Here, he writes,

Competition puts capitalists’ different motives, like their different ideas, to the acid test of consumer satisfaction. This tends to give consumers what they want–or at least what they think they want–and it diversifies a capitalist society’s investment portfolio. Capitalism thus mitigates both human greed and human fallibility.

Now consider again the alternatives liberals tend to favor–either the regulation of capitalism or its replacement by something more democratic, like an idealized socialism. Since regulators’ or citizens’ ideas would then be imposed on the whole economy at once, they could not be put to the competitive test–any more than the conflicting arguments of debaters, the conflicting promises of politicians, or the conflicting forecasts of budget analysts can be tested. If the citizens’ or the regulators’ ideas happen to be good ones, we all gain; if they happen to be bad, we all lose.

The point is that government regulation, by reducing diversity, actually makes markets less robust. This is counterintuitive. Instead, the conventional wisdom is that regulation makes markets more robust.

Next, in this blog post, he writes,

if one actually reads accounts of the decision making in the years leading up to the crisis, such as Gillian Tett’s Fool’s Gold and William D. Cohan’s House of Cards, no decision makers factored bailouts into their calculations. Why? Because they didn’t think they were doing anything particularly risky (an ignorance-based human error), so they didn’t even consider the chances of being bailed out.

Friedman steps into the minefield of what Austrian economics is or is not about–good luck to him on that. For me, the most important point is that it is wrong to boil down the causes of the financial crisis to incentives, without taking into account ignorance and error.