The interesting and relevant part begins at about 3:28. Friedman and Robinson are discussing what areas to shrink the government. Robinson, having reviewed a list of items to cut, begins a thought experiment with the suggestion that if Friedman were made dictator for one day, he could then begin cutting these programs. It is a mere thought experiment but note this: Friedman jumps on it and argues from his principles.
The whole principle is that one should not be dictator for a day even if it is to do what one considers good and beneficial. Robinson is making a 'for the sake of argument' assumption and Friedman resists it precisely because the 'for the sake of argument' begins of a premise that would concede the whole argument itself.
Friedman notes: "if we can't persuade the public that it is desirable to do them [the cuts/shrinkage of government] we have no right to oppose them even if we had the power to do so." Friedman takes the moral position (and it has to do with how he has defined libertarianism from the beginning [see the first video]). For Friedman change comes through the agreement of the citizens--something that is not often cherished, even in our day.
But note how well and serious Friedman takes freedom and opposes the use of power--even to force people to do things that he considers in their ultimate best interests.
This is contrary to so much of the political thinking that extends from both the right and the left today. The common assumption is that power is evil--unless of course I am doing something that is ultimately for your good. Furthermore the assumption soon becomes, my exercise of power over you is good if I am doing what is best for you even if you don't necessarily agree with it.
So our own President will joke that he'd like to do more if Congress would just get out of his way (see here or Google it). Or the Governor of South Caroline can use (as supporters claim) hyperbole to suggest we just suspend Congressional elections to get some work done and then we can all go back to normal (see here for example). Let's assume that the defenders are right and this is all just some light jesting in order to express the frustration about the wheels of democracy being stalled (despite the fact that James Madison designed it that way so that even the democratic majority could not have ultimate tyranny).
Isn't this precisely the point: some will joke about abandoning ones principles in order to establish them. Friedman, on the other hand, isn't even willing to entertain a thought experiment even to accomplish 'the greater good'. In other words, what good is the greater good if you abandoned the principle of liberty to gain it.
This says something about the character of the respective persons in each of these examples. Would it be to far to suggest such jokes may indeed be a Freudian slip? Perhaps. But then we should at least be cautionary from history and current events--that despite claims history demonstrates that the curtailing of liberty in the short term has never been used to 'establish the greater good of further liberty' in the long run.
In his book, The New Road to Serfdom Daniel Hannan documents the disturbing trend of the European Union to impose itself on people when it could not get what it wanted (the adoption of the EU Constitution) by referendum vote by the people of a particular nation. Rule of Law quite literally subverted when it didn't accomplish what was deemed best. When Liberty and what is deemed the 'Greatest Good' come seemingly at odds with each other, you can tell a lot about a person when they are willing to through it under the bus in order to--ya' know--"establish it."
For some theology to it...
The theological argument roots freedom and the corruption of power in the dual concepts of mankind in the image of God and now post-fall the universality and total pervasiveness of sin in mankind. Therefore, human systems of interaction function best when power is diversified, distributed and dispersed rather than combined, collected and channeled.
For all the recent talk about "Christian dominionism" Christians hardly want to establish a theocracy today. Part of the reason has to do with largely Protestant concepts of liberty of conscience and the pervasiveness of sin. Furthermore, it is the power of the gospel that changes people not the power of the sword of the state. The Kingdom of God is not the same as the Kingdom of Man. Christians have long recognized that the Christian has a dual citizenship.
What I find ironic is that those who champion the Kingdom of God and how it challenges 'all the Caesars'--will then often champion patterns of social justice that want to channel power to 'the Caesar' with the assumption that if we just keep shouting like prophets suddenly Caesar will use his power for the best possible common good--aside from the historical arguments that empowerment rarely if ever leads to benevolence.
This is why when it comes to the church, government, the family, and the Kingdom of God--I think Kuyper's "sphere sovereignty" is more internally consistent. Citizens of the kingdom will go out and and live as salt and light in the world. Yet even Christians, who should be united in doctrinal creeds, are given by God's Word permissible freedom to disagree how to best govern the country. Our doctrines are governed by the Word of God but where Scripture is silent we shouldn't bind the conscience. That to me seems to be a right use of gospel power and an abhorrence of other types of power.