarah Miller. Via Matt Yglesias."