Milton Friedman dies, aged 94

One of the greatest thinkers and the most articulate defender of freedom in the twentieth century has died.

drmiltonfriedman

Milton Friedman did not plan on becoming an economist. In the autobiography he wrote when accepting the Nobel Memorial Prize for Economics he stated that his ambition was to become an actuary. But his decision to study economics has left the world in a much better position. The Nobel Prize he received in economics was, according to the Nobel Foundation, “for his achievements in the fields of consumption analysis, monetary history and theory and for his demonstration of the complexity of stabilisation policy”.

Among other things, Friedman showed how the Great Depression of the 1930s was not a failure of capitalism, but a systemic failure of government. Monetary policy was his main academic focus. His comments at the Nobel Banquet Speech December 10, 1976:

“As some of you may know, my monetary studies have led me to the conclusion that central banks could profitably be replaced by computers geared to provide a steady rate of growth in the quantity of money. Fortunately for me personally, and for a select group of fellow economists, that conclusion has had no practical impact… else there would have been no Central Bank of Sweden to have established the award I am honoured to receive. Should I draw the moral that sometimes to fail is to succeed? Whether I do or not, I suspect some economists may.

Needless to say, the attention is flattering, but also corrupting. Somehow, we badly need an antidote for both the inflated attention granted a Nobel Laureate in areas outside his competence and the inflated ego each of us is in so much danger of acquiring. My own field suggests one obvious antidote: competition through the establishment of many more such awards.”

He did not just focus on America because he knew economic principles applied much the same throughout the world. For instance, while my father was running the (now defunct) India Policy Institute, Friedman wrote a few items about India, which are available here. And as Arvind Panagariya writes, the 5,000 word note Friedman produced on his visit to India in 1955 has become “standard thinking among reform-minded economists”. This was the power of his foresight, most evident in his proposal to institute school vouchers. Today we take his ideas for granted. At the time they were truly revolutionary.

But for many non-economists it was his philosophical outlook on life, and his powerful advocacy of an open and free society that had the most impact on ways of thinking. His work – most notably in his book Capitalism and Freedom – has provided the intellectual base for a generation of young libertarians who do not want to see the society around them slide back into socialism. Young libertarians who are progress orientated have found, and will continue to find, that Friedman is indispensable. His work is not the sort which can be discarded after one reading. It will remain relevant well into the next century, if not further.

What I found amazing was Friedman’s ability to remain intellectually active even in his nineties. He gave many interviews and wrote articles (such as this one on why Hong Kong, his ideal of capitalism, has gone backwards) right throughout his life. He knew how to express ideas well, in a way that was not demeaning and was highly persuasive. The clarity of his thought was remarkable and is something to aspire to. There is no doubt that his loss will be felt.

Milton Friedman, RIP.

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“…he was an extraordinary person, in more ways tha[n] I can describe.” David Friedman

“I’ve no doubt that his clarity will survive him and influence people born long after he died.” – Andrew Norton  

“In my view he was the greatest champion of human liberty in my lifetime, certainly in the 20th century. And he didn’t slack off in the 21st century.”Edward H. Crane

“Friedman really had the gift of selling his ideas and writing complex arguments in a manner that was clear and simple but without being dumbed down.” Jason Soon

“He is one of the few 20th century intellectuals who changed the world for the better.”Stephen Kirchner

“We lost a great human being today.” Gregory Mankiw 

Friedman was one of [the] genuinely great thinkers of twentieth century economics – his passing is a major event for all of us who have followed and been influenced by his thinking over the decades.” Harry Clarke

“[The] tight connection between academic work and public intellectual work is actually the hallmark of Friedman’s greatness.” – Peter Boettke

“He genuinely believed that economics was about making people’s lives better and that disagreements among economists were about means rather than ends and could ultimately be resolved by careful attention to the evidence.” John Quiggin

“He was truly a revolutionary thinker.” Steven Levitt

21 thoughts on “Milton Friedman dies, aged 94

  1. When I was 16 or so I read a book, ‘The Lexus and the olive tree’, by Thomas Friedman. Whenever people asked what I was reading, and I told them the author, they would ask “do you mean Milton Friedman?”. I didn’t – because I didn’t even know who Milton Friedman was. But I wish I did. I wish I hadn’t spent the next six years reading Newspaper and Magazine articles about society, about the economy and about politics without his key insights into the modern political-economic system.

    Milton Friedman was a smart man and a dedicated man. He was a successful economist, able to understand complicated math and apply it to his field. He invented a new kind of statistical test. He developed a new method of taxation. He was an intelligent, competent economist, already succesful as a young man.

    But he wasn’t just an intellectual who dedicated himself to whatever. He examined his views, and changed them. He abandoned the Keynesian economic policies he advocated early in his career. Despite many years of working for the government, he didn’t simply propose that government programs should solve our problems – like so many other intellectuals of his time did (and continue to do so today). He went beyond the comforting position that we can solve our ills by trusting them to the politicians – he developed his views – and came to a new, more accurate conclusion: that government is bad at most of the jobs that it has given itself:

    “The government solution to a problem is usually as bad as the problem.”
    -Milton Friedman

    That Government is very bad at looking after our money, consequently that user pays is more efficient and usually leads to better outcomes for all:

    “There are four ways in which you can spend money. You can spend your own money on yourself. When you do that, why then you really watch out what you’re doing, and you try to get the most for your money. Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I’m not so careful about the content of the present, but I’m very careful about the cost. Then, I can spend somebody else’s money on myself. And if I spend somebody else’s money on myself, then I’m sure going to have a good lunch! Finally, I can spend somebody else’s money on somebody else. And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get. And that’s government. And that’s close to 40% of our national income.”

    That there was a lot of moral hazard in big government solutions:

    “If you pay people not to work and tax them when they do, don’t be surprised if you get unemployment.”

    And that government programs were very poor at achieving their outcomes:

    “One of the great mistakes is to judge policies and programmes by their intentions rather than their results.”

    Mostly, he was a lover of human liberty, and the great works that free people in a free society could achieve, and the improvement that free markets bring to human welfare and to human institutions. Like Hayek, he made the link between free markets and free peoples – that people who eliminate their free economy generally end up with despotic government before long.

    But what made Milton Friedman really great was that he did something about it. He published books, he gave lectures, he produced TV shows (TV Shows!) on free market economics. He inspired a generation of free market economists who helped transform both developing economies like Chile and the Anglosphere. He really made a difference – he was both an intellectual inspiration for Margaret Thatcher and as an actual staffer for Ronald Reagan.

    The fight for economic and social freedom continues, but we are much better off for his contribution to liberty’s intellectual arsenal.

    Thank you, Milton Friedman. You were a great man – intelligent, thorough and influential.

  2. Milton is the reason I became a libertarian.

    Before going to university I was a fundamentalist christian nationalist conservative anti-gay pro-tarriff rural Qld redneck.

    In my first year of uni my leftist professor (and later my thesis supervisor and friend) had Free to Choose on the reading list for comparative political economy and I loved it. I started asking more questions and kept finding that Milt had the better answers.

    I remained a moderate libertarian with little interest in politics until my honours year at uni — when I met a brilliant anarcho-capitalist (now working at RBA) and found out about the CIS, ISIL, the world libertarian movement and David Friedman (Milt’s son). Slowly I started turning more radical.

    My honours thesis was inspired by Friedman’s writings on the negative income tax — an idea that I continue to champion. In the course of my research I contacted lots of economists and thinkers with ideas on the NIT and most didn’t respond. Friedman did. I got a large manila folder with a collection of his writings on the issue and a short written note. All for some 20-year-old stranger from the other side of the world. Top guy. RIP.

  3. Geniality and humility go a long way in being influential. I think that’s a big part to his success.

    My favourite misquote is what he said to Nixon about price fixing:

    http://www.pbs.org/wgbh/commandingheights/shared/minitextlo/int_miltonfriedman.html

    President Nixon said to me, “Don’t blame George for this silly business of wage and price controls,” meaning George Shultz. And I believe I said to him, I think I said to him, “Oh, no, Mr. President. I don’t blame George; I blame you! “

  4. Before going to university I was a fundamentalist christian nationalist conservative anti-gay pro-tarriff rural Qld redneck.

    You were obviously not very commited. I was in Queenland last week and wow was the weather good to us.

    Milton messed up on money and even though he got a Nobel prize for this work he was big enough to admit later that he got it wrong. Not completely wrong but significantly wrong in a practical sence.

  5. Not commited to what? Back at school I knew (not thought, absolutely knew) that God created the world 5000 years ago, gay people were abnormal, tariffs protected jobs and the National party should run Australia. Go Sir Joe! ;p

    I changed.

  6. “Underlying most arguments against the free market is a lack of belief in freedom itself”

    “There’s no such thing as a free lunch”

    “I am in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it’s possible”

    And one of my favourite:

    “Governments never learn. Only people learn”

    There was also another one that went something along the lines of…(paraphrased) “I do not know of a single government program that has fully achieved its stated objectives”

  7. As some of you may know, my monetary studies have led me to the conclusion that central banks could profitably be replaced by computers geared to provide a steady rate of growth in the quantity of money.

    The idea that was central to the Nobel prize that Friedman won is actually wrong. A constant growth in the nations currency (M0), or in any other broader definition of money is completely flawed. The 1980s proved that and Friedman admitted it. The notion that the velocity of money is constant, or in other words that the demand for currency and credit is static or predictable is wrong. Targeting the quantity of money is not an appropriate forumation of monetary policy unless you want wild unpredictable swings between inflation and deflation. The correct formulation is to target not the quantity of money but the value of money. Which is in essence what most of the world did prior to 1970 and what it returned to post 1990 (although in a far less optimal way).

    The value of credit is defined by the value of the currency that denominates it. Your bank statment says how many dollars or euros or yen the bank owes you. Fix the value of the currency and the value of all money, including credit money, becomes fixed. Then the trick is to grow (or shrink) the supply to match the demand at the fixed value (or price).

    A few years ago Friedman admitted that his assumptions in this regard were wrong. Too bad that many of his commited monetary fans refused to listen and continue to push this flawed outlook.

    http://www.wanniski.com/PrintPage.asp?TextID=2694

    “The use of quantity of money as a target has not been a success,” concedes the grand old man of conservative economics. “I’m not sure I would as of today push it as hard as I once did.”

  8. And yet, in a cross sectional sample of 110 countries over 30 years, the correlation between long run changes in monetary aggregates and inflation rates is almost exactly unity. The only way to control inflation is by controlling money.

  9. I agree George. Friedman was right where it mattered.

    Terje is distracted with a rather incidental part of the early Monetarist school suggestions — that money supply be controlled through a fixed money growth rule. When it became clear that a fixed money growth rule was inadequate monetarists shifted to supporting inflation-targetting as a more effective way of achieving the same goal.

    But the central elements of the Monetarist revolution hold true — that the long-run Phillips curve is vertical, inflation is a monetary phenomenon and monetary policy is more effective that fiscal policy because the latter is crowded out due to relatively elastic demand for loanable funds.

  10. George,

    Regarding your last sentence. Mises and many others said as much long before the monetarists came on the scene. Despite what John says the monetarists did focus on the idea that you could scientifically grow the money supply without needing to pay any regard to market feedback. Whether it is the gold price, interest rates or the CPI you need a price focus in order to track demand appropriately. You can’t just set the rudder and then ignore the landmarks. You need to constantly check your co-ordinates.

    The beauty of a price target, as in the gold standard, is that short term you get stabe commodity prices (unlike today), both short and mid term you get stable consumer prices (as we do today) and long term you get the steady growth in the money supply that the monetarists championed.

    I blame the Keynesians mostly for the inflationary mess of the 1970s. However the monetarists caused their share of pain.

    Regards,
    Terje.

    p.s. by short term I mean days and weeks. By mid term I mean from months to a year or so. By long term I mean from a year or so to many years.

  11. I would guess that every libertarian was once, in varying degrees, “a fundamentalist christian nationalist conservative anti-gay pro-tarriff rural Qld redneck”. Socialism is natural because tribal thinking is natural. Even Friedman flirted with Keynesianism early in his career.

    If everyone were born libertarian, that would be too easy! 😉

  12. Socialism is natural because tribal thinking is natural.

    Damn straight. I so often see political debates really coming down to reason versus evolutionary instinct. It’s still a while to go before reason and civilisation is truly the modus operandi for human kind.

  13. Even Friedman flirted with Keynesianism early in his career.

    I think he was pretty much a Keynesian all of his career. He was just a different flavour of Keynesian. He still essentially bought into the view that consumers and demand are the central agents in the economic process (hence his starve the beast mentality). However Keynesianism is such a pervasive paradigm that I doubt many people can even begin to see this.

  14. Terje — you really do use economic language totally differently from most economists.

    Its a semantic revolution.

    Seriously though I am aware of this fact. What can I do about most economists? I can’t get them to abandon a lifetime of learned outlook. I can only chip away an the margin. If you are saying that you think I am wrong then that is your opinion and I’m happy to deal with that on a point by point basis.

    Monetarism challenged most of what it meant to be a Keynesian.

    Yes. And now Keynesians are different. However they are still Keynesians and so was Milton essentially. It’s like saying that Abraham Lincoln challenged much of what it meant to be an American.

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