Milton Friedman, Nobel Laureate

Milton Friedman, the US economist, was born on July 31st, 1912. He was awarded the 1976 Nobel Prize in Economic Sciences for his research on consumption analysis, monetary history and theory, and the complexity of stabilization policy. In addition to being one of the century’s most influential economists, he was also the best known. He popularized economics. In addition to his 300+ op-eds for Newsweek magazine, he also published in the New York Times. He was a tireless advocate for free markets and free trade. His book “Capitalism and Freedom” (1962) was a best seller. He supported a range of free market ideas, including floating currencies, education vouchers, negative income tax and the abolition of many licences, including those for doctors. 

He vigorously opposed conscription (the draft), favouring a volunteer army instead. “You want an army of mercenaries?” demanded General Westmorland. “And you want an army of slaves?” Friedman shot back before a Congressional hearing.

With his wife, Rose Friedman, he co-authored “Free to Choose” (1980), another best seller, this time accompanied by a PBS documentary TV series that drew a mass audience. To academic economists he is best known for advocating monetarism as an alternative to Keynesianism. Famously he said that “Inflation is always and everywhere a monetary phenomenon.” Keynesians has supposed that inflation and unemployment traded off against each other (the Phillips Curve), and that inflation could boost employment, especially in a downturn. Friedman’s “Studies in the Quantity Theory of Money” (1956) stated that in the long term, once people became used to it, this ceased to hold. In the 1970s the Phillips Curve went vertical as rising inflation combined with rising unemployment (stagflation), and most academic opinion was won over to Friedman’s view.

His “Monetary History of the United States, 1867–1960,” co-authored with Anna Schwarz, made the case that the Great Depression of the 1930s was brought about by the Federal Reserve’s credit tightening in response to the stock market crash. This proved very influential with governments, and led them to ease credit, instead of tightening it, in response to the Financial Crisis of 2007-2008. Many people believe this prevented the emergence of another 1930s-style depression.

His view was that the best policy was to aim at an increase in the money supply that coincided as far as possible with the long-term growth rate, perhaps approximating to about 2 percent per annum. He thought this might sustainably achieve steady expansion of the economy. His influence on present-day government thinking can still be seen around the world.

He was one of the founder members of the Mont Pelerin Society, and graced nearly all of its meetings with his infectious smile and bubbling good humour. He was a good friend of the Adam Smith Institute, especially helpful in its early days, speaking at our meetings and lending his name to our activities. When I applied to read a master’s degree at Cambridge University, he sent them a hand-written note recommending me.