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Milton Friedman

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Milton Friedman
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Milton Friedman

Milton Friedman (born July 31, 1912) is an American economist, known for his work on macroeconomics, microeconomics, economic history, statistics, and for his advocacy of laissez-faire capitalism. In Capitalism and Freedom (1962) he minimized the role of government in a free market in order to create political and social freedom. In 1976 he won the Nobel Memorial Prize in Economics for his achievements in the fields of consumption analysis, monetary history and theory and for his demonstration of the complexity of stabilization policy.[Nobelprize.org] His television series Free to Choose aired on PBS in early 1980. It became a book co-authored with his wife, Rose Friedman. The book was widely read, as were his columns for Newsweek magazine.

In statistics, he devised the Friedman test, a non-parametric analogue to the two-way analysis of variance.

Contents

Biography

Born in New York City to a working-class family of Jewish immigrants from Beregszász (today Berehove, Ukraine), Friedman grew up in Rahway, New Jersey, and was educated at Rutgers University (B.A., 1932) and at the University of Chicago (M.A., 1933). He was strongly influenced by Jacob Viner at Chicago, as well as Frank Knight and Henry Simons. He was unable to find academic employment, and working for the New Deal was "a lifesaver." He approved of "many early New Deal measures as appropriate responses to the critical situation", especially the job creating relief agencies WPA, CCC, and PWA. However, he disapproved of the NRA and AAA farm program because they fixed prices. Friedman, Two Lucky People, p 59 In the late 1930s and again in 1941-43, Friedman worked for the federal government, becoming an advisor to high Treasury officials. As a spokesman for the U.S. Treasury in 1942 he advocated a Keynesian policy of taxation, and indeed helped develop the payroll withholding system of income tax payments. In his autobiography he comments on "how thoroughly Keynesian I was then." Friedman, Two Lucky People, p 113 However by 2006 he had seemingly reversed himself and said, "You know, it's a mystery as to why people think Roosevelt's policies pulled us out of the Depression. The problem was that you had unemployed machines and unemployed people. How do you get them together by forming industrial cartels and keeping prices and wages up?." Friedman, Milton. [Interview with John Hawkins. Right Wing News.]

Friedman before the late 1940s focused mostly on statistical issues in his research, as exemplified by his dissertation on Income from Independent Professional Practice published with coauthor and thesis advisor Simon Kuznets (1945).

Columbia University awarded him a Ph.D. in 1946. He then served as Professor of Economics at the University of Chicago from 1946 to 1976, where he helped build a close-knit intellectual community that produced a number of Nobel Prize winners, known collectively as the Chicago School of Economics. Since 1977, Friedman has been affiliated with the Hoover Institution at Stanford University.

Friedman's son is economist David D. Friedman.

Scholarly Contribution

As a professional economist Friedman is known primarily for his work in monetary economics: specifically the quantity theory of money. He co-authored, with Anna Schwartz, A Monetary History of the United States, which sought to examine the role of money supply in explaining macroeconomic fluctations in US history. He is also well-known for this work on the consumption function especially the permanent income hypothesis. Other important contributions include his critique of the Phillips curve and the concept of the natural rate of unemployment.

Political views

Friedman is the leading proponent of the monetarist school of economic thought. He maintains that there is a close and stable link between inflation and the money supply, mainly that the phenomenon of inflation is to be regulated by controlling the amount of money poured into the national economy by the Federal Reserve Bank; he rejects the use of fiscal policy as a tool of demand management; and he holds that the government's role in the guidance of the economy should be severely restricted. Friedman wrote extensively on the Great Depression, which he called the "Great Contraction," arguing that it had been caused by an ordinary financial shock whose duration and seriousness were greatly increased by the subsequent contraction of the money supply caused by the misguided policies of the directors of the Federal Reserve. "The Fed was largely responsible for converting what might have been a garden-variety recession, although perhaps a fairly severe one, into a major catastrophe. Instead of using its powers to offset the depression, it presided over a decline in the quantity of money by one-third from 1929 to 1933.... Far from the depression being a failure of the free-enterprise system, it was a tragic failure of government."(''Two Lucky People, p 233) Friedman also argued for the cessation of government intervention in currency markets, thereby spawning an enormous literature on the subject, as well as promoting the practice of freely floating exchange rates. Friedman's macroeconomic theories were soon displaced. His close friend George Stigler explained, "As is customary in science, he did not win a full victory, in part because research was directed along different lines by the theory of rational expectations, a newer approach developed by Robert Lucas, also at the University of Chicago."Stigler, p 34

Friedman worked at the Treasury Department during World War II and played an important role in designing the United States withholding tax system. [National Taxpayers Union] Before 1942, there was no withholding system; the rich people who paid income taxes did so in one lump sum on March 15 of the following year.

Friedman has also supported various libertarian policies such as decriminalization of drugs and prostitution. In addition, he headed the Reagan committee that researched the possibility of a move towards a paid/volunteer armed force, and played a role in the abolition of the draft that took place in the 1970s in the U.S. He served as a member of U.S. President Ronald Reagan's Economic Policy Advisory Board in 1981. In 1988 he received both the Presidential Medal of Freedom and the National Medal of Science. He has said that he is a libertarian philosophically but a member of the U.S. Republican Party for the sake of "expediency" ("I am a libertarian with a small l and a Republican with a capital R. And I am a Republican with a capital R on grounds of expediency, not on principle.") But, he says, "I think the term classical liberal is also equally applicable. I don't really care very much what I'm called. I'm much more interested in having people thinking about the ideas, rather than the person."[Friedman and Freedom], Interview with Peter Jaworski. The Journal, Queen's University, March 15, 2002 - Issue 37, Volume 129

Friedman made headlines by proposing a negative income tax to replace the existing welfare system and then opposing the bill to implement it because it merely supplemented the existing system rather than replacing it. In recent years Friedman has devoted much of his effort to promoting school vouchers that can be used to pay for tuition at both private and public schools, saying, "What is needed in America is a voucher of substantial size available to all students, and free of excessive regulations." His idea is that vouchers would allow private schools to compete with the public school monopoly.

Friedman allowed the Cato Institute to use his name for its Milton Friedman Prize for Advancing Liberty in 2001. His wife Rose, sister of Aaron Director, with whom he founded the Milton and Rose D. Friedman Foundation for School Choice, served in the international selection committee. Friedman's son, David D. Friedman, has carried on his tradition of arguing in favor of free markets but to a further extreme, advocating anarcho-capitalism.

At a ceremony celebrating Friedman's achievements, Alan Greenspan said "There are many Nobel Prize winners in economics, but few have achieved the mythical status of Milton Friedman."Formaini, Robert L. [Milton Friedman—Economist as Public Intellectual]. Economic Insights Volume 7, Number 2. Federal Reserve Bank of Dallas. 2002.

According to Harry Girvetz and Kenneth Minogue, Friedman is co-responsible with Friedrich von Hayek for providing the intellectual foundations for the revival of classical liberalism in the 20th century.Girvetz, Harry K. and Minogue Kenneth. [Liberalism], Encyclopedia Britannica (online), p. 16, retrived May 16,2006

In 2005, Friedman and more than 500 other economists, called for discussions regarding the economic benefits of the legalization of marijuana.[An open letter], via Prohibitioncosts.org

Ascribed criticism

Friedman visited Chile in 1975 during the military dictatorship of Augusto Pinochet. Invited by a private foundation, he gave a series of lectures on economics. Several professors from the Chicago School of Economics became advisors to the Chilean government and several Ph.D. graduates from the same university – known as "the Chicago boys" – served in Chilean ministries. Friedman met with Pinochet during his visit to Chile, but he did not serve as advisor to the Chilean government or maintain personal contact with Pinochet. He had given a lecture advocating monetarist economics to the Catholic University of Chile. Friedman says that the "the emphasis of that talk was that free markets would undermine political centralization and political control." [Interview with Jeffery Sachs on the "Miracle of Chile"] PBS.org Nevertheless, he was accused of supporting a regime whose policies included torture and the killing of political opponents. A number of protesters demonstrated against Friedman during the 1976 Nobel Prize ceremony.[[Citing sources citation needed]]

Critics have remarked that Chile's dictatorship used its power to implement free-market policies, thus contradicting the relationship that Friedman claims exists between free markets and political freedom, though Friedman stated that they have missed the point by defending his role in Chile on the grounds that the move towards open market policies not only improved the economic situation in Chile but also contributed to the softening of Pinochet's rule and to its eventual replacement by a democratic government in 1990. He also stressed that the lectures he gave in Chile in 1975 were the same lectures he later gave without incident in China and other Socialist states.

For more information on Milton Friedman's views on Chile, see Miracle of Chile.
Friedman also traveled to the People's Republic of China to [give lectures], meet with government leaders and [encourage them] to adopt free trade and implement free market policies, which led to criticism from anti-Communists.

In the 1970s, Friedman argued against the trade and diplomatic embargoes that many Western nations had imposed on the white minority governments of South Africa and Rhodesia (now Zimbabwe), claiming that the embargoes played into the hands of anti-Western, Communist insurgencies in those countries, that far more repressive regimes in Africa and elsewhere were not being similarly punished, and that progress towards racial equality and freedom in South Africa and Rhodesia might be better pursued through a policy of engagement with their governments. Friedman was criticized for visiting those countries in 1976 and meeting with members of pro-Apartheid government without publicly calling for repealing the racist electoral laws that were then in place.[[Citing sources citation needed]]

References

Works

Books and articles for general audiences

  • Roofs or Ceilings?: The Current Housing Problem with George J. Stigler. (Foundation for Economic Education, 1946), 22 pp. attacks rent control
  • Capitalism and Freedom ISBN 0226264017 (1962)
  • Social Security: Universal or Selective? with Wilbur J. Cohen (1972)
  • There's No Such Thing as a Free Lunch (1975), columns from Newsweek magazine
  • Free to Choose: A personal statement, with Rose Friedman, (1980)
  • "The Case for Overhauling the Federal Reserve", 1985, Challenge
  • Economic Freedom, Human Freedom, Political Freedom ISBN 188396900X (1992), short pamphlet
  • 'The Drug War as a Socialist Enterprise'', Friedman & Szasz on Liberty and Drugs, edited and with a Preface by Arnold S. Trebach, 1992
  • Two Lucky People: Memoirs (with Rose Friedman) ISBN 0226264149 (1998)
  • "George J. Stigler, 1911-1991: Biographical Memoir", 1998, at National Academy of Science
  • Money Mischief: Episodes in Monetary History ISBN 0151620423 (1994)
  • "The Case for Free Trade" with Rose Friedman, 1997, Hoover Digest
  • "Reflections on A Monetary History" The Cato Journal, Vol. 23, 2004

Scientific books and articles

  • "Professor Pigou's Method for Measuring Elasticities of Demand From Budgetary Data" The Quarterly Journal of Economics Vol. 50, No. 1 (Nov., 1935), pp. 151-163 [JSTOR]
  • "Marginal Utility of Money and Elasticities of Demand," The Quarterly Journal of Economics Vol. 50, No. 3 (May, 1936), pp. 532-533 [JSTOR]
  • "The Use of Ranks to Avoid the Assumption of Normality Implicit in the Analysis of Variance," Journal of the American Statistical Association Vol. 32, No. 200 (Dec., 1937), pp. 675-701 [JSTOR]
  • "The Inflationary Gap: II. Discussion of the Inflationary Gap," American Economic Review Vol. 32, No. 2, Part 1 (Jun., 1942), pp. 314-320 [JSTOR]
  • "The Spendings Tax as a Wartime Fiscal Measure," American Economic Review Vol. 33, No. 1, Part 1 (Mar., 1943), pp. 50-62 [JSTOR]
  • Taxing to Prevent Inflation: Techniques for Estimating Revenue Requirements (Columbia U.P. 1943, 236pp) with Carl Shoup and Ruth P. Mack
  • Income from Independent Professional Practice with Simon Kuznets (1945), Friedman's PhD thesis
  • "Lange on Price Flexibility and Employment: A Methodological Criticism," American Economic Review Vol. 36, No. 4 (Sep., 1946), pp. 613-631 [JSTOR]
  • "Utility Analysis of Choices Involving Risk" with Leonard Savage, 1948, Journal of Political Economy Vol. 56, No. 4 (Aug., 1948), pp. 279-304 [JSTOR]
  • "A Monetary and Fiscal Framework for Economic Stability", 1948, American Economic Review, Vol. 38, No. 3 (Jun., 1948), pp. 245-264 [JSTOR]
  • "A Fiscal and Monetary Framework for Economic Stability," Econometrica Vol. 17, Supplement: Report of the Washington Meeting (Jul., 1949), pp. 330-332 [JSTOR]
  • "The Marshallian Demand Curve," The Journal of Political Economy Vol. 57, No. 6 (Dec., 1949), pp. 463-495 [JSTOR]
  • "Wesley C. Mitchell as an Economic Theorist," The Journal of Political Economy Vol. 58, No. 6 (Dec., 1950), pp. 465-493 [JSTOR]
  • "Some Comments on the Significance of Labor Unions for Economic Policy", 1951, in D. McC. Wright, editor, The Impact of the Union.
  • "Commodity-Reserve Currency," Journal of Political Economy Vol. 59, No. 3 (Jun., 1951), pp. 203-232 [JSTOR]
  • "Price, Income, and Monetary Changes in Three Wartime Periods," American Economic Review Vol. 42, No. 2, Papers and Proceedings of the Sixty-fourth Annual Meeting of the American Economic Association (May, 1952), pp. 612-625 [JSTOR]
  • "The Expected-Utility Hypothesis and the Measurability of Utility", with Leonard Savage, 1952, Journal of Political Economy Vol. 60, No. 6 (Dec., 1952), pp. 463-474 [JSTOR]
  • [The Methodology of Positive Economics (1953)]
  • Essays in Positive Economics (1953)
  • "Choice, Chance, and the Personal Distribution of Income," Journal of Political Economy Vol. 61, No. 4 (Aug., 1953), pp. 277-290 [JSTOR]
  • "The Quantity Theory of Money: A restatement", 1956, in Friedman, editor, Studies in Quantity Theory.
  • A Theory of the Consumption Function (1957)
  • "A Statistical Illusion in Judging Keynesian Models" with Gary S. Becker, Journal of Political Economy Vol. 65, No. 1 (Feb., 1957), pp. 64-75 [JSTOR]
  • "The Supply of Money and Changes in Prices and Output", 1958, in Relationship of Prices to Economic Stability and Growth.
  • "The Demand for Money: Some Theoretical and Empirical Results," Journal of Political Economy Vol. 67, No. 4 (Aug., 1959), pp. 327-351 [JSTOR]
  • A Program for Monetary Stability (Fordham University Press, 1960) 110 pp
  • "Monetary Data and National Income Estimates," Economic Development and Cultural Change Vol. 9, No. 3, (Apr., 1961), pp. 267-286 [JSTOR]
  • "The Lag in Effect of Monetary Policy," Journal of Political EconomyVol. 69, No. 5 (Oct., 1961), pp. 447-466 [JSTOR]
  • Price Theory ISBN 0202060748 (1962), college textbook
  • "The Interpolation of Time Series by Related Series," Journal of the American Statistical Association Vol. 57, No. 300 (Dec., 1962), pp. 729-757 [JSTOR]
  • "Should There be an Independent Monetary Authority?", in L.B. Yeager, editor, ''In Search of a Monetary Constitution
  • Inflation: Causes and consequences,'' 1963.
  • "Money and Business Cycles," The Review of Economics and Statistics Vol. 45, No. 1, Part 2, Supplement (Feb., 1963), pp. 32-64 [JSTOR]
  • A Monetary History of the United States, 1867-1960, with Anna J. Schwartz, 1963; part 3 reprinted as The Great Contraction
  • "Money and Business Cycles" with A. J. Schwartz, 1963, Review of Economics & Statistics.
  • "The Relative Stability of Monetary Velocity and the Investment Multiplier in the United States, 1898-1958", with D. Meiselman, 1963, in Stabilization Policies.
  • "A Reply to Donald Hester", with D. Meiselman, 1964
  • "Reply to Ando and Modigliani and to DePrano and Mayer," with David Meiselman. American Economic Review Vol. 55, No. 4 (Sep., 1965), pp. 753-785 [JSTOR]
  • "Interest Rates and the Demand for Money," Journal of Law and Economics Vol. 9 (Oct., 1966), pp. 71-85 [JSTOR]
  • The Balance of Payments: Free Versus Fixed Exchange Rates with Robert V. Roosa (1967)]
  • "The Monetary Theory and Policy of Henry Simons," Journal of Law and Economics Vol. 10 (Oct., 1967), pp. 1-13 [JSTOR]
  • "What Price Guideposts?", in G.P. Schultz, R.Z. Aliber, editors, Guidelines
  • "The Role of Monetary Policy." American Economic Review, Vol. 58, No. 1 (Mar., 1968), pp. 1-17 [JSTOR] presidential address to American Economics Association
  • "Money: the Quantity Theory", 1968, IESS
  • "The Definition of Money" with Anna J. Schwartz, 1969.
  • 'Monetary vs. Fiscal Policy'' with Walter W. Heller (1969)
  • "Comment on Tobin", 1970, Quarterly Journal of Economics
  • "Monetary Statistics of the United States: Sources, methods''. with Anna J. Schwartz, 1970.
  • "A Theoretical Framework for Monetary Analysis", 1970, Journal of Political Economy
  • The Counter-Revolution in Monetary Theory 1970.
  • "A Monetary Theory of National Income", 1971, Journal of Political Economy
  • "Comments on the Critics", 1974, in Gordon, ed. Milton Friedman and his Critics.
  • "Monetary Correction: A proposal for escalation clauses to reduce the cost of ending inflation", 1974
  • The Optimum Quantity of Money: And Other Essays (1976)
  • Price Theory (1976)
  • Milton Friedman in Australia, 1975 (1975)
  • Milton Friedman's Monetary Framework: A Debate with His Critics (1975)
  • "Comments on Tobin and Buiter", 1976, in J. Stein, editor, Monetarism.
  • "Inflation and Unemployment: Nobel lecture", 1977, Journal of Political Economy. Vol. 85, pp. 451-72.
  • "Interrelations between the United States and the United Kingdom, 1873-1975.", with A.J. Schwartz, 1982, J Int Money and Finance
  • Monetary Trends in the United States and the United Kingdom: Their relations to income, prices and interest rates, 1876-1975. with Anna J. Schwartz, 1982
  • "Monetary Policy: Tactics versus strategy", 1984, in Moore, editor, To Promote Prosperity.
  • “Lessons from the 1979-1982 Monetary Policy Experiment, ” Papers and Proceedings, American Economic Association. pp. 397-401. (1984).
  • "Has Government Any Role in Money?" with Anna J. Schwartz, 1986, JME
  • "Quantity Theory of Money", in J. Eatwell, M. Milgate, P. Newman, eds., The New Palgrave (1998)

About Friedman

  • Chao, Hsiang-ke. "Milton Friedman and the Emergence of the Permanent Income Hypothesis" History of Political Economy 2003 35(1): 77-104. Issn: 0018-2702 Fulltext in Project Muse
  • A.W. Bob Coats; "The Legacy of Milton Friedman as Teacher" Economic Record, Vol. 77, 2001
  • Frazer, William. Power and Ideas: Milton Friedman and the Big U-Turn. Vol. 1: The Background. Vol. 2: The U-Turn. Gainesville, Fla.: Gulf/Atlantic, 1988. 867 pp.
  • Hammond, J. Daniel. "Remembering Economics" Journal of the History of Economic Thought 2003 25(2): 133-143. Issn: 1042-7716; focus is on Friedman
  • Hirsch, Abraham, and Neil de Marchi. Milton Friedman: Economics in Theory and Practice (1990) his methodology
  • Jordan, Jerry L., Allan H. Meltzer, Thomas J. Sargent and Anna J. Schwartz; "Milton, Money, and Mischief: Symposium and Articles in Honor of Milton Friedman's 80th Birthday" Economic Inquiry. Volume: 31. Issue: 2. 1993. pp 197+.
  • Kasper, Sherryl. The Revival of Laissez-Faire in American Macroeconomic Theory: A Case Study of Its Pioneers (2002)
  • Leeson, Robert, ed. Ideology and International Economy: The Decline and Fall of Bretton Woods (2003)
  • Rayack; Elton. Not So Free to Choose: The Political Economy of Milton Friedman and Ronald Reagan Praeger, 1987; attacks Friedman's policies from the left
  • Steindl, Frank G. "Friedman and Money in the 1930s" History of Political Economy 2004 36(3): 521-531. Issn: 0018-2702 lecture notes from his 1940 course show he did not criticize the Fed at that time, and did not emphasize money.
  • Tavlas, George S. "Retrospectives: Was the Monetarist Tradition Invented?" Journal of Economic Perspectives 1998 12(4): 211-222. Issn: 0895-3309 Fulltext in JSTOR
  • Stigler, George Joseph. Memoirs of an Unregulated Economist (1988)
  • Wahid, Abu N. M. ed; Frontiers of Economics: Nobel Laureates of the Twentieth Century. Greenwood Press. 2002 pp 109-15.

See also

Lists

External links

Biographies

Articles

Nobel Memorial Prize in Economics: Laureates
1969: Frisch, Tinbergen 70: Samuelson 71: Kuznets 72: Hicks, Arrow 73: Leontief 74: Myrdal, Hayek 75: Kantorovich, Koopmans 76: Friedman 77: Ohlin, Meade 78: Simon 79: Schultz, Lewis 80: Klein 81: Tobin 82: Stigler 83: Debreu 84: Stone 85: Modigliani 86: Buchanan 87: Solow 88: Allais 89: Haavelmo 90: Markowitz, Miller, Sharpe 91: Coase 92: Becker 93: Fogel, North 94: Harsanyi, Nash, Selten 95: Lucas 96: Mirrlees, Vickrey 97: Merton, Scholes 98: Sen 99: Mundell 2000: Heckman, McFadden 01: Akerlof, Spence, Stiglitz 02: Kahneman, Smith 03: Engle, Granger 04: Kydland, Prescott 05: Aumann, Schelling

 

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