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Milton Friedman (born July 31, 1912) is an American economist, known for his work on macroeconomics, microeconomics, economic history, statistics, and for his advocacy of laissez-faire capitalism. In Capitalism and Freedom (1962) he minimized the role of government in a free market in order to create political and social freedom. In 1976, he won the Nobel Prize for his achievements in the fields of consumption analysis, monetary history and theory and for his demonstration of the complexity of stabilization policy. His television series Free to Choose aired on PBS in early 1980. It became a book, co-authored with his wife, Rose Friedman. The book was widely read, as were his columns for Newsweek magazine. In statistics, he devised the Friedman test, a non-parametric analogue to the two-way analysis of variance.
Biography 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. 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." 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?." 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 has been affiliated with the Hoover Institution at Stanford University. Friedman also received National Medal of Science in 1988. Friedman's son is economist David D. Friedman. Scholarly contributions Friedman is 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, as largely formulated or influenced by Friedman. 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 US history. A striking conclusion of their research was on the role of money supply fluctuations as contributing to economic fluctuations. Or, as a representative of the Federal Reserve (one Ben Bernanke) pithily expressed it on the occasion of Friedman's 90th birthday in 2002: "Regarding the Great Depression. You're right, we did it. We're very sorry." 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 is also known for his refinement of the consumption function, the permanent income hypothesis (1957). It is considered by some academic economists as the greatest application of his own methodological position (see below). 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. Political views Friedman is the leading proponent of the monetarist school of economic thought. He maintains 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 rejects the use of fiscal policy as a tool of demand management; and he holds 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 worked at the Treasury Department during World War II and played an important role in designing the United States withholding tax system. Before 1942, there was no withholding system; the rich people who paid income taxes did so in one lump sum on March 15 of the following year. Friedman has also supported various libertarian policies such as decriminalization of drugs and prostitution. In addition, he headed the Reagan committee that researched the possibility of a move towards a paid/volunteer armed force, and played a role in the abolition of the draft that took place in the 1970s in the U.S. He served as a member of U.S. President Ronald 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 has said that he is 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 says, "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 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 recent years, Friedman has 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 is that vouchers would allow private schools to compete with the public school monopoly. Friedman allowed the Cato Institute to use his name for its Milton Friedman Prize for Advancing Liberty in 2001. 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 is co-responsible with Friedrich von Hayek for providing the intellectual foundations for the revival of classical liberalism in the 20th century. In 2005, Friedman and more than 500 other economists called for discussions regarding the economic benefits of the legalization of marijuana. Chile issue Friedman visited Chile in 1975 during the military dictatorship of Augusto Pinochet. Invited by a private foundation, he gave a series of lectures on economics. Several professors from the Chicago School of Economics became advisors to the Chilean government and several Ph.D. graduates from the same university – known as "the Chicago boys" – served in Chilean ministries. Friedman met with Pinochet during his visit to Chile, but he did not serve as a formal advisor to the Chilean government or maintain personal contact with Pinochet. He was, however, willing to advise Pinochet after Pinochet overthrew the democratically elected government of Salvador Allende, and was widely criticized for doing so. He had given a lecture advocating monetarist economics to the Catholic University of Chile. Friedman says that the "the emphasis of that talk was that free markets would undermine political centralization and political control." In an interview on the PBS program "Commanding Heights" in 2000, Friedman attributed the demonstrations to communists seeking to discredit anyone with only the slightest connection to Pinochet--such as himself--by opponents he recognized from earlier occasions, adding that "there was no doubt that there was a concerted effort to tar and feather me." Critics have remarked that Chile's dictatorship used its power to implement free-market policies, thus contradicting the relationship that Friedman claims exists between free markets and political freedom, though Friedman defended his role in Chile on the grounds that the move towards open market policies not only improved the economic situation in Chile but also contributed to the softening of Pinochet's rule and to its eventual replacement by a democratic government in 1990. He also stressed that the lectures he gave in Chile in 1975 were the same lectures he later gave without incident in China and other Socialist states. In the 2000 PBS Documentary the Commanding Heights, Milton Friedman also notes that this criticism was misdirected and missed his main point. Friedman advocated that freer markets led to free people, and that Chile had an unfree economy, which led to a dictatorship, which then implemented open economy policies, and later became politically free. For more information on Milton Friedman's views on Chile, see Miracle of Chile. Friedman also traveled to the Hong Kong Special Administrative Region of the People's Republic of China to give lectures, meet with government leaders and encourage them to adopt free trade and implement free market policies, which led to criticism from anti-Communists. Books and articles for general audiences Scientific books and articles About Friedman See also Lists Biographies Articles | |||||||||||||||||||||||||||||||
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