Milton Friedman
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Milton Friedman (; July 31, 1912 – November 16, 2006) was an American economist and statistician who received the 1976
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 ...
for his research on
consumption Consumption may refer to: *Resource consumption *Tuberculosis, an infectious disease, historically * Consumption (ecology), receipt of energy by consuming other organisms * Consumption (economics), the purchasing of newly produced goods for curren ...
analysis, monetary history and theory and the complexity of stabilization policy. With
George Stigler George Joseph Stigler (; January 17, 1911 – December 1, 1991) was an American economist. He was the 1982 laureate in Nobel Memorial Prize in Economic Sciences and is considered a key leader of the Chicago school of economics. Early life and e ...
and others, Friedman was among the intellectual leaders of the Chicago school of economics, a neoclassical school of economic thought associated with the work of the faculty at the
University of Chicago The University of Chicago (UChicago, Chicago, U of C, or UChi) is a private university, private research university in Chicago, Illinois. Its main campus is located in Chicago's Hyde Park, Chicago, Hyde Park neighborhood. The University of Chic ...
that rejected Keynesianism in favor of monetarism until the mid-1970s, when it turned to new classical macroeconomics heavily based on the concept of
rational expectations In economics, "rational expectations" are model-consistent expectations, in that agents inside the model are assumed to "know the model" and on average take the model's predictions as valid. Rational expectations ensure internal consistency i ...
. Several students, young professors and academics who were recruited or mentored by Friedman at Chicago went on to become leading economists, including
Gary Becker Gary Stanley Becker (; December 2, 1930 – May 3, 2014) was an American economist who received the 1992 Nobel Memorial Prize in Economic Sciences. He was a professor of economics and sociology at the University of Chicago, and was a leader of ...
,
Robert Fogel Robert William Fogel (; July 1, 1926 – June 11, 2013) was an American economic historian and scientist, and winner (with Douglass North) of the 1993 Nobel Memorial Prize in Economic Sciences. As of his death, he was the Charles R. Walgreen D ...
,
Thomas Sowell Thomas Sowell (; born June 30, 1930) is an American author, economist, political commentator and academic who is a senior fellow at the Hoover Institution. With widely published commentary and books—and as a guest on TV and radio—he becam ...
and Robert Lucas Jr. Friedman's challenges to what he called "naive
Keynesian Keynesian economics ( ; sometimes Keynesianism, named after British economist John Maynard Keynes) are the various macroeconomic theories and models of how aggregate demand (total spending in the economy) strongly influences economic output an ...
theory" began with his interpretation of
consumption Consumption may refer to: *Resource consumption *Tuberculosis, an infectious disease, historically * Consumption (ecology), receipt of energy by consuming other organisms * Consumption (economics), the purchasing of newly produced goods for curren ...
, which tracks how consumers spend. He introduced a theory which would later become part of the mainstream and among the first to propagate the theory of
consumption smoothing Consumption smoothing is an economic concept for the practice of optimizing a person's standard of living through an appropriate balance between savings and consumption over time. An optimal consumption rate should be relatively similar at each stag ...
. During the 1960s, he became the main advocate opposing Keynesian government policies, and described his approach (along with mainstream economics) as using "Keynesian language and apparatus" yet rejecting its initial conclusions. He theorized that there existed a
natural rate of unemployment The natural rate of unemployment is the name that was given to a key concept in the study of economic activity. Milton Friedman and Edmund Phelps, tackling this 'human' problem in the 1960s, both received the Nobel Memorial Prize in Economic Scien ...
and argued that unemployment below this rate would cause inflation to accelerate. He argued that the
Phillips curve The Phillips curve is an economic model, named after William Phillips hypothesizing a correlation between reduction in unemployment and increased rates of wage rises within an economy. While Phillips himself did not state a linked relationship ...
was in the long run vertical at the "natural rate" and predicted what would come to be known as
stagflation In economics, stagflation or recession-inflation is a situation in which the inflation rate is high or increasing, the economic growth rate slows, and unemployment remains steadily high. It presents a dilemma for economic policy, since actio ...
. Friedman promoted a macroeconomic viewpoint known as monetarism and argued that a steady, small expansion of the money supply was the preferred policy, as compared to rapid, and unexpected changes. His ideas concerning
monetary policy Monetary policy is the policy adopted by the monetary authority of a nation to control either the interest rate payable for very short-term borrowing (borrowing by banks from each other to meet their short-term needs) or the money supply, often a ...
,
tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or n ...
ation,
privatization Privatization (also privatisation in British English) can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation when ...
and deregulation influenced government policies, especially during the 1980s. His
monetary theory Monetary economics is the branch of economics that studies the different competing theories of money: it provides a framework for analyzing money and considers its functions (such as medium of exchange, store of value and unit of account), and it ...
influenced the Federal Reserve's
monetary policy Monetary policy is the policy adopted by the monetary authority of a nation to control either the interest rate payable for very short-term borrowing (borrowing by banks from each other to meet their short-term needs) or the money supply, often a ...
in response to the global financial crisis of 2007–2008. After retiring from the University of Chicago in 1977, and becoming
Emeritus professor ''Emeritus'' (; female: ''emerita'') is an adjective used to designate a retired chair, professor, pastor, bishop, pope, director, president, prime minister, rabbi, emperor, or other person who has been "permitted to retain as an honorary title ...
in economics in 1983, Friedman was an advisor to
Republican Republican can refer to: Political ideology * An advocate of a republic, a type of government that is not a monarchy or dictatorship, and is usually associated with the rule of law. ** Republicanism, the ideology in support of republics or agains ...
President Ronald Reagan and
Conservative Conservatism is a cultural, social, and political philosophy that seeks to promote and to preserve traditional institutions, practices, and values. The central tenets of conservatism may vary in relation to the culture and civilization in ...
British Prime Minister
Margaret Thatcher Margaret Hilda Thatcher, Baroness Thatcher (; 13 October 19258 April 2013) was Prime Minister of the United Kingdom from 1979 to 1990 and Leader of the Conservative Party from 1975 to 1990. She was the first female British prime ...
. His political philosophy extolled the virtues of a
free market In economics, a free market is an economic system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of government or any ot ...
economic system with minimal government intervention in social matters. He once stated that his role in eliminating conscription in the United States was his proudest achievement. In his 1962 book '' Capitalism and Freedom'', Friedman advocated policies such as a volunteer military, freely floating exchange rates, abolition of
medical license A medical license is an occupational license that permits a person to legally practice medicine. In most countries, a person must have a medical license bestowed either by a specified government-approved professional association or a governme ...
s, a
negative income tax In economics, a negative income tax (NIT) is a system which reverses the direction in which tax is paid for incomes below a certain level; in other words, earners above that level pay money to the state while earners below it receive money, as ...
,
school voucher A school voucher, also called an education voucher in a voucher system, is a certificate of government funding for students at schools chosen by themselves or their parents. Funding is usually for a particular year, term, or semester. In some cou ...
s and opposition to the war on drugs and support for drug liberalization policies. His support for
school choice School choice is a term for education options that allow students and families to select alternatives to public schools. The most common in the United States, by both the number of programs and by the number of participating students are scho ...
led him to found the Friedman Foundation for Educational Choice, later renamed
EdChoice EdChoice, formerly the Friedman Foundation for Educational Choice, is an American education reform organization headquartered in Indianapolis, Indiana. It was founded in 1996 by economist spouses Milton and Rose D. Friedman. The organization's m ...
. Friedman's works cover a broad range of economic topics and public policy issues. His books and essays have had global influence, including in former communist states.Johan Norberg (October 2008)
"Defaming Milton Friedman: Naomi Klein's disastrous yet popular polemic against the great free market economist"
. ''Reason Magazine''. Washington, D.C.
A 2011 survey of economists commissioned by the EJW ranked Friedman as the second-most popular economist of the 20th century, following only John Maynard Keynes. Upon his death, ''
The Economist ''The Economist'' is a British weekly newspaper printed in demitab format and published digitally. It focuses on current affairs, international business, politics, technology, and culture. Based in London, the newspaper is owned by The Eco ...
'' described him as "the most influential economist of the second half of the 20th century ... possibly of all of it".


Early life

Friedman was born in
Brooklyn Brooklyn () is a borough of New York City, coextensive with Kings County, in the U.S. state of New York. Kings County is the most populous county in the State of New York, and the second-most densely populated county in the United States, be ...
, New York on July 31, 1912. His parents, Sára Ethel (née Landau) and Jenő Saul Friedman, were
Jewish Jews ( he, יְהוּדִים, , ) or Jewish people are an ethnoreligious group and nation originating from the Israelites Israelite origins and kingdom: "The first act in the long drama of Jewish history is the age of the Israelites""The ...
working-class immigrants from Beregszász in
Carpathian Ruthenia Carpathian Ruthenia ( rue, Карпатьска Русь, Karpat'ska Rus'; uk, Закарпаття, Zakarpattia; sk, Podkarpatská Rus; hu, Kárpátalja; ro, Transcarpatia; pl, Zakarpacie); cz, Podkarpatská Rus; german: Karpatenukrai ...
, Kingdom of Hungary (now
Berehove Berehove ( uk, Берегове; hu, Beregszász) is a city located in Zakarpattia Oblast (province) in western Ukraine, near the border with Hungary. It is the cultural centre of the Hungarian minority in Ukraine. Serving as the administrativ ...
in Ukraine). They emigrated to America in their early teens. They both worked as
dry goods Dry goods is a historic term describing the type of product line a store carries, which differs by region. The term comes from the textile trade, and the shops appear to have spread with the mercantile trade across the British Empire (and forme ...
merchants. Friedman was their fourth child and only son, as well as the youngest of the children. Shortly after his birth, the family relocated to Rahway, New Jersey. Friedman's family experienced financial troubles, and financial uncertainty caused stability of income to be low. Friedman described his family's situation in the following manner: Friedman's father, Jenő Saul Friedman, died during Friedman's senior year of high school, leaving Friedman and two older sisters to care for his mother, Sára Ethel Friedman. In his early teens, Friedman was injured in a car accident, which scarred his upper lip. A talented student and an avid reader, Friedman graduated from Rahway High School in 1928, just before his 16th birthday. Although no family members had gone to university before Milton, Friedman was awarded a competitive scholarship to Rutgers University (then a private university receiving limited support from the State of New Jersey, e.g., for such scholarships). Friedman was expected to finance the cost of university himself. He graduated from Rutgers in 1932. Friedman initially intended to become an actuary or
mathematician A mathematician is someone who uses an extensive knowledge of mathematics in their work, typically to solve mathematical problems. Mathematicians are concerned with numbers, data, quantity, structure, space, models, and change. History On ...
, however, the state of the economy, which was at this point in a deep depression, convinced him to become an economist. He was offered two scholarships to do graduate work, one in mathematics at Brown University and the other in economics at the
University of Chicago The University of Chicago (UChicago, Chicago, U of C, or UChi) is a private university, private research university in Chicago, Illinois. Its main campus is located in Chicago's Hyde Park, Chicago, Hyde Park neighborhood. The University of Chic ...
, where he would later teach. Friedman chose the latter, earning a
Master of Arts A Master of Arts ( la, Magister Artium or ''Artium Magister''; abbreviated MA, M.A., AM, or A.M.) is the holder of a master's degree awarded by universities in many countries. The degree is usually contrasted with that of Master of Science. Th ...
degree in 1933. He was strongly influenced by
Jacob Viner Jacob Viner (3 May 1892 – 12 September 1970) was a Canadian economist and is considered with Frank Knight and Henry Simons to be one of the "inspiring" mentors of the early Chicago school of economics in the 1930s: he was one of the leading fig ...
,
Frank Knight Frank Hyneman Knight (November 7, 1885 – April 15, 1972) was an American economist who spent most of his career at the University of Chicago, where he became one of the founders of the Chicago School. Nobel laureates Milton Friedman, George ...
, and Henry Simons. Friedman met his future wife, economist Rose Director, while at the University of Chicago. During the 1933–1934 academic year, he had a fellowship at
Columbia University Columbia University (also known as Columbia, and officially as Columbia University in the City of New York) is a private research university in New York City. Established in 1754 as King's College on the grounds of Trinity Church in Manhatt ...
, where he studied statistics with statistician and economist Harold Hotelling. He was back in Chicago for the 1934–1935 academic year, working as a research assistant for Henry Schultz, who was then working on ''Theory and Measurement of Demand''. During the aforementioned 1934–35 academic year, Friedman formed what would later prove to be lifetime friendships with
George Stigler George Joseph Stigler (; January 17, 1911 – December 1, 1991) was an American economist. He was the 1982 laureate in Nobel Memorial Prize in Economic Sciences and is considered a key leader of the Chicago school of economics. Early life and e ...
and W. Allen Wallis, both of whom taught with Friedman at the
University of Chicago The University of Chicago (UChicago, Chicago, U of C, or UChi) is a private university, private research university in Chicago, Illinois. Its main campus is located in Chicago's Hyde Park, Chicago, Hyde Park neighborhood. The University of Chic ...
. Milton Friedman was also influenced by two lifelong friends, Arthur Burns and Homer Johnson. They helped Milton Friedman better understand the depth of economic thinking.


Public service

Friedman was unable to find academic employment, so in 1935 he followed his friend W. Allen Wallis to Washington, D.C., where Franklin D. Roosevelt's New Deal was "a lifesaver" for many young economists. At this stage, Friedman said he and his wife "regarded the job-creation programs such as the
WPA WPA may refer to: Computing *Wi-Fi Protected Access, a wireless encryption standard *Windows Product Activation, in Microsoft software licensing * Wireless Public Alerting (Alert Ready), emergency alerts over LTE in Canada * Windows Performance An ...
, CCC, and PWA appropriate responses to the critical situation," but not "the price- and wage-fixing measures of the National Recovery Administration and the Agricultural Adjustment Administration." Foreshadowing his later ideas, he believed price controls interfered with an essential signaling mechanism to help resources be used where they were most valued. Indeed, Friedman later concluded that all government intervention associated with the New Deal was "the wrong cure for the wrong disease," arguing the Federal Reserve was to blame, and that they should have expanded the money supply in reaction to what he later described in ''A Monetary History of the United States'' as " The Great Contraction." Later, Friedman and his colleague
Anna Schwartz Anna Jacobson Schwartz (pronounced ; November 11, 1915 – June 21, 2012) was an American economist who worked at the National Bureau of Economic Research in New York City and a writer for ''The New York Times''. Paul Krugman has said that Schwar ...
wrote '' A Monetary History of the United States, 1867–1960'', which argued that the
Great Depression The Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagio ...
was caused by a severe monetary contraction due to banking crises and poor policy on the part of the Federal Reserve.
Robert J. Shiller Robert James Shiller (born March 29, 1946) is an American economist, academic, and author. As of 2019, he serves as a Sterling Professor of Economics at Yale University and is a fellow at the Yale School of Management's International Center for ...
describes the book as the "most influential account" of the Great Depression. During 1935, he began working for the National Resources Planning Board, which was then working on a large consumer budget survey. Ideas from this project later became a part of his ''Theory of the Consumption Function,'' a book which first described
consumption smoothing Consumption smoothing is an economic concept for the practice of optimizing a person's standard of living through an appropriate balance between savings and consumption over time. An optimal consumption rate should be relatively similar at each stag ...
and the Permanent Income Hypothesis. Friedman began employment with the
National Bureau of Economic Research The National Bureau of Economic Research (NBER) is an American private nonprofit research organization "committed to undertaking and disseminating unbiased economic research among public policymakers, business professionals, and the academic c ...
during the autumn of 1937 to assist Simon Kuznets in his work on professional income. This work resulted in their jointly authored publication ''Incomes from Independent Professional Practice'', which introduced the concepts of permanent and transitory income, a major component of the
Permanent Income Hypothesis The permanent income hypothesis (PIH) is a model in the field of economics to explain the formation of consumption patterns. It suggests consumption patterns are formed from future expectations and consumption smoothing. The theory was develope ...
that Friedman worked out in greater detail in the 1950s. The book hypothesizes that professional licensing artificially restricts the supply of services and raises prices.''Incomes from Independent Professional Practice'', 1945, Milton Friedman, Simon Kuznets ''Incomes from Independent Professional Practice'' remained quite controversial within the
economics Economics () is the social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services. Economics focuses on the behaviour and intera ...
community because of Friedman's hypothesis that barriers to entry, which were exercised and enforced by the
American Medical Association The American Medical Association (AMA) is a professional association and lobbying group of physicians and medical students. Founded in 1847, it is headquartered in Chicago, Illinois. Membership was approximately 240,000 in 2016. The AMA's sta ...
, led to higher than average wages for
physician A physician (American English), medical practitioner (Commonwealth English), medical doctor, or simply doctor, is a health professional who practices medicine, which is concerned with promoting, maintaining or restoring health through th ...
s, compared to other professional groups. Barriers to entry are a
fixed cost In accounting and economics, 'fixed costs', also known as indirect costs or overhead costs, are business expenses that are not dependent on the level of goods or services produced by the business. They tend to be recurring, such as interest or r ...
which must be incurred regardless of any outside factors such as
work experience Work may refer to: * Work (human activity), intentional activity people perform to support themselves, others, or the community ** Manual labour, physical work done by humans ** House work, housework, or homemaking ** Working animal, an animal tr ...
, or other factors of human capital. During 1940, Friedman was appointed as an assistant professor teaching Economics at the
University of Wisconsin–Madison A university () is an educational institution, institution of higher education, higher (or Tertiary education, tertiary) education and research which awards academic degrees in several Discipline (academia), academic disciplines. Universities ty ...
, but encountered
anti semitism Antisemitism (also spelled anti-semitism or anti-Semitism) is hostility to, prejudice towards, or discrimination against Jews. A person who holds such positions is called an antisemite. Antisemitism is considered to be a form of racism. Antis ...
in the Economics department and returned to government service. From 1941 to 1943 Friedman worked on wartime tax policy for the federal government, as an advisor to senior officials of the
United States Department of the Treasury The Department of the Treasury (USDT) is the national treasury and finance department of the federal government of the United States, where it serves as an executive department. The department oversees the Bureau of Engraving and Printing and ...
. As a Treasury spokesman during 1942, he advocated a
Keynesian Keynesian economics ( ; sometimes Keynesianism, named after British economist John Maynard Keynes) are the various macroeconomic theories and models of how aggregate demand (total spending in the economy) strongly influences economic output an ...
policy of taxation. He helped to invent the payroll
withholding tax Tax withholding, also known as tax retention, Pay-as-You-Go, Pay-as-You-Earn, Tax deduction at source or a ''Prélèvement à la source'', is income tax paid to the government by the payer of the income rather than by the recipient of the income ...
system, since the federal government needed money to fund the war. He later said, "I have no apologies for it, but I really wish we hadn't found it necessary and I wish there were some way of abolishing withholding now." In Milton and Rose Friedman's jointly-written memoir, he wrote, "Rose has repeatedly chided me over the years about the role that I played in making possible the current overgrown government we both criticize so strongly."


Academic career


Early years

In 1940, Friedman accepted a position at the University of Wisconsin–Madison, but left because of differences with faculty regarding United States involvement in World War II. Friedman believed the United States should enter the war. In 1943, Friedman joined the Division of War Research at
Columbia University Columbia University (also known as Columbia, and officially as Columbia University in the City of New York) is a private research university in New York City. Established in 1754 as King's College on the grounds of Trinity Church in Manhatt ...
(headed by W. Allen Wallis and Harold Hotelling), where he spent the rest of
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 vast majority of the world's countries—including all of the great powers—forming two opposin ...
working as a mathematical statistician, focusing on problems of weapons design, military tactics, and metallurgical experiments. In 1945, Friedman submitted ''Incomes from Independent Professional Practice'' (co-authored with Kuznets and completed during 1940) to Columbia as his doctoral dissertation. The university awarded him a PhD in 1946. Friedman spent the 1945–1946 academic year teaching at the
University of Minnesota The University of Minnesota, formally the University of Minnesota, Twin Cities, (UMN Twin Cities, the U of M, or Minnesota) is a public university, public Land-grant university, land-grant research university in the Minneapolis–Saint Paul, Tw ...
(where his friend George Stigler was employed). On February 12, 1945, his only son,
David D. Friedman David Director Friedman (born February 12, 1945) is an American economist, physicist, legal scholar, and anarcho-capitalist theorist. Although he studied chemistry and physics and not law or economics, he is known for his textbook writings on m ...
, who would later follow in his father's footsteps as an economist was born.


University of Chicago

In 1946, Friedman accepted an offer to teach economic theory at the University of Chicago (a position opened by departure of his former professor
Jacob Viner Jacob Viner (3 May 1892 – 12 September 1970) was a Canadian economist and is considered with Frank Knight and Henry Simons to be one of the "inspiring" mentors of the early Chicago school of economics in the 1930s: he was one of the leading fig ...
to
Princeton University Princeton University is a private university, private research university in Princeton, New Jersey. Founded in 1746 in Elizabeth, New Jersey, Elizabeth as the College of New Jersey, Princeton is the List of Colonial Colleges, fourth-oldest ins ...
). Friedman would work for the University of Chicago for the next 30 years. There he contributed to the establishment of an intellectual community that produced a number of Nobel Memorial Prize winners, known collectively as the Chicago school of economics. At the time,
Arthur F. Burns Arthur Frank Burns (April 27, 1904 – June 26, 1987) was an American economist and diplomat who served as the 10th chairman of the Federal Reserve from 1970 to 1978. He previously chaired the Council of Economic Advisers under President Dwight ...
, who was then the head of the
National Bureau of Economic Research The National Bureau of Economic Research (NBER) is an American private nonprofit research organization "committed to undertaking and disseminating unbiased economic research among public policymakers, business professionals, and the academic c ...
, and later
chairman of the Federal Reserve The chair of the Board of Governors of the Federal Reserve System is the head of the Federal Reserve, and is the active executive officer of the Board of Governors of the Federal Reserve System. The chair shall preside at the meetings of the Boa ...
, asked Friedman to rejoin the Bureau's staff. He accepted the invitation, and assumed responsibility for the Bureau's inquiry into the role of money in the
business cycle Business cycles are intervals of Economic expansion, expansion followed by recession in economic activity. These changes have implications for the welfare of the broad population as well as for private institutions. Typically business cycles are ...
. As a result, he initiated the "Workshop in Money and Banking" (the "Chicago Workshop"), which promoted a revival of monetary studies. During the latter half of the 1940s, Friedman began a collaboration with
Anna Schwartz Anna Jacobson Schwartz (pronounced ; November 11, 1915 – June 21, 2012) was an American economist who worked at the National Bureau of Economic Research in New York City and a writer for ''The New York Times''. Paul Krugman has said that Schwar ...
, an
economic historian Economic history is the academic learning of economies or economic events of the past. Research is conducted using a combination of historical methods, statistical methods and the application of economic theory to historical situations and ins ...
at the Bureau, that would ultimately result in the 1963 publication of a book co-authored by Friedman and Schwartz, ''A Monetary History of the United States, 1867–1960''.


University of Cambridge

Friedman spent the 1954–1955 academic year as a Fulbright Visiting Fellow at
Gonville and Caius College, Cambridge Gonville and Caius College, often referred to simply as Caius ( ), is a constituent college of the University of Cambridge in Cambridge, England. Founded in 1348, it is the fourth-oldest of the University of Cambridge's 31 colleges and one of t ...
. At the time, the Cambridge economics faculty was divided into a Keynesian majority (including
Joan Robinson Joan Violet Robinson (''née'' Maurice; 31 October 1903 – 5 August 1983) was a British economist well known for her wide-ranging contributions to economic theory. She was a central figure in what became known as post-Keynesian economics. B ...
and Richard Kahn) and an anti-Keynesian minority (headed by Dennis Robertson). Friedman speculated he was invited to the fellowship because his views were unacceptable to both of the Cambridge factions. Later his weekly columns for ''Newsweek'' magazine (1966–84) were well read and increasingly influential among political and business people, and helped earn the magazine a
Gerald Loeb Special Award The Gerald Loeb Award is given annually for multiple categories of business reporting. Special awards were occasionally given for distinguished business journalism that doesn't necessarily fit into other categories. Gerald Loeb Special Award winner ...
in 1968. From 1968 to 1978, he and
Paul Samuelson Paul Anthony Samuelson (May 15, 1915 – December 13, 2009) was an American economist who was the first American to win the Nobel Memorial Prize in Economic Sciences. When awarding the prize in 1970, the Swedish Royal Academies stated that he " ...
participated in the Economics Cassette Series, a biweekly subscription series where the economist would discuss the days' issues for about a half-hour at a time.


''A Theory of the Consumption Function''

One of Milton Friedman's most popular works, ''A Theory of the Consumption Function'', challenged traditional Keynesian viewpoints about the household. This work was originally published in 1957 by
Princeton University Press Princeton University Press is an independent publisher with close connections to Princeton University. Its mission is to disseminate scholarship within academia and society at large. The press was founded by Whitney Darrow, with the financial su ...
, and it reanalyzed the relationship displayed "between aggregate consumption or aggregate savings and aggregate income." Friedman's counterpart
Keynes John Maynard Keynes, 1st Baron Keynes, ( ; 5 June 1883 – 21 April 1946), was an English economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments. Originally trained in m ...
believed people would modify their household consumption expenditures to relate to their existing income levels. Friedman's research introduced the term "permanent income" to the world, which was the average of a household's expected income over several years, and he also developed the
permanent income hypothesis The permanent income hypothesis (PIH) is a model in the field of economics to explain the formation of consumption patterns. It suggests consumption patterns are formed from future expectations and consumption smoothing. The theory was develope ...
. Friedman thought income consisted of several components, namely transitory and permanent. He established the formula y=y_p+y_t in order to calculate income, with ''p'' representing the permanent component, and ''t'' representing the transitory component.Milton Friedman's research changed how economists interpreted the consumption function, and his work pushed the idea that current income was not the only factor affecting people's adjustment household consumption expenditures. Instead, expected income levels also affected how households would change their consumption expenditures. Friedman's contributions strongly influenced research on consumer behavior, and he further defined how to predict
consumption smoothing Consumption smoothing is an economic concept for the practice of optimizing a person's standard of living through an appropriate balance between savings and consumption over time. An optimal consumption rate should be relatively similar at each stag ...
, which contradicts Keynes'
marginal propensity to consume In economics, the marginal propensity to consume (MPC) is a metric that quantifies induced consumption, the concept that the increase in personal consumer spending ( consumption) occurs with an increase in disposable income (income after taxes and ...
. Although this work presented many controversial points of view which differed from existing viewpoints established by Keynes, ''A Theory of the Consumption Function'' helped Friedman gain respect in the field of economics. His work on the
Permanent Income Hypothesis The permanent income hypothesis (PIH) is a model in the field of economics to explain the formation of consumption patterns. It suggests consumption patterns are formed from future expectations and consumption smoothing. The theory was develope ...
is among the many contributions which were listed as reasons for his Sveriges-Riskbank Prize in Economic Sciences. His work was later expanded on by Christopher D. Carroll, especially in regards to the absence of
liquidity constraint In economics, a liquidity constraint is a form of imperfection in the capital market which imposes a limit on the amount an individual can borrow, or an alteration in the interest rate they pay. By raising the cost of borrowing or restricting the a ...
s. The
Permanent Income Hypothesis The permanent income hypothesis (PIH) is a model in the field of economics to explain the formation of consumption patterns. It suggests consumption patterns are formed from future expectations and consumption smoothing. The theory was develope ...
faces some criticism, mainly from
Keynesian Keynesian economics ( ; sometimes Keynesianism, named after British economist John Maynard Keynes) are the various macroeconomic theories and models of how aggregate demand (total spending in the economy) strongly influences economic output an ...
economists. The primary criticism of the hypothesis is based on a lack of
liquidity constraint In economics, a liquidity constraint is a form of imperfection in the capital market which imposes a limit on the amount an individual can borrow, or an alteration in the interest rate they pay. By raising the cost of borrowing or restricting the a ...
s.


''Capitalism and Freedom''

His book '' Capitalism and Freedom'', inspired by a series of lectures he gave at
Wabash College Wabash College is a private liberal arts men's college in Crawfordsville, Indiana. Founded in 1832 by several Dartmouth College graduates and Midwestern leaders, it enrolls nearly 900 students. The college offers an undergraduate liberal arts cu ...
, brought him national and international attention outside academia. It was published in 1962 by the
University of Chicago Press The University of Chicago Press is the largest and one of the oldest university presses in the United States. It is operated by the University of Chicago and publishes a wide variety of academic titles, including ''The Chicago Manual of Style'', ...
and consists of essays that used non-mathematical economic models to explore issues of public policy. It sold over 400,000 copies in the first eighteen years and more than half a million since 1962.1982 edition preface of ''Capitalism and freedom'', p. xi of the 2002 edition ''Capitalism and Freedom'' was translated into eighteen languages. Friedman talks about the need to move to a classically liberal society, that free markets would help nations and individuals in the long-run and fix the efficiency problems currently faced by the United States and other major countries of the 1950s and 1960s. He goes through the chapters specifying an issue in each respective chapter from the role of government and money supply to social welfare programs to a special chapter on occupational licensure. Friedman concludes ''Capitalism and Freedom'' with his "classical liberal" stance that government should stay out of matters that do not need and should only involve itself when absolutely necessary for the survival of its people and the country. He recounts how the best of a country's abilities come from its free markets while its failures come from government intervention.


Post-retirement

In 1977, at the age of 65, Friedman retired from the
University of Chicago The University of Chicago (UChicago, Chicago, U of C, or UChi) is a private university, private research university in Chicago, Illinois. Its main campus is located in Chicago's Hyde Park, Chicago, Hyde Park neighborhood. The University of Chic ...
after teaching there for 30 years. He and his wife moved to San Francisco, where he became a visiting scholar at the
Federal Reserve Bank of San Francisco The Federal Reserve Bank of San Francisco (informally referred to as the San Francisco Fed) is the federal bank for the twelfth district in the United States. The twelfth district is made up of nine western states—Alaska, Arizona, California, ...
. From 1977 on, he was affiliated with the Hoover Institution at Stanford University. During 1977, Friedman was approached by Bob Chitester and the Free To Choose Network, Free to Choose Network. They asked him to create a television program presenting his economic and social philosophy. Friedman and his wife Rose worked on this project for the next three years, and during 1980, the ten-part series, titled ''Free to Choose'', was broadcast by the Public Broadcasting Service (PBS). The companion book to the series (co-authored by Milton and his wife, Rose Friedman), also titled ''Free To Choose'', was the bestselling Nonfiction, nonfiction book of 1980. Friedman served as an Adviser, unofficial adviser to Ronald Reagan during his Ronald Reagan 1980 presidential campaign, 1980 presidential campaign, and then served on the Economic Policy Advisory Board, President's Economic Policy Advisory Board for the rest of the Reagan Administration. Alan O. Ebenstein, Ebenstein says Friedman was "the 'guru' of the Presidency of Ronald Reagan, Reagan administration." In 1988 he received the National Medal of Science and Reagan honored him with the Presidential Medal of Freedom. Friedman is known now as one of the most influential economists of the 20th century. Throughout the 1980s and 1990s, Friedman continued to write op-ed, editorials and appear on television. He made several visits to Eastern Europe and to China, where he also advised governments. He was also for many years a Trustee of the Philadelphia Society.


Personal life

Friedman had two children, David D. Friedman, David and Jan Martel (bridge), Jan. He first met his wife, Rose Friedman (née Director), at the
University of Chicago The University of Chicago (UChicago, Chicago, U of C, or UChi) is a private university, private research university in Chicago, Illinois. Its main campus is located in Chicago's Hyde Park, Chicago, Hyde Park neighborhood. The University of Chic ...
in 1932, and wed six years later, in 1938. Friedman was noticeably shorter than some of his colleagues; he measured , and has been described as an "Elfin Libertarian" by Binyamin Appelbaum. Rose Friedman, when asked about Friedman's successes, said that “I have never had the desire to compete with Milton professionally (perhaps because I was smart enough to recognize I couldn't). On the other hand, he has always made me feel that his achievement is my achievement." During the 1960s, Friedman built, and subsequently maintained a cottage in Fairlee, Vermont, Fairlee, Vermont. Friedman also had an apartment in Russian Hill, San Francisco, Russian Hill, San Francisco, where he lived from 1977 until his death.


Religious views

According to a 2007 article in ''Commentary (magazine), Commentary'' magazine, his "parents were moderately observant Jews, but Friedman, after an intense burst of childhood piety, rejected religion altogether."Lanny Ebenstein (May 2007)
Milton Friedman
''Commentary (magazine), Commentary'', p. 286.
He described himself as an Agnosticism, agnostic. Friedman wrote extensively of his life and experiences, especially in 1998 in his memoirs with his wife, Rose Friedman, Rose, titled ''Two Lucky People''. In this book, Rose Friedman describes how she and Milton Friedman raised their two children, Janet and David, with a Christmas Tree in the home. "Orthodox Jews of course, do not celebrate Christmas. However, just as, when I was a child, my mother had permitted me to have a Christmas tree one year when my friend had one, she not only tolerated our having a Christmas tree, she even strung popcorn to hang on it."


Death

Friedman died of heart failure at the age of 94 years in San Francisco on November 16, 2006. He was still a working economist performing original economic research; his last column was published in ''The Wall Street Journal'' the day after his death. He was survived by his wife, Rose Friedman (who would die on August 18, 2009) and their two children,
David D. Friedman David Director Friedman (born February 12, 1945) is an American economist, physicist, legal scholar, and anarcho-capitalist theorist. Although he studied chemistry and physics and not law or economics, he is known for his textbook writings on m ...
, known for ''The Machinery of Freedom,'' as well as his unique anarcho-capitalism from a Chicago school of economics, Chicago School perspective, and attorney and Contract bridge, bridge player Jan Martel (bridge), Jan Martel.


Scholarly contributions


Economics

Friedman was 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. Its origins can be traced back to the 16th-century School of Salamanca#Money, value, and price, School of Salamanca or even further; however, Friedman's contribution is largely responsible for its modern popularization. He co-authored, with Anna Schwartz, ''A Monetary History of the United States, 1867–1960'' (1963), which was an examination of the role of the money supply and economy of the United States, economic activity in the U.S. history. Friedman was the main proponent of the monetarism, monetarist school of economics. He maintained that there is a close and stable association between inflation and the money supply, mainly that inflation could be avoided with proper regulation of the monetary base's growth rate. He famously used the analogy of "Helicopter money, dropping money out of a helicopter", in order to avoid dealing with money injection mechanisms and other factors that would overcomplicate his models. Friedman's arguments were designed to counter the popular concept of cost-push inflation, that the increased Price Level, general price level at the time was the result of increases in the price of oil, or increases in wages; as he wrote: Friedman 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 restricted severely. Friedman wrote extensively on the
Great Depression The Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagio ...
, and he termed the 1929–1933 period the Great Contraction. He argued that the Depression had been caused by an ordinary financial shock (economics), 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. This theory was put forth in ''A Monetary History of the United States'', and the chapter on the Great Depression was then published as a stand-alone book entitled ''The Great Contraction, 1929–1933''. Both books are still in print from the
Princeton University Press Princeton University Press is an independent publisher with close connections to Princeton University. Its mission is to disseminate scholarship within academia and society at large. The press was founded by Whitney Darrow, with the financial su ...
, and some editions include as an appendix a speech at a
University of Chicago The University of Chicago (UChicago, Chicago, U of C, or UChi) is a private university, private research university in Chicago, Illinois. Its main campus is located in Chicago's Hyde Park, Chicago, Hyde Park neighborhood. The University of Chic ...
event honoring Friedman in which Ben Bernanke made this statement:
Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression, you're right. We did it. We're very sorry. But thanks to you, we won't do it again.FRB Speech
FederalReserve.gov: Remarks by Governor Ben S. Bernanke, At the Conference to Honor Milton Friedman, University of Chicago, Nov. 8, 2002
/ref>
Friedman also argued for the removal of government intervention in Foreign exchange market, currency markets, thereby spawning an enormous literature on the subject, as well as promoting the practice of freely floating exchange rates. His close friend
George Stigler George Joseph Stigler (; January 17, 1911 – December 1, 1991) was an American economist. He was the 1982 laureate in Nobel Memorial Prize in Economic Sciences and is considered a key leader of the Chicago school of economics. Early life and e ...
explained, "As is customary in science, he did not win a full victory, in part because research was directed along different lines by the Rational expectations, theory of rational expectations, a newer approach developed by Robert Lucas Jr., Robert Lucas, also at the University of Chicago." The relationship between Friedman and Lucas, or new classical macroeconomics as a whole, was highly complex. The Friedmanian
Phillips curve The Phillips curve is an economic model, named after William Phillips hypothesizing a correlation between reduction in unemployment and increased rates of wage rises within an economy. While Phillips himself did not state a linked relationship ...
was an interesting starting point for Lucas, but he soon realized that the solution provided by Friedman was not quite satisfactory. Lucas elaborated a new approach in which
rational expectations In economics, "rational expectations" are model-consistent expectations, in that agents inside the model are assumed to "know the model" and on average take the model's predictions as valid. Rational expectations ensure internal consistency i ...
were presumed instead of the Friedmanian adaptive expectations. Due to this reformulation, the story in which the theory of the new classical Phillips curve was embedded radically changed. This modification, however, had a significant effect on Friedman's own approach, so, as a result, the theory of the Friedmanian Phillips curve also changed. Moreover, New classical macroeconomics, new classical adherent Neil Wallace, who was a graduate student at the
University of Chicago The University of Chicago (UChicago, Chicago, U of C, or UChi) is a private university, private research university in Chicago, Illinois. Its main campus is located in Chicago's Hyde Park, Chicago, Hyde Park neighborhood. The University of Chic ...
between 1960 and 1963, regarded Friedman's theoretical courses as a mess, highlighting the strained relationship between monetarism and New classical macroeconomics, new classical schools. Friedman was also known for his work on the consumption function, the
permanent income hypothesis The permanent income hypothesis (PIH) is a model in the field of economics to explain the formation of consumption patterns. It suggests consumption patterns are formed from future expectations and consumption smoothing. The theory was develope ...
(1957), which Friedman himself referred to as his best scientific work. This work contended that utility-maximizing consumers would spend a proportional amount of what they perceived to be their permanent income. Permanent Income refers to such factors like human capital. Windfall gains would mostly be saved because of the law of diminishing marginal utility. Friedman's essay "Essays in Positive Economics#The Methodology of Positive Economics, The Methodology of Positive Economics" (1953) provided the Epistemology, epistemological pattern for his own subsequent research and to a degree that of the Chicago School. 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 but by its simplicity and fruitfulness as an engine of prediction. That is, students should measure the accuracy of its predictions, rather than the 'soundness of its assumptions'. His argument was part of an ongoing debate among such statisticians as Jerzy Neyman, Leonard Savage, and Ronald Fisher. However, despite being an advocate of the free market, Milton Friedman believed that the government had two crucial roles. In an interview with Phil Donahue, Milton Friedman argued that "the two basic functions of a government are to protect the nation against foreign enemy, and to protect citizens against its fellows.” He also admitted that although privatization of national defense could reduce the overall cost, he has not yet thought of a way to make this privatization possible.


Rejection and subsequent evolution of the Philips Curve

Other important contributions include his critique of the
Phillips curve The Phillips curve is an economic model, named after William Phillips hypothesizing a correlation between reduction in unemployment and increased rates of wage rises within an economy. While Phillips himself did not state a linked relationship ...
and the concept of the
natural rate of unemployment The natural rate of unemployment is the name that was given to a key concept in the study of economic activity. Milton Friedman and Edmund Phelps, tackling this 'human' problem in the 1960s, both received the Nobel Memorial Prize in Economic Scien ...
(1968). This critique associated his name, together with that of Edmund Phelps, with the insight that a government that brings about greater inflation cannot permanently reduce unemployment by doing so. Unemployment may be temporarily lower, if the inflation is a surprise, but in the long run unemployment will be determined by the frictions and imperfections of the labor market. If the conditions are not met and inflation is expected, the "long run" effects will replace the "short term" effects. Through his critique, the Phillips curve, Philips curve evolved from a strict model emphasizing the connection between inflation and unemployment as being absolute, to a model which emphasized short term unemployment reductions and long term employment stagnations.Chang, Roberto (1997) "Is Low Unemployment Inflationary?" ''Economic Review,'' Federal Reserve Bank of Atlanta. pp. 4–13. Friedman's revised and updated Phillips Curve also changed as a result of Robert Lucas Jr., Robert Lucas's idea of Rational expectations, Rational Expectations, replacing the adaptive expectations Friedman used.


Statistics

One of his most famous contributions to statistics is sequential analysis, sequential sampling. Friedman did statistical work at the Division of War Research at Columbia, where he and his colleagues came up with the technique. It became, in the words of ''The New Palgrave Dictionary of Economics'', "the standard analysis of quality control inspection". The dictionary adds, "Like many of Friedman's contributions, in retrospect it seems remarkably simple and obvious to apply basic economic ideas to quality control; that, however, is a measure of his genius."Doherty, Brian
The Life and Times of Milton Friedman – Remembering the 20th century's most influential libertarian
. Reason.com. Retrieved on September 6, 2017.


Public policy positions


Federal Reserve and monetary policy

Although Friedman concluded the government does have a role in the monetary system he was critical of the Federal Reserve due to its poor performance and felt it should be abolished. He was opposed to Federal Reserve policies, even during the so-called 'Paul Volcker, Volcker shock' that was labeled Monetarism, 'monetarist'. Friedman believed the Federal Reserve System should ultimately be replaced with a computer program. He favored a system that would automatically buy and sell Security (finance), securities in response to changes in the money supply. The proposal to constantly grow the money supply at a certain predetermined amount every year has become known as Friedman's k-percent rule.Salter, Alexander, William. (2014). An Introduction to Monetary Policy Rules. ''Mercatus Workıng Paper. George Mason University''. There is debate about the effectiveness of a theoretical money supply targeting regime. The Fed's inability to meet its money supply targets from 1978–1982 led some to conclude it is not a feasible alternative to more conventional inflation and interest rate targeting. Towards the end of his life, Friedman expressed doubt about the validity of targeting the quantity of money. To date, most countries have adopted inflation targeting instead of the Friedman's k-percent rule, k-percent rule. Idealistically, Friedman actually favored the principles of the 1930s Chicago plan, which would have ended fractional reserve banking and, thus, private money creation. It would force banks to have 100% reserves backing deposits, and instead place money creation powers solely in the hands of the US Government. This would make targeting money growth more possible, as endogenous money created by fractional reserve lending would no longer be a major issue. Friedman was a strong advocate for floating exchange rates throughout the entire Bretton Woods system, Bretton-Woods period (1944–1971). He argued that a flexible exchange rate would make external adjustment possible and allow countries to avoid balance of payments crises. He saw fixed exchange rates as an undesirable form of government intervention. The case was articulated in an influential 1953 paper, "The Case for Flexible Exchange Rates," at a time when most commentators regarded the possibility of floating exchange rates as an unrealistic policy proposal.


Foreign policy

While Walter Oi is credited with establishing the economic basis for a volunteer military, Friedman was a proponent, and was credited with ending the draft, stating that the Conscription, draft was "inconsistent with a free society." In '' Capitalism and Freedom'', he argued conscription is inequitable and arbitrary, preventing young men from shaping their lives as they see fit. During the Presidency of Richard Nixon, Nixon administration he headed the committee to research a conversion to paid/volunteer armed force. He would later state his role in eliminating the conscription in the United States was his proudest accomplishment. Friedman did, however, believe the introduction of a system of universal military training as a reserve in cases of war-time could be justified. He still opposed its implementation in the United States, describing it as a “monstrosity”. Biographer Alan O. Ebenstein, Lanny Ebenstein noted a drift over time in Friedman's views from an interventionist to a more cautious foreign policy. He supported US involvement in the Second World War and initially supported a hard-line against Communism, but moderated over time. However, Friedman did state in a 1995 interview that he was an anti-interventionist. He opposed the Gulf War and the Iraq War. In a spring 2006 interview, Friedman said the US's stature in the world had been eroded by the Iraq War, but that it might be improved if Iraq were to become a Peace, peaceful and independent country.


Libertarianism and the Republican Party

Friedman was an economic advisor and speech writer in Barry Goldwater's failed presidential campaign in 1964. He was an advisor to California governor Ronald Reagan, and was active in Reagan's presidential campaigns. He served as a member of President Reagan's Economic Policy Advisory Board starting in 1981. In 1988, he received the Presidential Medal of Freedom and the National Medal of Science. Friedman stated that he was a libertarian philosophically, but a member of the U.S. Republican Party (United States), 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 said, "I think the term classical liberalism, 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." His citation for the Presidential Medal of Freedom reads: "He has used a brilliant mind to advance a moral vision: the vision of a society where men and women are free, free to choose, but where government is not as free to override their decisions. That vision has changed America, and it is changing the world. All of us owe a tremendous debt to this man’s towering intellect and his devotion to liberty."


Governmental involvement in the economy

Friedman was supportive of the state provision of some Public good (economics), public goods that private businesses are not considered as being able to provide. However, he argued that many of the services performed by government could be performed better by the private sector. Above all, if some public goods are provided by the state, he believed that they should not be a legal monopoly where private competition is prohibited; for example, he wrote: In 1962, Friedman criticized Social Security (United States), Social Security in his book '' Capitalism and Freedom'', arguing that it had created welfare dependency. However, in the penultimate chapter of the same book, Friedman argued that while Capitalism#Economic growth, capitalism had greatly reduced the extent of poverty in absolute terms, "poverty is in part a Poverty threshold, relative matter, [and] even in [wealthy Western] countries, there are clearly many people living under conditions that the rest of us label as poverty." Friedman also noted that while private charity could be one recourse for alleviating poverty and cited late 19th century Britain and the United States as exemplary periods of extensive private charity and eleemosynary activity, he made the following point: Friedman argued further that other advantages of the negative income tax were that it could fit directly into the tax system, would be less costly, and would reduce the administrative burden of implementing a social safety net. Friedman reiterated these arguments 18 years later in ''Free to Choose'', with the additional proviso that such a reform would only be satisfactory if it replaced the current system of welfare programs rather than augment it. According to economist Robert H. Frank, writing in ''The New York Times'', Friedman's views in this regard were grounded in a belief that while "market forces ... accomplish wonderful things", they "cannot ensure a distribution of income that enables all citizens to meet basic economic needs". Friedman also criticized Urban renewal#United States, urban renewal programs in the United States due to their Housing discrimination in the United States, racially discriminatory and Gentrification in the United States, economically regressive effects. In 1979, Friedman expressed support for environmental taxes in general in an interview on ''The Phil Donahue Show'', saying "the best way to [deal with pollution] is to impose a tax on the cost of the pollutants emitted by a car and make an incentive for car manufacturers and for consumers to keep down the amount of pollution." In ''Free to Choose'', Friedman reiterated his support for environmental taxes as compared with increased Environmental law, environmental regulation, stating "The preservation of the environment and the avoidance of undue pollution are real problems and they are problems concerning which the government has an important role to play. … Most economists agree that a far better way to control pollution than the present method of specific regulation and supervision is to introduce market discipline by imposing effluent charges." In his 1955 article "The Role of Government in Education" Friedman proposed supplementing publicly operated schools with privately run but publicly funded schools through a system of
school voucher A school voucher, also called an education voucher in a voucher system, is a certificate of government funding for students at schools chosen by themselves or their parents. Funding is usually for a particular year, term, or semester. In some cou ...
s. Reforms similar to those proposed in the article were implemented in, for example, Chile in 1981 and Sweden in 1992. In 1996, Friedman, together with his wife, founded the Friedman Foundation for Educational Choice to advocate
school choice School choice is a term for education options that allow students and families to select alternatives to public schools. The most common in the United States, by both the number of programs and by the number of participating students are scho ...
and vouchers. In 2016, the Friedman Foundation changed its name to
EdChoice EdChoice, formerly the Friedman Foundation for Educational Choice, is an American education reform organization headquartered in Indianapolis, Indiana. It was founded in 1996 by economist spouses Milton and Rose D. Friedman. The organization's m ...
to honor the Friedmans' desire to have the educational choice movement live on without their names attached to it after their deaths. Michael Walker (economist), Michael Walker of the Fraser Institute and Friedman hosted a series of conferences from 1986 to 1994. The goal was to create a clear definition of economic freedom and a method for measuring it. Eventually this resulted in the first report on worldwide economic freedom, ''Economic Freedom in the World''. This annual report has since provided data for numerous peer-reviewed studies and has influenced policy in several nations. With sixteen other distinguished economists he opposed the Copyright Term Extension Act, and signed on to an amicus brief filed in ''Eldred v. Ashcroft''. Friedman jokingly described it as a "wikt:no-brainer, no-brainer". Friedman argued for stronger basic legal (constitutional) protection of economic rights and freedoms to further promote industrial-commercial growth and prosperity and buttress democracy and freedom and the rule of law generally in society.


Social issues

Friedman also supported libertarian policies such as legalization of Recreational drug use, drugs and prostitution. During 2005, Friedman and more than 500 other economists advocated discussions regarding the economic benefits of the Legalization of non-medical cannabis in the United States, legalization of marijuana. Friedman was also a supporter of gay rights. He never specifically supported same-sex marriage, instead saying "I do not believe there should be any discrimination against gays." Friedman favored immigration, saying "legal and illegal immigration has a very positive impact on the U.S. economy." However, he suggested that immigrants ought not to have access to the welfare system. Friedman stated that immigration from Mexico had been a "good thing", in particular illegal immigration. Friedman argued that illegal immigration was a boon because they "take jobs that most residents of this country are unwilling to take, they provide employers with workers of a kind they cannot get" and they do not use welfare. In ''Free to Choose'', Friedman wrote:
No arbitrary obstacles should prevent people from achieving those positions for which their talents fit them and which their values lead them to seek. Not birth, nationality, color, religion, sex, nor any other irrelevant characteristic should determine the opportunities that are open to a person – only his abilities.
Friedman also famously argued that the welfare state must end before immigration, or more specifically, before open borders, because Immigration, immigrants might have an incentive to come directly because of welfare payments. Economist Bryan Caplan has disputed this assertion, arguing that welfare is generally distributed not among immigrants, but instead retirees, through Social Security (United States), Social Security. Friedman was against public housing as he believed it was also a form of welfare. He believed the one of the main arguments that politicians have for public housing is that regular low income housing was too expensive due to the imposed higher cost of a fire and police department. He believed that it would only increase taxes and not benefit low income people in the long run. Friedman was an advocate for direct cash instead of public housing believing that the people would be better off that way. He argued that Liberalism in the United States, liberals would never agree with this idea due to them not trusting their own citizens. He also stated that regression has already happened with more land being left vacant due to slow construction. Friedman argued that public housing instead encourages juvenile delinquency. Friedman was also against minimum wage laws, he saw them as a clear case as one can find that the precise opposite is happening when this was attempted. Minimum wage laws would increase unemployment in his eyes and that employers would not hire back workers that were already there for less pay. In his view, this would leave low income people worse off because the voters for minimum wage laws would then become the victims of unemployment. He believed that these ideas of new minimum wage laws came from Northern factories and Unions, in an attempt to reduce competition from the South.


Honors, recognition and legacy

George H. Nash, a leading historian of American conservatism, says that by "the end of the 1960s he was probably the most highly regarded and influential conservative scholar in the country, and one of the few with an international reputation." In 1971, Friedman received the Golden Plate Award of the Academy of Achievement, American Academy of Achievement. Friedman allowed the libertarian Milton Friedman Prize, Cato Institute to use his name for its biennial Milton Friedman Prize for Advancing Liberty beginning in 2001. A Friedman Prize was given to the late British economist Peter Thomas Bauer, Peter Bauer in 2002, Peruvian economist Hernando de Soto (economist), Hernando de Soto in 2004, Mart Laar, former Estonian Prime Minister in 2006 and a young Venezuelan student Yon Goicoechea in 2008. His wife Rose, sister of Aaron Director, with whom he initiated the EdChoice, Friedman Foundation for Educational Choice, served on the international selection committee. Friedman was also a recipient of the Nobel Memorial Prize in Economic Sciences, Nobel Memorial Prize in Economics. Upon Friedman's death, Harvard President Lawrence Summers called him "The Great Liberator", saying "any honest Democrat will admit that we are now all Friedmanites." He said Friedman's great popular contribution was "in convincing people of the importance of allowing free markets to operate." Stephen Moore (writer), Stephen Moore, a member of the editorial forward of ''The Wall Street Journal'', said in 2013: "Quoting the most-revered champion of free-market economics since Adam Smith has become a little like quoting the Bible." He adds, "There are sometimes multiple and conflicting interpretations." Although Post-Keynesian economics, post-Keynesian economist John Kenneth Galbraith, J. K. Galbraith was a prominent critic of Friedman and his ideology, he observed that "The age of John Maynard Keynes gave way to the age of Milton Friedman."


1976 Nobel Memorial Prize in Economic Sciences

Friedman won 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 ...
, the sole recipient for 1976, "for his achievements in the fields of consumption analysis, money supply, monetary history and theory and for his demonstration of the complexity of stabilization policy." His appointment was controversial, mainly for his association with military dictator Augusto Pinochet. Some economists, such as Institutional economics, Institutional economist and 1974 Nobel Prize winner Gunnar Myrdal, criticized Friedman, and Myrdal's own 1974 Nobel Memorial Prize in Economic Sciences, Nobel Prize partner Friedrich Hayek, for being reactionaries. Myrdal's criticism caused some economists to oppose the Nobel Memorial Prize in Economic Sciences, Sveriges Riksbank Prize in Economics Sciences in Memory of Alfred Nobel itself.


Hong Kong

Friedman once said: "If you want to see capitalism in action, go to Hong Kong." He wrote in 1990 that the economy of Hong Kong, Hong Kong economy was perhaps the best example of a Market economy, free market economy. One month before his death, he wrote "Hong Kong Wrong – What would John James Cowperthwaite, Cowperthwaite say?" in ''The Wall Street Journal'', criticizing Donald Tsang, Chief Executive of Hong Kong, for abandoning "positive non interventionism." Tsang later said he was merely changing the slogan to "big market, small government", where small government is defined as less than 20% of GDP. In a debate between Tsang and his rival Alan Leong before the 2007 Hong Kong Chief Executive election, Leong introduced the topic and jokingly accused Tsang of angering Friedman to death (Friedman had died only a year prior).


Chile

During 1975, two years after the 1973 Chilean coup d'état, military coup that brought Military dictatorship, military dictator Augusto Pinochet to power and ended the Presidency of Salvador Allende, government of Salvador Allende, the economy of Chile experienced a severe crisis. Friedman and Arnold Harberger accepted an invitation of a private Chilean foundation to visit Chile and speak on principles of economic freedom. He spent seven days in Chile giving a series of lectures at the Pontifical Catholic University of Chile and the University of Chile. One of the lectures was entitled "The Fragility of Freedom" and according to Friedman, "dealt with precisely the threat to freedom from a centralized military government." In a letter to Pinochet of April 21, 1975, Friedman considered the "key economic problems of Chile are clearly ... inflation and the promotion of a healthy social market economy".[Two Lucky People: Memoirs By Milton Friedman, Rose D. Friedman. Appendix A, pp. 591–593. Letter from Friedman to Pinochet, April 21, 1975.] He stated that "There is only one way to end inflation: by drastically reducing the rate of increase of the quantity of money" and that "cutting government spending is by far and away the most desirable way to reduce the fiscal deficit, because it ... strengthens the private sector thereby laying the foundations for ''healthy'' economic growth". As to how rapidly inflation should be ended, Friedman felt that "for Chile where inflation is raging at 10–20% a month ... gradualism is not feasible. It would involve so painful an operation over so long a period that the ''patient'' would not survive." Choosing "a brief period of higher unemployment" was the lesser evil.. and that "the experience of Germany, ... of Brazil ..., of the post-war adjustment in the U.S. ... all argue for shock treatment". In the letter Friedman recommended to deliver the shock approach with "a package to eliminate the surprise and to relieve acute distress" and "for definiteness let me sketch the contents of a package proposal ... to be taken as illustrative" although his knowledge of Chile was "too limited to enable [him] to be precise or comprehensive". He listed a "sample proposal" of 8 Monetary policy, monetary and Fiscal policy, fiscal measures including "the removal of as many as obstacles as possible that now hinder the private market. For example, suspend ... the present law against discharging employees". He closed, stating "Such a shock program could end inflation in months". His letter suggested that cutting spending to reduce the fiscal deficit would result in less transitional unemployment than raising taxes. Sergio de Castro (economist), Sergio de Castro, a Chilean Chicago School graduate, became the nation's Minister of Finance in 1975. During his six-year tenure, foreign investment increased, restrictions were placed on striking and labor unions, and GDP rose yearly. A foreign exchange program was created between the Catholic University of Chile and the
University of Chicago The University of Chicago (UChicago, Chicago, U of C, or UChi) is a private university, private research university in Chicago, Illinois. Its main campus is located in Chicago's Hyde Park, Chicago, Hyde Park neighborhood. The University of Chic ...
. Many other Chicago School alumni were appointed government posts during and after Pinochet's dictatorship; others taught its economic doctrine at Chilean universities. They became known as the Chicago Boys. Friedman defended his activity in Chile on the grounds that, in his opinion, the adoption of free market policies not only improved the economic situation of Chile but also contributed to the amelioration of Military dictatorship of Chile (1973–90), Pinochet's rule and to the eventual Chilean transition to democracy, transition to a democratic government during 1990. That idea is included in '' Capitalism and Freedom'', in which he declared that economic freedom is not only desirable in itself but is also a necessary condition for political freedom. In his 1980 documentary ''Free to Choose'', he said the following: "Chile is not a politically free system, and I do not condone the system. But the people there are freer than the people in Communist societies because government plays a smaller role. ... The conditions of the people in the past few years has been getting better and not worse. They would be still better to get rid of the junta and to be able to have a free democratic system." In 1984, Friedman stated that he has "never refrained from criticizing the political system in Chile." In 1991 he said: "I have nothing good to say about the political regime that Pinochet imposed. It was a terrible political regime. The real miracle of Chile is not how well it has done economically; the real miracle of Chile is that a military junta was willing to go against its principles and support a free market regime designed by principled believers in a free market. ... In Chile, the drive for political freedom, that was generated by economic freedom and the resulting economic success, ultimately resulted in a referendum that introduced political democracy. Now, at long last, Chile has all three things: political freedom, human freedom and economic freedom. Chile will continue to be an interesting experiment to watch to see whether it can keep all three or whether, now that it has political freedom, that political freedom will tend to be used to destroy or reduce economic freedom." He stressed that the lectures he gave in Chile were the same lectures he later gave in China and other socialist states. He further stated "I do not consider it as evil for an economist to render technical economic advice to the Chilean Government, any more than I would regard it as evil for a physician to give technical medical advice to the Chilean Government to help end a medical plague." During the 2000 PBS documentary ''The Commanding Heights'' (based on The Commanding Heights, the book), Friedman continued to argue that "free markets would undermine [Pinochet's] political centralization and political control.", and that criticism over his role in Chile missed his main contention that freer markets resulted in freer people, and that Chile's unfree economy had caused Pinochet's rise. Friedman advocated for free markets which undermined "political centralization and political control". Because of his involvement with the government of Chile, which was a dictatorship at the time of his visit, there were international protests, spanning from Sweden to America when Friedman was awarded the Nobel Memorial Prize in 1976. Friedman was accused of supporting the military dictatorship in Chile because of the relation of economists of the University of Chicago to Pinochet, and a seven-day trip he took to Chile during March 1975 (less than two years after the coup that ended with the death of President Salvador Allende). Friedman answered that he was never an advisor to the dictatorship, but only gave some lectures and seminars on inflation, and met with officials, including Augusto Pinochet the head of the military dictatorship, while in Chile. After a 1991 speech on drug legalization, Friedman answered a question on his involvement with the Pinochet regime, saying that he was never an advisor to Pinochet (also mentioned in his 1984 Iceland interview), but that a group University of Chicago students were involved in Chile's economic reforms. Friedman credited these reforms with high levels of economic growth and with the establishment of democracy that has subsequently occurred in Chile. In October 1988, after returning from a lecture tour of China during which he had met with Zhao Ziyang, General Secretary of the Chinese Communist Party, Friedman wrote to The Stanford Daily asking if he should anticipate a similar "avalanche of protests for having been willing to give advice to so evil a government? And if not, why not?"


Iceland

Friedman visited Iceland during the autumn of 1984, met with important Icelanders and gave a lecture at the University of Iceland on the "tyranny of the ''status quo''." He participated i
a lively television debate
on August 31, 1984, with socialist intellectuals, including Ólafur Ragnar Grímsson, who later became President of Iceland. When they complained that a fee was charged for attending his lecture at the university and that, hitherto, lectures by visiting scholars had been free-of-charge, Friedman replied that previous lectures had not been free-of-charge in a meaningful sense: lectures always have related costs. What mattered was whether attendees or non-attendees covered those costs. Friedman thought that it was fairer that only those who attended paid. In this discussion Friedman also stated that he did not receive any money for delivering that lecture.


Estonia

Although Friedman never visited Estonia, his book ''Free to Choose'' influenced Estonia's then 32-year-old prime minister, Mart Laar, who has claimed that it was the only book on economics he had read before taking office. Laar's reforms are often credited with responsibility for transforming Estonia from an impoverished Republics of the Soviet Union, Soviet republic to the "Baltic Tiger." A prime element of Laar's program was introduction of the flat tax. Laar won the Milton Friedman Prize for Advancing Liberty, 2006 Milton Friedman Prize for Advancing Liberty, awarded by the Cato Institute.


United Kingdom

After 1950 Friedman was frequently invited to lecture in Britain, and by the 1970s his ideas had gained widespread attention in conservative circles. For example, he was a regular speaker at the Institute of Economic Affairs (IEA), a libertarian think tank.
Conservative Conservatism is a cultural, social, and political philosophy that seeks to promote and to preserve traditional institutions, practices, and values. The central tenets of conservatism may vary in relation to the culture and civilization in ...
politician
Margaret Thatcher Margaret Hilda Thatcher, Baroness Thatcher (; 13 October 19258 April 2013) was Prime Minister of the United Kingdom from 1979 to 1990 and Leader of the Conservative Party from 1975 to 1990. She was the first female British prime ...
closely followed IEA programs and ideas, and met Friedman there in 1978. He also strongly influenced Keith Joseph, who became Thatcher's senior advisor on economic affairs, as well as Alan Walters and Patrick Minford, two other key advisers. Major newspapers, including the ''Daily Telegraph,'' ''The Times,'' and ''The Financial Times'' all promulgated Friedman's monetarist ideas to British decision-makers. Friedman's ideas strongly influenced Thatcher and her allies when she became Prime Minister in 1979. Galbraith strongly criticised the "workability of the Friedmanite formula" for which, he said, "Britain has volunteered to be the guinea pig".


United States

After his death a number of obituaries and articles were written in Friedman's honor, citing him as one of the most important and influential economists of the Post-World War II, post-war era. Milton Friedman's somewhat controversial legacy in America remains strong within the Conservatism in the United States, conservative movement. However, some journalists and economists like Noah Smith and Scott Sumner have argued Friedman's academic legacy has been buried under his political philosophy and misinterpreted by modern conservatives.


Criticism of published works

Econometrician David Forbes Hendry, David Hendry criticized part of Friedman's and Anna Schwartz's 1982 ''Monetary Trends''. When asked about it during an interview with Icelandic TV in 1984, Friedman said that the criticism referred to a different problem from that which he and Schwartz had tackled, and hence was irrelevant, and pointed out the lack of consequential peer review amongst econometricians on Hendry's work. In 2006, Hendry said that Friedman was guilty of "serious errors" of misunderstanding that meant "the t-ratios he reported for UK money demand were overstated by nearly 100 per cent", and said that, in a paper published in 1991 with Neil Ericsson, he had refuted "almost every empirical claim ... made about UK money demand" by Friedman and Schwartz. A 2004 paper updated and confirmed the validity of the Hendry–Ericsson findings through 2000. Some commentators believe that Friedman was not open enough, in their view, to the possibility of market inefficiencies. Economist Noah Smith argues that while Friedman made many important contributions to economic theory not all of his ideas relating to macroeconomics have entirely held up over the years and that too few people are willing to challenge them. Political scientist C. B. Macpherson disagreed with Friedman's historical assessment of economic freedom leading to political freedom, suggesting that political freedom actually gave way to economic freedom for property-owning elites. He also challenged the notion that markets efficiently allocated resources and rejected Negative liberty, Friedman's definition of liberty. Friedman's Essays in Positive Economics, positivist methodological approach to economics has also been critiqued and debated. Finland, Finnish economist Uskali Mäki argued some of his assumptions were unrealistic and vague. Friedman has been criticized by some prominent Austrian School, Austrian economists, including Murray Rothbard and Walter Block. Block called Friedman a Socialism, "socialist", and was critical of his support for a Central bank, central banking system, saying "First and foremost, this economist supported the Federal Reserve, Federal Reserve System all throughout his professional life. That organization of course does not own the Money supply, money stock, but controls it. Friedman was an inveterate hater of the gold standard, denigrating its advocates as 'gold bugs'." Rothbard criticized Friedman's conclusion that the
Great Depression The Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagio ...
happened as a result of a deflationary spiral, arguing that this is inconsistent with the data, because during the period described by Friedman as "The Great Contraction", the money supply increased. Although the book was described by the Cato Institute as among the greatest economics books in the 20th century, and ''A Monetary History of the United States'' is widely considered to be among the most influential economics books ever made, it has endured criticisms for its conclusion that the Federal Reserve was to blame for the
Great Depression The Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagio ...
. Some economists, including noted Friedman critic Peter Temin, have raised questions about the legitimacy of Friedman's claims about whether or not Money supply, monetary quantity levels were Endogenous money, endogenous rather than Exogeny, exogenously determined, as ''A Monetary History of the United States'' posits. Nobel-prize winning economist Paul Krugman argued that the Great Recession, 2008 recession proved that, during a recession, a central bank cannot control broad money (M3 monetary aggregate, M3 money, as defined by the OECD), and even if it can, the money supply does not bear a direct or proven relationship with Gross domestic product, GDP. According to Krugman, this was true in the 1930s, and the claim that the Federal Reserve could have avoided the Great Depression by reacting to what Friedman called '' The Great Contraction'' is "highly dubious". James Tobin questioned the importance of velocity of money, and how informative this measure of the frequency of transactions is to understanding the various fluctuations observed in ''A Monetary History of the United States''. Economic history, Economic historian Barry Eichengreen argued that because of the gold standard, which was at this point in time the chief monetary system of the world, the Federal Reserve, Federal Reserve's hands were tied. This was because, in order to retain the credibility of the gold standard, the Federal Reserve could not undertake actions like dramatically expanding the money supply as proposed by Friedman and Schwartz. Lawrence Mishel, distinguished fellow of the Economic Policy Institute, argues that wages have been kept low in the United States because of the Friedman doctrine, namely the adoption of corporate practices and Economic policy, economic policies (or the blocking of reforms) at the behest of business and the Elite, wealthy elite, which resulted in the systematic Empowerment, disempowerment of workers. He argues that the lack of worker power caused wage suppression, increased Economic inequality, wage inequality, and exacerbated racial disparities. Notably, mechanisms such as excessive unemployment, globalization, eroded International labour law, labor standards (and their lack of enforcement), weakened collective bargaining, and corporate structure changes that disadvantage workers, all collectively functioned to keep wages low. From 1980 to 2020, while economy-wide productivity rose almost 70 percent, hourly compensation for typical workers increased less than 12 percent, whilst the earnings of the top 1 percent and 0.1 percent increased 158 percent and 341 percent, respectively.


Selected bibliography

* ''A Theory of the Consumption Function'' (1957) . * ''A Program for Monetary Stability'' (Fordham University Press, 1960) 110 pp
online version
* '' Capitalism and Freedom'' (1962), highly influential series of essays that established Friedman's position on major issues of public policy
excerpts
* ''A Monetary History of the United States, 1867–1960'', with Anna J. Schwartz, 1963; part 3 reprinted as ''The Great Contraction'' * "The Role of Monetary Policy." ''American Economic Review,'' Vol. 58, No. 1 (Mar. 1968), pp. 1–1
JSTOR
presidential address to American Economics Association * "Inflation and Unemployment: Nobel Lecture", 1977, ''Journal of Political Economy''. Vol. 85, pp. 451–472
JSTOR
* ''Free to Choose, Free to Choose: A Personal Statement'', with Rose Friedman, (1980), highly influential restatement of policy views * ''The Essence of Friedman'', essays edited by Kurt R. Leube, (1987) () * ''Two Lucky People: Memoirs'' (with Rose Friedman) (1998
excerpt and text search
* ''Milton Friedman on Economics: Selected Papers by Milton Friedman'', edited by Gary S. Becker (2008)


See also

* Bob Chitester * '' Capitalism and Freedom'' * Causes of the Great Depression * ''Free to Choose'' * Friedrich Hayek * Friedman doctrine *
George Stigler George Joseph Stigler (; January 17, 1911 – December 1, 1991) was an American economist. He was the 1982 laureate in Nobel Memorial Prize in Economic Sciences and is considered a key leader of the Chicago school of economics. Early life and e ...
* Great Contraction * History of economic thought * List of economists * List of Jewish Nobel laureates * List of Presidential Medal of Freedom recipients * Ludwig von Mises * Monetary/fiscal debate * "We are all Keynesians now"


Notes


References


Sources

* * *


Further reading

* * Jones, Daniel Stedman. ''Masters of the Universe: Hayek, Friedman, and the Birth of Neoliberal Politics'' (2nd ed. 2014) * * * Wood, John Cunningham, and Ronald N. Wood, ed. (1990), ''Milton Friedman: Critical Assessments'', v. 3. Routledge.


External links


Collected Works of Milton Friedman
(Multiple Text, audio, video)
The Milton Friedman papers
at th
Hoover Institution Archives


at the University of Chicago Library
Profile
an

at Research Papers in Economics/RePEc *
Becker Friedman Institute
at the
University of Chicago The University of Chicago (UChicago, Chicago, U of C, or UChi) is a private university, private research university in Chicago, Illinois. Its main campus is located in Chicago's Hyde Park, Chicago, Hyde Park neighborhood. The University of Chic ...

The Foundation for Educational Choice


at Scarlett

1976 lecture at NobelPrize.org
Nobel Memorial Prize acceptance speech
*
Milton Friedman vs. The Fed Bailout
by Michael Hirsh, ''Newsweek'', July 17, 2009
Four Deformations of the Apocalypse
David Stockman, ''The New York Times'', July 31, 2010 * *
A collection of Milton Friedman's works
; Videos * *
''Booknotes'' interview with Friedman on the 50th Anniversary Edition of F.A. Hayek's ''Road to Serfdom'', November 20, 1994.
*
''In Depth'' interview with Friedman, September 3, 2000
* * * *

''Commanding Heights'', Public Broadcasting Service, PBS, October 1, 2000, interview, profile and video
"Free To Choose" (1980), a PBS TV series by Milton Friedman

Milton Friedman
at the Cato Institute
Free to Choose Network
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