include monographs, books, scholarly articles, papers, magazine columns, television programs, and lectures, and cover a broad range of economic topics and public policy issues.
His books and essays have had global influence, including in former communist states
A 2011 survey of economists commissioned by the EJW
ranked Friedman as the second-most popular economist of the 20th century, following only by John Maynard Keynes
Upon his death, The Economist
described him as "the most influential economist of the second half of the 20th century ... possibly of all of it".
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).
He graduated from Rutgers in 1932.
During the 1933–1934 academic year, he had a fellowship
at Columbia University
, 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
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 that he and his wife "regarded the job-creation programs such as the WPA
, 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 that the money supply should simply have been expanded, instead of contracted.
Later, Friedman and his colleague Anna Schwartz
wrote A Monetary History of the United States, 1867–1960
, which argued that the Great Depression
was caused by a severe monetary contraction
due to banking crises and poor policy on the part of the Federal Reserve
. Robert J. Shiller
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
. Friedman began employment with the National Bureau of Economic Research
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
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.
During 1940, Friedman was appointed as an assistant professor teaching Economics at the University of Wisconsin–Madison
, but encountered antisemitism
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
. As a Treasury spokesman during 1942, he advocated a Keynesian
policy of taxation. He helped to invent the payroll withholding tax
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."
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
(headed by W. Allen Wallis
and Harold Hotelling
), where he spent the rest of World War II
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
(where his friend George Stigler was employed). On February 12, 1945, his son, David D. Friedman
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
to Princeton University
). 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 that time, Arthur F. Burns
, who was then the head of the National Bureau of Economic Research
, and later chairman of the Federal Reserve
, 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
. 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, an economic historian
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
Friedman spent the 1954–1955 academic year as a Fulbright Visiting Fellow at Gonville and Caius College, Cambridge
. At the time, the Cambridge economics faculty was divided into a Keynesian majority (including Joan Robinson
and Richard Kahn
) and an anti-Keynesian minority (headed by Dennis Robertson
). Friedman speculated that 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
From 1968 to 1978, he and Paul Samuelson
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
, and it reanalysed the relationship displayed "between aggregate consumption or aggregate savings and aggregate income."
Friedman's counterpart Keynes
believed that 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
. Friedman thought that income consisted of several components, namely transitory and permanent. He established the formula
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 that affected 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
, which contradicts Keynes' marginal propensity to consume
. Although this work presented many controversial points of view that 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
is among the many contributions which were listed as reasons for his Nobel Prize.
His work was later expanded on by Christopher D. Carroll, especially in regards to the absence of liquidity constraints
Capitalism and Freedom
His book Capitalism and Freedom
, inspired by a series of lectures he gave at Wabash College
brought him national and international attention outside academia.
It was published in 1962 by the University of Chicago Press
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. It has been 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 a specific 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"
(more accurately, libertarian
) 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.
In 1977, at the age of 65, Friedman retired from the University of Chicago 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. From 1977 on, he was affiliated with the Hoover Institution
at Stanford University
. During the same year, Friedman was approached by the Free To Choose Network
and asked to create a television program presenting his economic and social philosophy.
The Friedmans 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 book of 1980.
Friedman is known now as one of the most influential economists of the 20th century.
Throughout the 1980s and 1990s, Friedman continued to write 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
According to a 2007 article in Commentary
magazine, his "parents were moderately observant Jews
, but Friedman, after an intense burst of childhood piety, rejected religion altogether."
He described himself as an agnostic
Friedman wrote extensively of his life and experiences, especially in 1998 in his memoirs with his wife, 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."
Friedman was the main proponent of the 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 "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 general price level
at the time was the result of increases in the price of oil, or increases in wages; as he wrote:
Inflation is always and everywhere a monetary phenomenon.
— Milton Friedman, 1963.
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
, and he termed the 1929–1933 period the Great Contraction
. He argued that the Depression had been caused by an ordinary financial shock
whose duration and seriousness were greatly increased by the subsequent contraction of the money supply caused by the misguided policies of the directors of the Federal Reserve.
The Fed was largely responsible for converting what might have been a garden-variety recession, although perhaps a fairly severe one, into a major catastrophe. Instead of using its powers to offset the depression, it presided over a decline in the quantity of money by one-third from 1929 to 1933 ... Far from the depression being a failure of the free-enterprise system, it was a tragic failure of government.
— Milton Friedman, Two Lucky People, 233
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 Princeton University Press, and some editions include as an appendix a speech at a University of Chicago
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.
Friedman also argued for the cessation of government intervention in currency markets
, thereby spawning an enormous literature on the subject, as well as promoting the practice of freely floating exchange rates
. His close friend George Stigler
explained, "As is customary in science, he did not win a full victory, in part because research was directed along different lines by the theory of rational expectations
, a newer approach developed by Robert Lucas
, also at the University of Chicago."
The relationship between Friedman and Lucas, or new classical macroeconomics
as a whole, was highly complex. The Friedmanian Phillips curve
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
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 Neil Wallace
, who was a graduate student at the University of Chicago
between 1960 and 1963, regarded Friedman's theoretical courses as a mess.
This evaluation clearly indicates the broken relationship between Friedmanian monetarism
and new classical macroeconomics.
Friedman's essay "The Methodology of Positive Economics
" (1953) provided the 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
and the concept of the natural rate of unemployment
(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" ones.
Through his critique, the Philips curve
evolved from a strict model emphasizing the connection between inflation
as being absolute, to a model which emphasized short term unemployment reductions and long term employment stagnations.
One of his most famous contributions to statistics is 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."
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 'Volcker shock
' that was labeled 'monetarist'.
Friedman believed that the Federal Reserve System should ultimately be replaced with a computer program
He favored a system that would automatically buy and sell 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
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 has 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.
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
period. 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 a fantasy.
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 vouchers
Reforms similar to those proposed in the article were implemented in, for example, Chile in 1981 and Sweden
In 1996, Friedman, together with his wife, founded the Friedman Foundation for Educational Choice to advocate school choice
and vouchers. In 2016, the Friedman Foundation changed its name to EdChoice
to honor the Friedmans' desire to have the educational choice movement live on without their names attached to it after their deaths.
While Walter Oi
is credited with establishing the economic basis for a volunteer military
, Friedman was a proponent, stating that the draft
was "inconsistent with a free society."
In Capitalism and Freedom
, he argued that conscription is inequitable and arbitrary, preventing young men from shaping their lives as they see fit.
During the Nixon administration he headed the committee to research a conversion to paid/volunteer armed force. He would later state that his role in eliminating the conscription in the United States
was his proudest accomplishment.
Friedman did, however, believe that the introduction of a system of universal military training as a reserve in cases of war-time could be justified.
But opposed its implementation in the United States, describing it as a “monstrosity”.
Biographer 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 that 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 peaceful and independent country.
Libertarianism and the Republican Party
Friedman was an economic advisor and speech writer in Barry Goldwater
's 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
. He said that he was a libertarian philosophically, but a member of the U.S. Republican Party
for the sake of "expediency" ("I am a libertarian with a small 'l' and a Republican with a capital 'R.' And I am a Republican with a capital 'R' on grounds of expediency, not on principle.") But, he said, "I think the term classical liberal
is also equally applicable. I don't really care very much what I'm called. I'm much more interested in having people thinking about the ideas, rather than the person."
Public goods and monopoly
Friedman was supportive of the state provision of some 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:
There is no way to justify our present public monopoly of the post office. It may be argued that the carrying of mail is a technical monopoly
and that a government monopoly is the least of evils. Along these lines, one could perhaps justify a government post office, but not the present law, which makes it illegal for anybody else to carry the mail. If the delivery of mail is a technical monopoly, no one else will be able to succeed in competition with the government. If it is not, there is no reason why the government should be engaged in it. The only way to find out is to leave other people free to enter.
Social security, welfare programs and negative income tax
It can be argued that private charity is insufficient because the benefits from it accrue to people other than those who make the gifts— ... a neighborhood effect
. I am distressed by the sight of poverty; I am benefited by its alleviation; but I am benefited equally whether I or someone else pays for its alleviation; the benefits of other people's charity therefore partly accrue to me. To put it differently, we might all of us be willing to contribute to the relief of poverty, provided everyone else did. We might not be willing to contribute the same amount without such assurance.
In small communities, public pressure can suffice to realize the proviso even with private charity. In the large impersonal communities that are increasingly coming to dominate our society, it is much more difficult for it to do so. Suppose one accepts, as I do, this line of reasoning as justifying governmental action to alleviate poverty
; to set, as it were, a floor under the standard of life of every person in the community
. [While there are questions of how much should be spent and how, the] arrangement that recommends itself on purely mechanical grounds is a negative income tax
. ... The advantages of this arrangement are clear. It is directed specifically at the problem of poverty. It gives help in the form most useful to the individual, namely, cash. It is general and could be substituted for the host of special measures now in effect. It makes explicit the cost borne by society. It operates outside the market. Like any other measures to alleviate poverty, it reduces the incentives of those helped to help themselves, but it does not eliminate that incentive entirely, as a system of supplementing incomes up to some fixed minimum would. An extra dollar earned always means more money available for expenditure.
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 supported libertarian
policies such as legalization of drugs
and prostitution. During 2005, Friedman and more than 500 other economists advocated discussions regarding the economic benefits of the 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.
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.
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.
Honors, recognition and legacy
Friedman in 1976
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 American Academy of Achievement
Friedman allowed the libertarian Cato Institute
to use his name for its biannual Milton Friedman Prize for Advancing Liberty beginning in 2001. A Friedman Prize was given to the late British economist Peter Bauer
in 2002, Peruvian 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 Friedman Foundation for Educational Choice
, served on the international selection committee.
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, 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."
Nobel Memorial Prize in Economic Sciences
Friedman once said: "If you want to see capitalism in action, go to Hong Kong."
He wrote in 1990 that the Hong Kong economy
was perhaps the best example of a free market economy.
One month before his death, he wrote the article "Hong Kong Wrong—What would Cowperthwaite
say?" in The Wall Street Journal
, criticizing Donald Tsang
, the Chief Executive of Hong Kong, for abandoning "positive noninterventionism."
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.
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
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
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
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, 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. Many other Chicago School alumni were appointed government posts during and after the Pinochet years; 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 Pinochet's rule
and to the eventual 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 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 the military government. Friedman advocated for free markets which undermined "political centralization and political control".
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 in a lively television debate
on August 31, 1984, with socialist intellectuals, including Ólafur Ragnar Grímsson
, who later became the 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.
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
politician Margaret Thatcher
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.
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-war
Milton Friedman's somewhat controversial legacy
in America remains strong within the conservative
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.
Econometrician 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.
Although Keynesian Nobel laureate Paul Krugman
praised Friedman as a "great economist and a great man" after Friedman's death in 2006, and acknowledged his many, widely accepted contributions to empirical economics, Krugman had been, and remains, a prominent critic of Friedman. Krugman has written that "he slipped all too easily into claiming both that markets always work and that only markets work. It's extremely hard to find cases in which Friedman acknowledged the possibility that markets could go wrong, or that government intervention could serve a useful purpose."
Others agree Friedman was not open enough 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.
In her book The Shock Doctrine
, author and social activist Naomi Klein
criticized Friedman's economic liberalism, identifying it with the principles that guided the economic restructuring that followed the military coups in countries such as Chile and Argentina. Based on their assessments of the extent to which what she describes as neoliberal
policies contributed to income disparities and inequality, both Klein and Noam Chomsky
have suggested that the primary role of what they describe as neoliberalism was as an ideological cover for capital accumulation by multinational corporations
Visit to Chile
Because of his involvement with the government of Chile, which was a dictatorship, there were international protests 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 controversial 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 adviser 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.
Chilean economist Orlando Letelier
asserted that Pinochet's dictatorship resorted to oppression because of popular opposition to Chicago School policies in Chile.
After a 1991 speech on drug legalisation, 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 of his students
at the University of Chicago
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 Communist Party of China
, 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?"
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- A Program for Monetary Stability (Fordham University Press, 1960) 110 pp. online version ISBN 0-8232-0371-9
- 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. 1–17 JSTOR presidential address to American Economics Association
- "Inflation and Unemployment: Nobel Lecture", 1977, Journal of Political Economy. Vol. 85, pp. 451–72. JSTOR
- Free to Choose: A Personal Statement, with Rose Friedman, (1980), highly influential restatement of policy views
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David F. Hendry; Neil R. Ericsson (October 1983). "Assertion without Empirical Basis: An Econometric Appraisal of 'Monetary Trends in ... the United Kingdom' by Milton Friedman and Anna Schwartz," in Monetary Trends in the United Kingdom, Bank of England Panel of Academic Consultants, Panel Paper No. 22, pp. 45–101.
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- ^ van Steven Moore, CMA (August 31, 1984). "Milton Friedman – Iceland 2 of 8". YouTube. Archived from the original on May 12, 2014. Retrieved April 22, 2014.
- ^ J. Daniel Hammond (2005). Theory and Measurement: Causality Issues in Milton Friedman's Monetary Economics. Cambridge U.P. pp. 193–99. ISBN 978-0521022644.
- ^ David F. Hendry; Neil R. Ericsson (July 1989). "An Econometric Analysis of UK Money Demand in Monetary Trends in the United States and the United Kingdom by Milton Friedman and Anna J. Schwartz" (PDF). International Finance Discussion Papers: 355. Federal Reserve. Archived (PDF) from the original on November 3, 2013. Retrieved August 2, 2013.
- ^ David F. Hendry (April 25, 2013). "Friedman's t-ratios were overstated by nearly 100%". ft.com. Archived from the original on October 30, 2013. Retrieved May 1, 2013.
- ^ Escribano, Alvaro (2004). "Nonlinear error correction: The case of money demand in the United Kingdom (1878–2000)" (PDF). Macroeconomic Dynamics. 8 (1): 76–116. doi:10.1017/S1365100503030013. hdl:10016/2573. Archived (PDF) from the original on November 3, 2013. Retrieved August 1, 2013.
Escribano's approach had already been recognized by Friedman, Schwartz, Hendry et al. (p. 14 of the pdf) as yielding significant improvements over previous money demand equations.
- ^ The New York Review of Books, Who Was Milton Friedman? Archived April 10, 2008, at the Wayback Machine, February 15, 2007
- ^ Colander, D. (1995). Is Milton Friedman an artist or a scientist?. Journal of Economic Methodology, 2(1), 105–22.
- ^ Smith, Noah (January 12, 2017). "Milton Friedman's Cherished Theory Is Laid to Rest". www.bloomberg.com. Archived from the original on September 26, 2018. Retrieved September 25, 2018.
- ^ Macpherson, C.B. "Elegant Tombstones: A Note on Friedman's Freedom." Democratic Theory: Essays in Retrieval. Clarendon: Oxford, 1973.
- ^ Caldwell, B.J. (1980). A critique of Friedman's methodological instrumentalism. Southern Economic Journal, 366–74.
- ^ Hill, L.E. (1968). A critique of positive economics. American Journal of Economics and Sociology, 27(3), 259–66.
- ^ Ng, Y.K. (2016). Are unrealistic assumptions/simplifications acceptable? some methodological issues in economics. Pacific Economic Review, 21(2), 180–201.
- ^ Mäki, U. (2009). Unrealistic assumptions and unnecessary confusions: Rereading and rewriting F53 as a realist statement.
- ^ Maki, U., & Mäki, U. (Eds.). (2009). The methodology of positive economics: reflections on the Milton Friedman legacy. Cambridge University Press.
- ^ Noam Chomsky (1999). Profit Over People: Neoliberalism and Global Order. New York: Seven Stories Press.
- ^ Burton Feldman (2000). "Chapter 9: The Economics Memorial Prize". The Nobel Prize: A History of Genius, Controversy, and Prestige. New York: Arcade Publishing. p. 350. ISBN 978-1-55970-537-0.
- ^ O'Shaughnessy, Hugh (December 11, 2006). "General Augusto Pinochet". The Independent. Archived from the original on May 15, 2011. Retrieved September 5, 2017.
- ^ Milton Friedman and Rose D. Friedman. "Two Lucky People: One Week in Stockholm". Hoover Digest: Research and Opinion on Public Policy. 1998 (4). Archived from the original on March 14, 2008.
- ^ Orlando Letelier (August 28, 1976), "Economic Freedom's Awful Toll" Archived September 21, 2013, at the Wayback Machine, The Nation.
- ^ The Drug War as a Socialist EnterpriseArchived June 13, 2010, at the Wayback Machine, Milton Friedman, From: Friedman & Szasz on Liberty and Drugs, edited and with a Preface by Arnold S. Trebach and Kevin B. Zeese. Washington, D.C.: The Drug Policy Foundation, 1992.
- ^ YouTube clip: Milton Friedman – Pinochet and Chile Archived September 21, 2013, at the Wayback Machine. YouTube.com (January 2, 2013). Retrieved on 2017-09-06.
- ^ Milton Friedman and Rose D. Friedman (1999). Two Lucky People: Memoirs. University of Chicago Press. p. 600. ISBN 978-0226264158.
- "Symposium: Why Is There No Milton Friedman Today?". Econ Journal Watch. 10 (2). May 2013.
- Jones, Daniel Stedman. Masters of the Universe: Hayek, Friedman, and the Birth of Neoliberal Politics (2nd ed. 2014) excerpt.
- McCloskey, Deirdre (Winter 2003). "Other Things Equal: Milton". Eastern Economic Journal. 29 (1): 143–146. JSTOR 40326463.
- Steelman, Aaron (2008). "Friedman, Milton (1912–2006)". In Hamowy, Ronald (ed.). The Encyclopedia of Libertarianism. Thousand Oaks, CA: SAGE; Cato Institute. pp. 195–197. doi:10.4135/9781412965811.n118. ISBN 978-1-4129-6580-4. LCCN 2008009151. OCLC 750831024.
- Wood, John Cunningham, and Ronald N. Wood, ed. (1990), Milton Friedman: Critical Assessments, v. 3. Scroll to chapter-preview links. Routledge.
- Collected Works of Milton Friedman (Multiple Text, audio, video)
- The Milton Friedman papers at the Hoover Institution Archives
- Selected Bibliography for Milton Friedman at the University of Chicago Library
- Profile and Papers at Research Papers in Economics/RePEc
- "Milton Friedman collected news and commentary". The New York Times.
- Milton Friedman at IMDb
- Becker Friedman Institute at the University of Chicago
- The Foundation for Educational Choice
- Milton Fridman at Scarlett
- Milton Friedman on Nobelprize.org with the Prize Lecture December 13, 1976 Inflation and Unemployment
- Inflation and Unemployment 1976 lecture at NobelPrize.org
- Nobel Memorial Prize acceptance speech
- "Milton Friedman (1912–2006)". The Concise Encyclopedia of Economics. Library of Economics and Liberty (2nd ed.). Liberty Fund. 2008.
- Interview with Milton Friedman, Dominic Streatfeild, May 25, 2000, source material for Cocaine: An Unauthorised Biography
- 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
- Roberts, Russ. "Milton Friedman Podcasts". EconTalk. Library of Economics and Liberty.
- Milton Friedman publications indexed by Google Scholar
- A collection of Milton Friedman's works
Last edited on 13 May 2021, at 15:55
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