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Milton Friedman

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Milton Friedman

Milton Friedman (born July 31, 1912) is a U.S. economist, known primarily for his work on macroeconomics, microeconomics, economic history, statistics, and for his advocacy of laissez-faire capitalism. 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." [1] His television series Free to Choose, aired on PBS in early 1980; it became a book coauthored with his wife Rose Friedman, that was widely read, as were his columns for Newsweek magazine.

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

Biography

Born in New York City, New York to a working class family of Jewish Hungarian immigrants from Beregszász (Berehove, today Ukraine), Friedman grew up in Rahway, New Jersey, was educated at Rutgers University (B.A., 1932) and at the University of Chicago (M.A., 1933). After working for the federal government and for Columbia University, he received a Ph.D. from that institution in 1946. He then served as Professor of Economics at the University of Chicago from 1946 to 1976, where he contributed significantly to the intellectual tradition of the so-called Chicago school of economics. Since 1977, Friedman has been affiliated with the Hoover Institution at Stanford University.

Friedman is widely regarded as 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. 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 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.")

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 worked at the Treasury Department during World War II and played an important role in designing the United States withholding tax system.[2] 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. And as Murray Rothbard put it[3]: "The Internal Revenue Service could never hope to extract the entire annual sum from the mass of the working population. Only the Friedmanite withholding tax has permitted the government to use every employer as an unpaid tax collector."

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, has carried on his tradition of arguing in favor of free markets but to a further extreme, advocating anarcho-capitalism.

Political controversy

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 University of Chicago 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. 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.

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 believes they've 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 stresses 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.

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.

In 2005, Friedman and more than 500 other economists, called for discussions regarding the economic benefits of the legalization of marijuana in an open letter.

Works


Scientific Books and Articles

  • Income from Independent Professional Practice with Simon Kuznets (1945), MF’s PhD thesis
  • "Utility Analysis of Choices Involving Risk" with L. Savage, 1948, Journal of Political Economy.
  • "A Monetary and Fiscal Framework for Economic Stability", 1948, ‘’American Economic Review’‘ [in JSTOR].
  • "Some Comments on the Significance of Labor Unions for Economic Policy", 1951, in D. McC. Wright, editor, The Impact of the Union. New York: Harcourt Brace.
  • "Commodity-Reserve Currency", 1951, Journal of Political Economy
  • "The Expected-Utility Hypothesis and the Measurability of Utility", with L. Savage, 1952, Journal of Political Economy
  • The Methodology of Positive Economics (1953)
  • Essays in Positive Economics (1953)
  • "The Quantity Theory of Money: A restatement", 1956, in Friedman, editor, Studies in Quantity Theory.
  • A Theory of the Consumption Function (1957)
  • "The Supply of Money and Changes in Prices and Output", 1958, in Relationship of Prices to Economic Stability and Growth.
  • A Program for Monetary Stability (1960)
  • "The Demand for Money: Some theoretical and empirical results", 1959, ‘’Journal of Political Economy’‘ [also in JSTOR]
  • ‘’A Program for Monetary Stability’‘ (1960
  • "The Lag in Effect of Monetary Policy", 1961, ‘’Journal of Political Economy’‘ [in JSTOR]
  • "Should There be an Independent Monetary Authority?", in L.B. Yeager, editor, In Search of a Monetary Constitution
  • Inflation: Causes and consequences, 1963.
  • A Monetary History of the United States, 1867-1960, with Anna J. Schwartz, 1963.
  • "Money and Business Cycles" with A.J. Schwartz, 1963, REStat.
  • "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, REStat
  • "Interest Rates and the Demand for Money", 1966, JlawE
  • The Balance of Payments: Free Versus Fixed Exchange Rates with Robert V. Roosa (1967)
  • "What Price Guideposts?", in G.P. Schultz, R.Z. Aliber, editors, Guidelines
  • "The Role of Monetary Policy: Presidential Address to AEA", 1968, American Economic Review [in JSTOR] Vol. 58, pp. 4-17. * "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 [in JSTOR].
  • The Counter-Revolution in Monetary Theory. 1970.
  • "A Monetary Theory of National Income", 1971, Journal of Political Economy [in JSTOR]
  • "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 [in JSTOR]. 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).
  • "The Case for Overhauling the Federal Reserve", 1985, Challenge
  • "Has Government Any Role in Money?" with Anna J. Schwartz, 1986, JME
  • "Quantity Theory of Money", in J. Eatwell, M. Milgate, P. Newman, editors, The New Palgrave (1998)
  • "George J. Stigler, 1911-1991: Biographical Memoir", 1998, at

National Academy of Science

About Friedman

  • A.W. Bob Coats; "The Legacy of Milton Friedman as Teacher" Economic Record, Vol. 77, 2001
  • 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+.
  • Elton Rayack; Not So Free to Choose: The Political Economy of Milton Friedman and Ronald Reagan Praeger, 1987
  • Abu N. M. Wahid, ed; Frontiers of Economics: Nobel Laureates of the Twentieth Century. Greenwood Press. 2002 pp 109-15.

See also

Wikiquote has quotations related to Milton Friedman.

Criticisms of Friedman

Lists

Bios

Articles

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