Happy Birthday, Milton Friedman
Today (31st July) would have been Milton Friedman’s birthday. Friedman (1912–2006) was a towering figure in economics, whose ideas reshaped modern economic policy and gave enormous clout to the ideas of the free society and free economy. Made a Nobel laureate for his technical work in economics, Friedman’s intellectual rigour and commitment to free-market principles left an indelible mark on both academia and public policy, influencing governments and central banks worldwide.
Friedman’s most significant contribution was his restatement and development of monetarism, which emphasises the role of the money supply in creating economic stability. He demonstrated how fluctuations in the money supply could drive inflation and economic cycles, challenging the Keynesian dominance of the time. In A Monetary History of the United States, 1867–1960, co-authored with Anna Schwartz, he examined in detail the origins of the Great Depression, attributing it to the Federal Reserve’s tight monetary policy. It shattered the prevailing explanations given at the time, and shifted how policymakers viewed central banking. This work laid the foundation for modern monetary policy, where central banks prioritize stable money growth to curb inflation. Indeed, after Friedman’s ideas became popular, world banks became much more prudent with monetary policy and worldwide inflation fell (from an average of around 30%!) to the more manageable levels we have even today.
Beyond monetarism, Friedman’s advocacy for individual freedom was profound. In Capitalism and Freedom (1962), he argued that economic liberty is inseparable from personal liberty, positing that free markets empower individuals by reducing government control, unleashing enterprise and allowing individuals to pursue their own ambitions. His case for policies like school vouchers, deregulation, and tax simplification sparked debates that continue to shape education reform and fiscal policy. Never happier than when he was arguing with orthodox economists or enlightening students on the realities of economics, Friedman’s ability to distil complex ideas into accessible arguments made him a public intellectual, influencing leaders like Ronald Reagan and Margaret Thatcher.
His work was not without critics. Some argued his policies favoured the wealthy or ignored social inequalities. But Friedman insisted that the free-market system was the most effective anti-poverty measure ever discovered. Indeed, it was the only effective anti-poverty measure ever discovered.
Friedman’s insistence on empirical evidence and logical consistency forced opponents to sharpen their arguments. His debates, often televised, demonstrated his wit and clarity, making economics engaging for everyone.
His legacy endures in institutions like the University of Chicago, where he taught, and through the Friedman Foundation for Educational Choice. His ideas on negative income tax inspired modern welfare proposals, and his critique of government overreach remains relevant in discussions about bureaucracy and regulation.
Above all, Friedman's unwavering belief in markets as engines of prosperity and freedom continues to inspire students, economists, policymakers, and individuals seeking to understand the interplay of economics and liberty. Friedman’s work reminds us that good ideas, grounded in evidence and reason, can change the world.
Eamonn Butler is author of Milton Friedman: A Concise Guide to the Ideas and Influence of the Free-Market Economist is published by Harriman House.