I have seen both teachers and books describe neoliberalism as an ideology in opposition to government intervention in the economy. Its adherents tend to be vilified as zealous believers in the invisible hand and this definition of neoliberalism is then used in a straw man argument, with neoliberalism clearly shown as false due to the many examples of how the invisible hand does not always guide private interests in favor of the common good.

Any just definition of “neoliberalism” must be compatible with Milton Friedman’s ideas, since, as far as I can tell, he has been the one most widely described as a neoliberal, even though he did not identify as one (as few if any “neoliberals” do). Thus, we should probably consider what he had to say about government intervention in the economy:

“[T]here are only three major grounds on which government intervention is to be justified. One is “natural monopoly” or similar market imperfection which makes effective competition (and therefore thoroughly voluntary exchange) impossible. A second is the existence of substantial “neighborhood effects,” i.e., the action of one individual imposes significant costs on other individuals for which it is not feasible to make him compensate them or yields significant gains to them for which it is not feasible to make them compensate him–circumstances that again make voluntary exchange impossible. The third derives from an ambiguity in the ultimate objective rather than from the difficulty of achieving it by voluntary exchange, namely, paternalistic concern for children and other irresponsible individuals.”

-Milton Friedman, “The Role of Government in Education.”<http://www.schoolchoices.org/roo/fried1.htm>

Even if we assume that these are the only conditions under which government intervention is to be justified, it is possible to allow a great variety of interventions, including tobacco taxes (the “paternal concern” clause), radical environmental laws (due to neighborhood effects), public companies (in cases of natural monopolies) and so forth — all while respecting the limits of government intervention as stated by the best known “neoliberal”. Thus, it seems ridiculous to claim that neoliberals are opposed to government intervention in the economy.

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