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Milton Friedman (July 31 1912 – November 16 2006) was an American Nobel Laureate economist and public intellectual.

An advocate of economic freedom and personal liberty, Friedman made major contributions to the fields of macroeconomics, microeconomics, economic history and statistics. In 1976, he was awarded the Nobel Prize in Economics for his achievements in the fields of consumption analysis, monetary history and theory, and for his demonstration of the complexity of stabilization policy.

According to The Economist, Friedman "was the most influential economist of the second half of the 20th century…possibly of all of it."

Alan Greenspan stated "There are very few people over the generations who have ideas that are sufficiently original to materially alter the direction of civilization. Milton is one of those very few people."

In his 1962 book Capitalism and Freedom, Friedman advocated minimizing the role of government in a free market as a means of creating political and social freedom. In his 1980 television series Free to Choose Friedman explained how the free market works, emphasizing that its principles have been shown to solve social and political problems that other systems have failed to address adequately. His books and columns for Newsweek were widely read and even circulated underground behind the Iron Curtain. 

Earning a Ph.D in economics from Columbia University in 1946, Friedman originally was a Keynesian supporter of the New Deal and advocate of high taxes. Seeing the effects of those policies, he moved away from the idea of central control in the 1950s, along with his close friend George Stigler. Before the 1970s their advocacy of free markets was a minority view among economists. His political philosophy, which Friedman himself considered classically liberal and consequentialist libertarian, stressed the advantages of the marketplace and the disadvantages of government intervention, strongly influencing the outlook of American conservatives and libertarians. He adamantly argued that if capitalism, or economic freedom, is introduced into countries governed by totalitarian regimes, political freedom would tend to result. He lived to see his laissez-faire ideas embraced by the mainstream, especially during the 1980s, a watershed decade for the acceptance of Friedman’s ideas. His views of monetary policy, taxation, privatization and deregulation informed the policy of governments around the globe, especially the administrations of Ronald Reagan in the U.S. and Margaret Thatcher in Britain.

Friedman’s political positions were buttressed by a large number of technical articles covering a wide range of topics in economics and economic history, which gained the grudging respect of specialists by the early 1960s. His intellectual leadership of the Chicago School, which came to dominate theoretical economics by the 1970s, further strengthened his stature. 

 

Milton Friedman was born on July 31, 1912 in Brooklyn, New York to a working family of Jewish immigrants from Beregszász in Hungary (now Berehove, part of Ukraine). He was the first son and youngest child of Sára Eszter Landau and Jenő Saul Friedman, both of whom worked as dry goods merchants. Shortly after Milton’s birth, the family relocated to Rahway, New Jersey. A gifted student, Friedman graduated from Rahway High School in 1928, shortly before his 16th birthday.

Friedman was awarded a competitive scholarship to Rutgers University in New Jersey, graduating with a Bachelor of Arts in 1932. He specialized in Mathematics, and initially intended to become an actuary but found the exams cumbersome and quit. During his time at Rutgers, Friedman fell under the influence of two economics professors, Arthur F. Burns and Homer Jones. At the height of the Great Depression, they convinced him that the study of Economics could help to solve the ongoing economic difficulties, and he ended up graduating with the equivalent of a double major in Mathematics and Economics.

Upon his graduation from Rutgers, Friedman turned down an offer to study Applied Mathematics at Brown University, instead accepting a scholarship to study Economics at the University of Chicago (M.A., 1933). During this year in Chicago, Friedman’s intellectual development was strongly influenced by Jacob Viner, Frank Knight, and Henry Simons. It was also during this time at Chicago that Friedman met his future wife, Rose Director (sister of prominent law professor Aaron Director).

After completing his master’s degree, Friedman spent the next academic year (1933-34) on a postgraduate fellowship at Columbia University, where he studied statistics with renowned statistician and economist Harold Hotelling.

He was back in Chicago for 1934-35, spending the year working as a research assistant for Henry Schultz, who was then working on his Theory and Measurement of Demand. During this year, Friedman formed what would prove to be lifelong friendships with George Stigler and W. Allen Wallis.

Friedman was unable to find academic employment, so in 1935, he followed his friend W. Allen Wallis to Washington, D.C., where Roosevelt’s New Deal was "a lifesaver" for many young economists.

At this stage, Friedman said that he and his wife "regarded [the job-creation programs such as the WPA, CCC, and PWA] appropriate responses to the critical situation," but not "the price- and wage-fixing measures of the National Recovery Administration and the Agricultural Adjustment Administration." Foreshadowing his later ideas, he saw price controls as interfering with an essential signaling mechanism to help resources go where they are most valued. Indeed, Friedman later concluded that all government intervention associated with the New Deal was "the wrong cure for the wrong disease," arguing that the money supply should simply have been expanded, instead of contracted. In Monetary History of the United States he argues that the Great Depression was caused by monetary contraction, which was consequence of poor policy making and continuous crisis in banking system.

In 1935, he began work at the National Resources Committee which was then working on a large consumer budget survey. Ideas from this project later became a part of his Theory of the Consumption Function.

Friedman moved to the National Bureau of Economic Research in fall 1937 to assist Simon Kuznets in his work on professional income. This work led to their jointly-authored Incomes from Independent Professional Practice, which introduced the concepts of permanent and transitory income, which was a major component of the Permanent Income Hypothesis which Friedman worked out in greater detail in the 1950s. The book hypothesizes that professional licensing artificially restricts the supply of services and raises prices. In 1945, Friedman submitted this book (completed in 1940) to Columbia University as his doctoral dissertation.

In 1940, Friedman was appointed an assistant professor teaching Economics at the University of Wisconsin-Madison, but encountered anti-Semitism in the Economics department and decided to return to government service.

Friedman spent 1941-1943 working on wartime tax policy for the Federal Government, as an advisor to senior officials of the United States Department of the Treasury. As a Treasury spokesman in 1942 he advocated a Keynesian policy of taxation, and during this time he helped to invent the payroll withholding tax system.

In his autobiography, he comments on "how thoroughly Keynesian I was then." As Friedman grew older he reversed himself; in 2006 he observed, "You know, it’s a mystery as to why people think Roosevelt’s policies pulled us out of the Depression. The problem was that you had unemployed machines and unemployed people. How do you get them together by forming industrial cartels and keeping prices and wages up?"

In 1943, Friedman joined the Division of War Research at Columbia University (headed by W. Allen Wallis and Henry Hotelling), where he spent the rest of the war years working as a mathematical statistician, focusing on problems of weapons design, military tactics, and metallurgical experiments.

In 1945, Friedman submitted Incomes from Independent Professional Practice (co-authored with Kuznets and completed in 1940) to Columbia, which subsequently awarded him a Ph.D. in 1946.

Milton and Rose Friedman’s son, David Director Friedman, was born during their time at Columbia, on February 2, 1945.

Friedman spent the 1945-46 academic year teaching at the University of Minnesota (where his friend George Stigler was employed)

In 1946, Friedman accepted an offer to teach economic theory at the University of Chicago (a position opened by Jacob Viner‘s departure to Princeton University). Friedman would stay at the University of Chicago for the next thirty years. There he helped build a close-knit intellectual community that produced a number of Nobel Prize winners, known collectively as the Chicago School of Economics.

At the same time he moved to the University of Chicago, Arthur Burns, who was then the head of the National Bureau of Economic Research, asked Friedman to rejoin the Bureau’s staff. He accepted the invitation, and assumed responsibility for the Bureau’s inquiry into the role of money in the business cycle. As a result, he founded the "Workshop in Money and Banking" (the "Chicago Workshop"), which led a revival in monetary studies. During the latter half of the 1940s, Friedman began a collaboration with Anna Schwartz, an economic historian at the Bureau, which would ultimately result in the 1963 publication of a book co-authored by Friedman and Schwartz, A Monetary History of the United States, 1867-1960.

Friedman spent the latter part of 1950 in Paris, where he assisted the US administrators of the Marshall Plan in formulating their response to the Schuman Declaration. This led Friedman to the study of floating exchange rates which resulted in his The Case for Flexible Exchange Rates.

Friedman spent the 1954-55 academic year as a Visiting Fellow at Gonville and Caius College, Cambridge. At the time, the Cambridge economics faculty was deeply divided into a Keynesian majority (including Joan Robinson and Richard Kahn) and a virulently anti-Keynesian minority (headed by Dennis Robertson). Friedman speculates that he was invited to the fellowship because his extreme laissez-faire views were unacceptable to both of the Cambridge factions, a fact which highlights how far out of the mainstream Friedman was in the 1950s.

In 1962, in his first major salvo as a public intellectual, Friedman published Capitalism and Freedom, a major defense of capitalism and critique of the New Deal and the emerging welfare state. The book would eventually sell half a million copies.

Friedman served as an economic adviser to Barry Goldwater during his failed 1964 presidential campaign. Like Friedman, Goldwater had come to reject the New Deal and called for a return to economic freedom. This position was extreme in 1964, but gained momentum over the next two decades, finally culminating in the presidency of Ronald Reagan.

In 1966, Friedman began publishing a tri-weekly column for Newsweek magazine, giving his ideas wider public dissemination. (He would continue writing this column until 1983.)

Friedman became one of Richard Nixon‘s economic advisors in the late 1960s. In 1968, he served on Nixon’s committee of economic advisers. Friedman later remarked that Nixon did not always follow his advice. For example Nixon imposed wage and price controls with disastrous results for the economy. In 1969, Nixon appointed him to the Advisory Commission on an All-Volunteer Force (the "Gates Commission"), on which Friedman loudly advocated against the draft and in favor of a voluntary military, a result which was achieved in the US in 1973.

In 1975, Friedman was a keynote speaker at a high-profile economic conference in Santiago, Chile where he, along with other members of the University of Chicago paved the way for economic freedom. Friedman subsequently wrote in a published letter that his visit to Chile and meeting Pinochet provoked criticism from the left, but no such criticism was heard when he met the top communist Chinese leadership in Beijing.

Milton Friedman was not very outspoken on how he viewed the cosmos, and generally only discussed the concept of God when asked. He was known to have told others that he did not ‘believe in’ God, but thought it was impossible to know whether he existed or not, so he considered himself technically agnostic. He claimed that religious views had little to do with economics, but much more with values. He said he could have good values without believing in such a deity.

In 1976, Friedman won the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel "for his achievements in the fields of consumption analysis, monetary history and theory and for his demonstration of the complexity of stabilization policy."

In 1977, at age 65, Friedman retired from the University of Chicago after teaching there for thirty years. He and his wife moved to San Francisco. From 1977 on, he was affiliated with the Hoover Institution at Stanford University.

In 1977, Friedman was approached by the Palmer R. Chitester Fund and asked to create a television program presenting his economic and social philosophy. The Friedmans worked on this project for the next three years, and in 1980, the ten-part series, entitled Free to Choose, aired on PBS. The companion book to the series (co-authored by Milton and Rose Friedman), also entitled Free to Choose, was the bestselling nonfiction book of 1980 and has since been translated into 14 foreign languages.

Friedman served as an unofficial adviser to Ronald Reagan during his 1980 presidential campaign, and then served on the President’s Economic Policy Advisory Board for the rest of the Reagan Administration. In 1988, he received the National Medal of Science and Reagan honored him with the Presidential Medal of Freedom. Milton Friedman is today known as one of the most influential economists of the 20th century.

Throughout the 1980s and 1990s, Friedman continued to write op-eds and appear in the media. He made several trips to Eastern Europe and to China.

A proponent of school vouchers since the 1950s, in 1996, the Friedmans established the Milton and Rose D. Friedman Foundation to advocate for school vouchers.

The Friedmans’ memoirs, Two Lucky People by Milton and Rose Friedman, were published in 1998.

In Friedman’s last email interview in 2006, he said that the greatest threat to the world’s economy is "Islam-fascism, with terrorism as its weapon."

Milton Friedman died at the age of 94 in San Francisco on November 16 2006 of heart failure. Friedman’s son is the philosopher and economist David D. Friedman.

 

Friedman was best known for reviving interest in the money supply as a determinant of the nominal value of output, that is, the quantity theory of money. Monetarism is the set of views associated with modern quantity theory. Its origins can be traced back to the 16th century School of Salamanca or even further but Friedman’s contribution is largely responsible for its modern formulation. He co-authored, with Anna Schwartz, A Monetary History of the United States (1963), which sought to examine the role of the money supply and economic activity in U.S. history. A striking conclusion of their research was one regarding the role of money supply fluctuations as contributing to economic fluctuations. Several regression studies with David Meiselman in the 1960s suggested the primacy of the money supply over investment and government spending in determining consumption and output. These challenged a prevailing but largely untested view on their relative importance. Friedman’s empirical research and some theory supported the conclusion that the short-run effect of a change in the money supply was primarily on output but that the longer-run effect was primarily on the price level.

Friedman was the leading proponent of the monetarist school of economic thought. He maintained that there is a close and stable link between inflation and the money supply, mainly that the phenomenon of inflation is to be regulated by controlling the amount of money poured into the national economy by the Federal Reserve Bank; he rejected the use of fiscal policy as a tool of demand management; and he held that the government’s role in the guidance of the economy should be severely restricted. Friedman wrote extensively on the Great Depression, which he called the Great Contraction, arguing that it had been caused by an ordinary financial shock whose duration and seriousness were greatly increased by the subsequent contraction of the money supply caused by the misguided policies of the directors of the Federal Reserve. "The Fed was largely responsible for converting what might have been a garden-variety recession, although perhaps a fairly severe one, into a major catastrophe. Instead of using its powers to offset the depression, it presided over a decline in the quantity of money by one-third from 1929 to 1933…. Far from the depression being a failure of the free-enterprise system, it was a tragic failure of government." Friedman also argued for the cessation of government intervention in currency markets, thereby spawning an enormous literature on the subject, as well as promoting the practice of freely floating exchange rates. Friedman’s macroeconomic theories were soon displaced. His close friend George Stigler explained, "As is customary in science, he did not win a full victory, in part because research was directed along different lines by the theory of rational expectations, a newer approach developed by Robert Lucas, also at the University of Chicago."

Friedman was also known for his work on the consumption function, the permanent income hypothesis (1957), which Friedman himself referred to as his best scientific work. Other important contributions include his critique of the Phillips curve and the concept of the natural rate of unemployment (1968). Each of these has implications for the effect of monetary and fiscal policy on output in the short run and the long run.

Friedman’s essay "The Methodology of Positive Economics" (1953) set the epistemological course for his own subsequent research and to a degree that of the Chicago School of Economics. There he argued that economics as science should be free of value judgments for it to be objective. Moreover, a useful economic theory should be judged not by its descriptive realism (hair color, etc.) but by its simplicity and fruitfulness as an engine of prediction.

During World War II, Milton Friedman and others worked to develop a more efficient sampling technique known as sequential sampling "which became, in the words of The New Palgrave Dictionary of Economics, ‘the standard analysis of quality control inspection…Like many of Friedman’s contributions, in retrospect it seems remarkably simple and obvious to apply basic economic ideas to quality control; that however is a measure of his genius.’"

Friedman also supported various libertarian policies such as decriminalization of drugs and prostitution. During the Nixon administration he headed the committee to explore a move towards a paid/volunteer armed force. He would later state that his role in eliminating the draft was his proudest accomplishment. Friedman did, however, believe a nation could compel military training as a reserve in case of war time. He served as a member of President Reagan’s Economic Policy Advisory Board in 1981. In 1988, he received both the Presidential Medal of Freedom and the National Medal of Science. He said that he was a libertarian philosophically, but a member of the U.S. Republican Party for the sake of "expediency" ("I am a libertarian with a small ‘l’ and a Republican with a capital ‘R.’ And I am a Republican with a capital ‘R’ on grounds of expediency, not on principle.") But, he said, "I think the term classical liberal is also equally applicable. I don’t really care very much what I’m called. I’m much more interested in having people thinking about the ideas, rather than the person."

Friedman was supportive of the state provision of some public goods that the market is not seen as being able to provide. However, he saw the scope of such goods as being minimal. And, he argued that many of the services performed by government could be performed better by the private sector. Above all, if some public goods are provided by the state, he believed that they should not be a legal monopoly where private competition is prohibited. For, example, in response to the United States Post Office’s legal monopoly on mail, he said, "there is no way to justify our present public monopoly of the post office. It may be argued that the carrying of mail is a technical monopoly and that a government monopoly is the least of evils. Along these lines, one could perhaps justify a government post office, but not the present law, which makes it illegal for anybody else to carry the mail. If the delivery of mail is a technical monopoly, no one else will be able to succeed in competition with the government. If it is not, there is no reason why the government should be engaged in it. The only way to find out is to leave other people free to enter." In recent years, Friedman devoted much of his effort to promoting school vouchers that can be used to pay for tuition at both private and public schools, saying, "What is needed in America is a voucher of substantial size available to all students, and free of excessive regulations." His idea was that vouchers would allow private schools to compete with the public school monopoly.

Friedman made headlines by proposing a negative income tax to replace the existing welfare system and then opposing the bill to implement it because it merely supplemented the existing system rather than replace it. In 2005, Friedman and more than 500 other economists called for discussions regarding the economic benefits of the legalization of marijuana.

Michael Walker of the Fraser Institute and Friedman hosted a series of conferences from 1986 to 1994. The goal was to create a clear definition of Economic freedom and a method for measuring it. Eventually this resulted in the first report on worldwide economic freedom, Economic Freedom in the World. These annual report has since provided data for numerous peer-reviewed studies and has influenced policy in several nations. Friedman was in favor of abolishing the Federal Reserve System and replacing it with a mechanical system in nature that would keep the quantity of money going up at a steady rate, issed directly by the government and cutting back on fractional reserve banking powers for the banks.

Friedman allowed the Cato Institute to use his name for its Milton Friedman Prize for Advancing Liberty in 2001. The award is given out biannually. The Friedman Prize went to the late British economist Peter Bauer in 2002, Peruvian economist Hernando de Soto in 2004 and Mart Laar, former Estonian Prime Minister in 2006.

His wife Rose, sister of Aaron Director, with whom he founded the Milton and Rose D. Friedman Foundation for School Choice, served in the international selection committee. Friedman’s son, David D. Friedman, has carried on his tradition of arguing in favor of free markets, but to a further extreme, advocating anarcho-capitalism.

At a ceremony celebrating Friedman’s achievements, Alan Greenspan said "There are many Nobel Prize winners in economics, but few have achieved the mythical status of Milton Friedman."

According to Harry Girvetz and Kenneth Minogue, Friedman was co-responsible with Friedrich von Hayek for providing the intellectual foundations for the revival of classical liberalism in the 20th century.

29 January 2007 has been declared Milton Friedman Day by Arnold Schwarzenegger, Governor of California, to honor his life, works, and achievements, as well as his influence on modern economic and governmental policy.

 

Milton Friedman delivered a speech entitled "The Chinese Economic Reform" in 1988 to Chinese students and scholars in the San Francisco Bay Area. The taped speech was hand-delivered to Deng Xiaoping, the architect of the Chinese Economic Reform.

Friedman once said "if you want to see capitalism in action, go to Hong Kong". He believed the Hong Kong economy is the best example of a laissez-faire capitalism economy.

One month before his death, he wrote the article "Hong Kong Wrong – What would Cowperthwaite say?" in the Wall Street Journal, criticizing Donald Tsang, Chief Executive of Hong Kong, for abandoning "positive noninterventionism". Tsang later said he was merely changing the slogan to "big market, small government", where small government is defined as less than 20% of GDP. In a debate between Tsang and Alan Leong, rival for the position of Chief Executive, Leong brought up the topic and accused Tsang of angering Friedman to death.

Just before he died, he criticized Hong Kong’s kindergarten voucher system as "not properly structured".