Milton Friedman

Milton Friedman

(1912-2006)

Milton Friedman is the twentieth century's most prominent economist advocate of free markets. He was born in 1912 to Jewish immigrants in New York City. He attended Rutgers University, where he received his B.A. at the age of twenty, then went on to earn his M.A. from the University of Chicago in 1933 and his Ph.D. from Columbia University in 1946. In 1951 Friedman won the John Bates Clark Medal honoring economists under age forty for outstanding achievement. He had served as an adviser to President Nixon and was president of the American Economic Association in 1967. In 1976 he won the Nobel Prize in Economics. After retiring from the University of Chicago in 1977, Friedman was a senior research fellow at the Hoover Institution at Stanford University.

In his 1957 book A Monetary History of the United States, Friedman contended that the Great Depression was the result of ill-conceived government policies, and that a free market would have eventually corrected itself. Friedman defended capitalism on the grounds that capitalism sparked entrepreneurship, and he pointed out that entrepreneurs innovate, not just by figuring out how to use inventions, but also by introducing new means of production, new products, and new forms of organization. Innovation by the entrepreneur, argued Friedman, led to gales of "creative destruction" as innovations caused old inventories, ideas, technologies, skills, and equipment to become obsolete. This creative destruction, he believed, caused both the highs and the lows of a self-correcting business cycle: the misery and unemployment of depressions as well as tremendous progress and improved standards of living for everyone.

Friedman liberated the study of market economics from its ivory tower and brought it down to earth in Capitalism and Freedom, published in 1962, in which he contended that  most good things in the United States and the world came from the free market, not the government.  Government intervention often has an effect opposite of that intended and the government, despite its good intentions, should stay out of areas where it does not need to be. In Free to Choose, the best-selling nonfiction book of 1980, Friedman argued that:
Milton Friedman - Man of the Year
  1. Economic freedom promotes political freedom. If the means of production are under the control of the government, it is nearly impossible for real dissent and exchange of ideas to exist.
  2. The only role of the government in a liberal society is to enforce law and order and protect property rights.  The doctrine of "social responsibility", that corporations should care about the community and not just profit, is highly subversive to the capitalist system and can only lead towards totalitarianism.
  3. Direct and indirect government intervention in the market should be stopped as government policies are limited by the rational ignorance of voters, the special interest effect from lobbyists, and the short-sightedness of politicians.
  4. Taxation and spending by the government make the economy less, not more stable.
  5. It would be far more to have a uniform flat tax with no deductions than a progressive income tax.  The progressive income tax was introduced in order to redistribute income to make things more fair, but, in fact, the rich take advantage of numerous loopholes which nullify the redistributive effects.
  6. Though well-intentioned, many social welfare programs don't actually help the poor; rather they reward poverty and create a 'poverty trap' that keeps families and individuals from investing in their own human capital.
  7. Everyone, in a democracy, needs a basic education for citizenship, but free public education provided by the government is foolish.  Anything that is perceived as free is undervalued and abused.  Vouchers which students may use for education at a school--public or private--of their choice would promote better, more efficient, and more innovative schools.
  8. Right-to-work laws should be abolished, and government should not make or enforce fair employment laws such as the Civil Rights Act of 1964.   These laws are unnecessary given the impersonal nature of market transactions in a capitalist society as it is very difficult and more important costs money to discriminate on anything other than skills and income. These regulations also inhibit the freedom of employers to hire someone based on specific qualifications.
  9. There is no justification for licensing ; it results in inferior products and cartels.  The biggest advocates for licenses in an industry are, usually, the people in the industry, wishing to keep out potential competitors.
  10. The only true solution to the problem of global conflict and poverty is a floating exchange rate system and the end of all currency controls and trade barriers.

Friedman's ideas had a tremendous impact on the resurgence of capitalism in the United States under Ronald Reagan, and the views were obvious in Reagan's First Inaugural Address.  No other economist since Marx has reshaped the way we think about and use economics as much as Milton Friedman. By his scope of topics and magnitude of ideas, Friedman has not only laid a cornerstone of contemporary economic thought but has also built an entire construction.

Selected Works

Capitalism and Freedom. 1962.

Free to Choose. 1980.

A Monetary History of the United States, 1867-1960. 1963.