Merton Howard Miller (May 16, 1923 – June 3, 2000) was an American economist, and the co-author of the
Modigliani–Miller theorem
The Modigliani–Miller theorem (of Franco Modigliani, Merton Miller) is an influential element of economic theory; it forms the basis for modern thinking on capital structure. The basic theorem states that in the absence of taxes, bankruptcy cos ...
(1958), which proposed the irrelevance of debt-equity structure. He shared the
Nobel Memorial Prize in Economic Sciences
The Nobel Memorial Prize in Economic Sciences, officially the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel ( sv, Sveriges riksbanks pris i ekonomisk vetenskap till Alfred Nobels minne), is an economics award administered ...
in 1990, along with
Harry Markowitz and
William F. Sharpe. Miller spent most of his academic career at the
University of Chicago
The University of Chicago (UChicago, Chicago, U of C, or UChi) is a private research university in Chicago, Illinois. Its main campus is located in Chicago's Hyde Park neighborhood. The University of Chicago is consistently ranked among the b ...
's
Booth School of Business.
Biography
Early years
Miller was born in
Boston, Massachusetts to Jewish parents Sylvia and Joel Miller,
a housewife and attorney. He attended Harvard University as an undergraduate student. He worked during
World War II
World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the World War II by country, vast majority of the world's countries—including all of the great power ...
as an economist in the division of tax research of the Treasury Department, and received a
Ph.D. in economics from
Johns Hopkins University
Johns Hopkins University (Johns Hopkins, Hopkins, or JHU) is a private research university in Baltimore, Maryland. Founded in 1876, Johns Hopkins is the oldest research university in the United States and in the western hemisphere. It consi ...
, 1952. His first academic appointment after receiving his doctorate was Visiting Assistant Lecturer at the
London School of Economics
, mottoeng = To understand the causes of things
, established =
, type = Public research university
, endowment = £240.8 million (2021)
, budget = £391.1 milli ...
.
Career
In 1958, at
Carnegie Institute of Technology
Carnegie Mellon University (CMU) is a private research university in Pittsburgh, Pennsylvania. One of its predecessors was established in 1900 by Andrew Carnegie as the Carnegie Technical Schools; it became the Carnegie Institute of Technolog ...
(now
Carnegie Mellon University), he collaborated with his colleague
Franco Modigliani
Franco Modigliani (18 June 1918 – 25 September 2003) was an Italian-American economist and the recipient of the 1985 Nobel Memorial Prize in Economics. He was a professor at University of Illinois at Urbana–Champaign, Carnegie Mellon Un ...
on the paper ''The Cost of Capital, Corporate Finance and the Theory of Investment''. This paper urged a fundamental objection to the traditional view of
corporate finance
Corporate finance is the area of finance that deals with the sources of funding, the capital structure of corporations, the actions that managers take to increase the value of the firm to the shareholders, and the tools and analysis used to all ...
, according to which a corporation can reduce its
cost of capital by finding the right debt-to-equity ratio. According to the
Modigliani–Miller theorem
The Modigliani–Miller theorem (of Franco Modigliani, Merton Miller) is an influential element of economic theory; it forms the basis for modern thinking on capital structure. The basic theorem states that in the absence of taxes, bankruptcy cos ...
, on the other hand, there is no right ratio, so corporate managers should seek to minimize tax liability and maximize corporate net wealth, letting the debt ratio chips fall where they will.
The way in which they arrived at this conclusion made use of the "no
arbitrage" argument, i.e. the
premise that any state of affairs that will allow traders of any market instrument to create a riskless money machine will almost immediately disappear. They set the pattern for many arguments based on that premise in subsequent years.
Miller wrote or co-authored eight books. He became a fellow of the
Econometric Society
The Econometric Society is an international society of academic economists interested in applying statistical tools to their field. It is an independent organization with no connections to societies of professional mathematicians or statisticians. ...
in 1975 and was president of the
American Finance Association in 1976. He was on the faculty of the
University of Chicago
The University of Chicago (UChicago, Chicago, U of C, or UChi) is a private research university in Chicago, Illinois. Its main campus is located in Chicago's Hyde Park neighborhood. The University of Chicago is consistently ranked among the b ...
's
Booth School of Business from 1961 until his retirement in 1993, although he continued teaching at the school for several more years.
His works formed the basis of the "Modigliani-Miller Financial Theory".
He served as a public director on the
Chicago Board of Trade 1983–85 and the
Chicago Mercantile Exchange
The Chicago Mercantile Exchange (CME) (often called "the Chicago Merc", or "the Merc") is a global derivatives marketplace based in Chicago and located at 20 S. Wacker Drive. The CME was founded in 1898 as the Chicago Butter and Egg Board, an ...
from 1990 until his death in
Chicago
(''City in a Garden''); I Will
, image_map =
, map_caption = Interactive Map of Chicago
, coordinates =
, coordinates_footnotes =
, subdivision_type = List of sovereign states, Count ...
on June 3, 2000. In 1993, Miller waded into the controversy surrounding $2 billion in trading losses by what was characterized as a rogue futures trader at a subsidiary of
Metallgesellschaft, arguing in the ''Wall Street Journal'' that management of the subsidiary was to blame for panicking and liquidating the position too early. In 1995, Miller was engaged by
Nasdaq
The Nasdaq Stock Market () (National Association of Securities Dealers Automated Quotations Stock Market) is an American stock exchange based in New York City. It is the most active stock trading venue in the US by volume, and ranked second ...
to rebut allegations of price fixing.
Personal life
Miller was married to Eleanor Miller, who died in 1969. He was survived by his second wife, Katherine Miller, and by three children from his first marriage: Pamela (1952), Margot (1955), and Louise (1958), and two grandsons.
[ Louis Uchitelle (2000). "Merton H. Miller, 77, Dies; Economist Who Won Nobel," ''New York Times'', June ]
/ref>
Bibliography
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See also
* List of economists
This is an incomplete alphabetical list by surname of notable economists, experts in the social science of economics, past and present. For a history of economics, see the article History of economic thought. Only economists with biographical arti ...
References
External links
*
*
* including the Prize Lecture December 7, 1990 ''Leverage''
Guide to the Merton H. Miller Papers 1941-2002
at th
University of Chicago Special Collections Research Center
{{DEFAULTSORT:Miller, Merton
1923 births
2000 deaths
Nobel laureates in Economics
American Nobel laureates
Financial economists
American business theorists
Harvard University alumni
Johns Hopkins University alumni
University of Chicago faculty
Carnegie Mellon University faculty
Corporate finance theorists
Jewish American economists
20th-century American economists
Fellows of the Econometric Society
Distinguished Fellows of the American Economic Association
Presidents of the American Finance Association
Management & Organization scholars