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The Friedmans made three powerful factual claims about how the world works –claims that seemed true or maybe true or at least arguably true at the time, but that now seem to be pretty clearly false. Their case for small-government libertarianism rested largely on those claims

The first claim was that macroeconomic distress is caused by the government, not by the unstable private market, or, rather, that the form of macroeconomic regulation required to produce economic stability is straightforward and easily achieved.

The second claim was that externalities were relatively small, or at least that they were better dealt with via contract and tort law than through government regulation, because the disadvantages of government regulation outweighed the harm done by those externalities that the legal system could not properly address.

The third, and most important, [..] the Friedmans argued that a minimal safety net for those whom bad luck or a lack of prudence had rendered destitute, and elimination of all legal barriers to equality of opportunity, would lead to the most equitable outcomes possible.
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