Milton Friedman has passed away at 94. I hope he has a good rest. Milton Friedman spent his whole life dealing with the role of government in relation to economics. In other words, Friedman’s ideas and writings may have influenced how many hamburgers you find yourself able to afford at any given time. How much of every dollar you work for do you get to keep? Do you even have a clue? How much money do you earn? Is that really how much you take home? Probably not. Government keeps a good chunk of that money, and uses it for various purposes, including muddling with interest rates and otherwise attempting to massage the economy. And that is what Milton Friedman spent his life thinking about. How money flows from point A to point B and back again, except in much more complex scenarios.
Born in New York City to a working-class family of Jewish immigrants from Beregszász, Hungary (today Berehove, Ukraine), Friedman grew up in Rahway, New Jersey, and was educated at Rutgers University (B.A., 1932) and at the University of Chicago (M.A., 1933). He was strongly influenced by Jacob Viner at Chicago, as well as Frank Knight and Henry Simons. He was unable to find academic employment, and working for the New Deal was "a lifesaver." He approved of "many early New Deal measures as appropriate responses to the critical situation", especially the job creating relief agencies WPA, CCC, and PWA. However, he disapproved of the NRA and AAA farm program because they fixed prices.[3] He taught briefly at the University of Wisconsin, but encountered anti-Semitism in the economics department and went back to government service. In 1941-43, Friedman worked for the federal government, becoming an advisor to high Treasury officials. As a spokesman for the U.S. Treasury in 1942 he advocated a Keynesian policy of taxation, and indeed helped develop the payroll withholding system of income tax payments. In his autobiography, he comments on "how thoroughly Keynesian I was then."[4] As Friedman grew older he reversed himself and in 2006 said, "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?"[5]
Friedman, before the late 1940s, focused mostly on statistical issues in his research, as exemplified by his dissertation on Income from Independent Professional Practice published with coauthor and thesis advisor Simon Kuznets (1945).
Columbia University awarded him a Ph.D. in 1946. He then served as Professor of Economics at the University of Chicago, from 1946 to 1976, where he helped build a close-knit intellectual community that produced a number of Nobel prize winners, known collectively as the Chicago School of Economics. He spent the academic year 1953-1954 as a visiting fellow at Gonville and Caius College, Cambridge. Since 1977, Friedman had been affiliated with the Hoover Institution at Stanford University.
Friedman also received the National Medal of Science in 1988.
Friedman’s son is the philosopher and economist David D. Friedman.
Many of us start off as socialists until we realize that socialism, rather than improving societies, often just gives people easier ways to scam other people via the power of government. Friedman seems to have been one of these. However, he spent his life learning, and adjusting his opinions:
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."[6] 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."[7]
Whatever the role of government is in your personal life Milton Friedman’s life and theories have probably influenced you indirectly. His latter life advocacy of economic freedom means that I will miss him. He leaves behind a great legacy and some important ideas.