Milton Friedman

An Assessment of his Contribution to Economics

Unknown Author

[The individual identified as the author of this article contacted SCI in February, 2012 to advise this article was wrongly attributed to him. SCI would appreciate hearing from anyone who knows who the actual author is and where this was originally published]

Last week, University of Chicago undergraduates, who were not born when Milton Friedman retired from teaching, jammed one of the school's lecture halls to hear the diminutive 84-year-old give a talk about the postwar development of Hong Kong. Their presence was a welcome rebuttal to the idea that today's young people don't recognize what they owe their elders.

Among the many debts those students owe Friedman is the pleasure of having never known a world in which his ideas were not taken seriously. When Friedman began his career, he was generally regarded, even in his profession, as badly deluded. Today, it is widely acknowledged that the real delusions belonged to his critics.

It's a rare professor who greatly alters the thinking of his professional colleagues. It's an even rarer one who helps transform the world. Friedman has done both. His formidable scholarly contributions on arcane matters like consumption theory, monetary history and economic methodology won him the 1976 Nobel Prize in economics. It was the first glimmer of recognition of his place as the most influential economist of the 20th Century.

Even those who once dismissed his theories have had to surrender. Friedman argued in the 1960s that it was a mistake to believe, as most people did, that the government could keep unemployment low by accepting higher inflation. His fellow Nobel Laureate, liberal economist Paul Samuelson, pointedly disagreed in the 1967 edition of his famous textbook, "Economics."

By 1985, though, the book had fully adopted Friedman's view.

Friedman's experience should demolish the notion that the scribblings of academic economists do nothing for ordinary people. He long argued that the Federal Reserve's policies are by far the most important influence on the state of the economy, an idea that vanquished universal doubt to become accepted wisdom. The application of his insight by the Federal Reserve has greatly reduced the frequency and severity of economic downturns, to the benefit of the multitudes. Meanwhile, Friedman's work on the sources of inflation has enabled the economy to combine steady growth with stable prices--a happy marriage once deemed impossible.

Not content to instruct his students and colleagues, however, Friedman also ventured out to teach the public at large about the value of free markets, the importance of liberty and the folly of government control. For years, he wrote a regular column for Newsweek, and in 1980, he and his wife, Rose Friedman, wrote a best-selling book, "Free to Choose," to accompany a public television series of the same title. His 1962 classic, "Capitalism and Freedom," has been in print for 35 years and has sold more than half a million copies.

When he began his career, communism and socialism were advancing, the American welfare state was growing unchallenged and unfettered capitalism was regarded as a crude relic of a less enlightened age. Today, of course, communism is dead, socialism has few defenders or practitioners, the free market is regarded across the world as the only route to prosperity and even Bill Clinton disavows Big Government.

"Capitalism and Freedom" included a list of policies that the author found most objectionable. The list suggests that any government program desiring a long life should not incur the ire of Friedman. Fixed exchange rates? They were junked in 1973. Trucking regulation by the Interstate Commerce Commission? It's gone, too - -along with the ICC itself. Rent control? In danger even in its strongest bastion, New York City. Legal limits on the interest paid on savings accounts? Just a quaint memory. Farm price supports and output restrictions? Congress voted last year to phase most of them out.

Friedman's proudest policy achievement was one that helped establish his credibility with the young people of another age. As perhaps the most influential member of a presidential commission that recommended the abolition of the military draft during the Vietnam War, he deserves much of the credit for bringing about the current all-volunteer force.

Like most of his proposals, the all-volunteer force rests on the belief that citizens have rights to life, liberty and property that the government should respect, both as a matter of economic efficiency and as a matter of justice. That simple notion has become the dominant idea of our age.

"All over the world, his kind of economics were out of fashion from the late 1930s until the early 1960s," said his University of Chicago colleague Arnold Harberger when Friedman won the Nobel Prize. "Now everybody knows he was right." Those University of Chicago students, who grew up in the midst of a flowering of liberty and prosperity stimulated by ideas spread by Milton Friedman, may not have to be told.