Encyclopedia, Difference between revisions of "Milton Friedman" - New World

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[[Image:MiltonFriedman2.JPG|right|thumb|Milton Friedman]]
 
[[Image:MiltonFriedman2.JPG|right|thumb|Milton Friedman]]
  
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'''Milton Friedman''' (July 31, 1912 – November 16, 2006) was an American economist and intelectual who made major contributions to the fields of macroeconomics, microeconomics, economic history and statistics while advocating laissez-faire capitalism. In 1976, he was awarded the Nobel Memorial Prize for his achievements in the fields of consumption analysis, monetary history and theory and for his demonstration of the complexity of stabilization policy.
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==Biography==
  
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'''Milton Friedman''' (July 31 1912 &ndash; November 16 2006) was an [[United States|American]] [[economist]] and [[public intellectual]] who made major contributions to the fields of [[macroeconomics]], [[microeconomics]], economic history and [[statistics]] while advocating [[laissez-faire capitalism]]. In 1976, he was awarded the [[Nobel Prize in Economics|Nobel Memorial Prize]] for his achievements in the fields of consumption analysis, [[money supply|monetary]] history and theory and for his demonstration of the complexity of stabilization policy.<ref>[http://nobelprize.org/economics/laureates/1976/index.html Nobel Laureates for 1976] at [http://www.nobelprize.org http://www.nobelprize.org], accessed 20 November 2006.</ref>
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He was born in New York City  in 1912 to a working-class family of Jewish immigrants from Austria-Hungary, more specifically from Bergsaß/Beregszász (Berehove) in nowadays Slovakia. After his father's death the family moved to Rahway, New Jersey. He was awarded a  scholarship to Rutgers University from which he graduated in 1932. Afterwards, the Chicago University Economics Department offered Friedman a tuition scholarship. He spent the year there, obtaining M.A. in 1933. While in Chicago, he met extremely bright fellow economics student, Rose Director, whom he married six years later. After Chicago, he then went, on a fellowship arranged by Henry Schultz and Harold Hotelling,  to Columbia University.  
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Friedman, along with [[John Maynard Keynes]], is considered to be one of the most influential economists of the 20th century.<ref>[http://www.economist.com/business/displaystory.cfm?story_id=8313925 ''A heavyweight champ, at five foot two''] from [[The Economist]].</ref> In his 1962 book ''[[Capitalism and Freedom]]'', he advocated minimizing the role of government in a [[free market]] as a means of creating political and social freedom. In his television series ''[[Free to Choose]]'', which aired on the [[Public Broadcasting Service]] (PBS) in 1980, Friedman explained how the free market works, emphasizes that its principles have shown to solve social and political problems that other systems have failed to adequately address. It was later released as a book, co-authored with his wife, [[Rose Friedman]]. The book was widely read, as were his columns for ''[[Newsweek]]'' magazine. His writings were circulated underground behind the Iron Curtain before it fell in 1989, <ref> Holcomb B. Noble, "Milton Friedman, a Leading Economist, Dies at 94, ''New York Times" November 16, 2006, obituary.</ref>
 
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In statistics, he devised the [[Friedman test]]. His political philosophy, which Friedman himself considered more [[Classical liberalism|classically liberal]], stressing the advantages of the marketplace and the disadvantages of government intervention shaped the outlook of [[American conservatives]] and [[libertarians]] and had a major impact on the economic policy of the [[Richard Nixon]] and [[Ronald Reagan]] administrations in the United States and in many other countries after 1980.  
 
  
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==Biography==
 
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He was born in New York City  in 1912 to a working-class family of Jewish immigrants from Austria-Hungary, more specifically from Bergsaß/Beregszász (Berehove) in nowadays Slovakia. After his father's death the family moved to Rahway, New Jersey.  He was awarded a  scholarship to Rutgers University from which he graduated in 1932. Afterwards, the Chicago University Economics Department offered  Friedman a tuition scholarship. He spent the year there, obtaining M.A. in 1933. While in Chicago, he met extremely bright fellow economics student, Rose Director, whom he married six years later. After Chicago, he then went, on a fellowship arranged by Henry Schultz and Harold Hotelling,  to Columbia University.
 
 
After the year at Columbia, Friedman returned to Chicago, spending a year as research assistant to Henry Schultz, who was then completing his classic, The Theory and Measurement of Demand, and  forming a lifelong friendship with two fellow students, [[George J. Stigler]] and [[W. Allen Wallis]].
 
After the year at Columbia, Friedman returned to Chicago, spending a year as research assistant to Henry Schultz, who was then completing his classic, The Theory and Measurement of Demand, and  forming a lifelong friendship with two fellow students, [[George J. Stigler]] and [[W. Allen Wallis]].
  
 
When Wallis went first to New Deal Washington, Friedman followed in the summer of 1935, working at the National Resources Committee on the design of a large consumer budget study. This was one of the two principal components of his later Theory of the Consumption Function.
 
When Wallis went first to New Deal Washington, Friedman followed in the summer of 1935, working at the National Resources Committee on the design of a large consumer budget study. This was one of the two principal components of his later Theory of the Consumption Function.
 
The other came from his next job - at the National Bureau of Economic Research, where he went in the fall of 1937 to assist [[Simon Kuznets]] in his studies of professional income. The end result was our jointly published Incomes from Independent Professional Practice, which also served as his doctoral dissertation at Columbia ( Lindbeck, 1992 ).  
 
The other came from his next job - at the National Bureau of Economic Research, where he went in the fall of 1937 to assist [[Simon Kuznets]] in his studies of professional income. The end result was our jointly published Incomes from Independent Professional Practice, which also served as his doctoral dissertation at Columbia ( Lindbeck, 1992 ).  
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He spent 1941 to 1943 at the U.S. Treasury Department, working on wartime tax policy, and 1943-45 at Columbia University in a group headed by Harold Hotelling and W. Allen Wallis, working as a mathematical statistician on problems of weapon design, military tactics, and metallurgical experiments.  In 1945, Friedman joined George Stigler at the University of Minnesota, from which he had been on leave. After one year there, he accepted an offer from the University of Chicago to teach economic theory, a position opened up by Jacob Viner's departure for Princeton. Chicago has become his intellectual home ever since (Lindbeck, 1992) .
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He served as Professor of Economics at the University of Chicago 1946-76, 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. He spent the academic year 1953-54 as a Visiting Fellow at Gonville and Caius College, Cambridge. In 1976, he won the Nobel 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." From 1977, Friedman was affiliated with the Hoover Institution at Stanford University. In 1988 he received the National Medal of Science and Presidential Medal of Freedom. He died at the age of 94 in San Francisco on November 16, 2006 of heart failure. Friedman's son is the philosopher and economist David D. Friedman.
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He spent 1941 to 1943 at the U.S. Treasury Department, working on wartime tax policy, and 1943-45 at Columbia University in a group headed by Harold Hotelling and W. Allen Wallis, working as a mathematical statistician on problems of weapon design, military tactics, and metallurgical experiments.  In 1945, Friedman joined George Stigler at the University of Minnesota, from which he had been on leave. After one year there, he accepted an offer from the University of Chicago to teach economic theory, a position opened up by Jacob Viner's departure for Princeton. Chicago has become his intellectual home ever since (Lindbeck, 1992).
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Milton Friedman served as Professor of Economics at the University of Chicago 1946-76, 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. He spent the academic year 1953-54 as a Visiting Fellow at Gonville and Caius College, Cambridge. In 1976, he won the Nobel 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." From 1977, Friedman was affiliated with the Hoover Institution at Stanford University. In 1988 he received the National Medal of Science and Presidential Medal of Freedom. He died at the age of 94 in San Francisco on November 16, 2006 of heart failure. Friedman's son is the philosopher and economist David D. Friedman.
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==Major Works==
 
==Major Works==
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===Income Hypothesis in Consumption===
 
===Income Hypothesis in Consumption===
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Friedman's early contributions include the "Permanent Income Hypothesis" in consumption (1957), his formulation of  risk-aversion and risk-proclivity (1948, with L.J. Savage), his use of evolutionary theory in the theory of the firm,  and his propositions for a "positivist" methodology in economics (1953).   
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His major achievement was his “Theory of the Consumption Function” ( Friedman 1957 ), which was the work most prominently mentioned in the citation for the Nobel Prize he won in 1974. His investigation was touched off by a well known paradox. Cross-section data appeared to show that the percentage of income saved, increased as income rose. On the other hand, time series data showed much less change in the savings proportion over the years. The resolution of the puzzle was that spending and savings decisions depended on people's views of their long-term (“permanent”) income; but they were much less inclined to adjust to transitory income variations in either direction.
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Friedman's early contributions include the "Permanent Income Hypothesis" in consumption (1957), his formulation of  risk-aversion and risk-proclivity (1948, with L.J. Savage), his use of evolutionary theory in the theory of the firm,  and his propositions for a "positivist" methodology in economics (1953).  
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His major achievement was his ''Theory of the Consumption Function'' ( Friedman 1957 ), which was the work most prominently mentioned in the citation for the Nobel Prize he won in 1974. His investigation was touched off by a well known paradox. Cross-section data appeared to show that the percentage of income saved, increased as income rose. On the other hand, time series data showed much less change in the savings proportion over the years. The resolution of the puzzle was that spending and savings decisions depended on people's views of their long-term (“permanent”) income; but they were much less inclined to adjust to transitory income variations in either direction.
  
 
=== Critique of  the Phillips Curve===
 
=== Critique of  the Phillips Curve===
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Other important contributions include his critique of the Phillips curve and the concept of the natural rate of unemployment (1968). Each of these has implications for the effect of monetary and fiscal policy on output in the short run and the long run.
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Some economists would argue that Friedman's most important contribution to macroeconomics lay, not in his technical monetary work, but in his 1967 presidential address to the American Economic Association. Here he demonstrated that the idea of a stable trade-off between inflation and unemployment which held sway under the name of the Phillips curve and which seemed to give policymakers a menu of choices was invalid. Suppose that a Government or central bank tried to raise output and employment at the expense of accepting higher inflation. Once market participants started to take into account inflation in their behaviour, the economy would eventually end up with the same rate of unemployment as before but a higher rate of inflation. If the authorities none the less persisted in trying to achieve an over-ambitious target unemployment rate, the result would not be merely inflation, but accelerating inflation, with which no society could live for long.
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Other important contributions include his critique of the [[Phillips curve]] and the concept of the natural rate of unemployment (1968). Each of these has implications for the effect of monetary and fiscal policy on output in the short run and the long run.
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This family of Friedman doctrines was sometimes called the vertical Phillips curve, sometimes the accelerationist hypothesis and sometimes the ‘natural rate' of unemployment. The latter was the level at which the economy would settle once any stable rate of inflation had been established. The name was later changed by some users to the”NAIRU”: the Non-Accelerating Inflation Rate of Unemployment to banish the idea that there was anything natural or inevitable about it.
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Some economists would argue that Friedman's most important contribution to macroeconomics lay, not in his technical monetary work, but in his 1967 presidential address to the American Economic Association. Here he demonstrated that the idea of a stable trade-off between inflation and unemployment which held sway under the name of the [[Phillips curve]] and which seemed to give policymakers a menu of choices was invalid. Suppose that a Government or central bank tried to raise output and employment at the expense of accepting higher inflation. Once market participants started to take into account inflation in their behaviour, the economy would eventually end up with the same rate of unemployment as before but a higher rate of inflation. If the authorities none the less persisted in trying to achieve an over-ambitious target unemployment rate, the result would not be merely inflation, but accelerating inflation, with which no society could live for long.
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This family of Friedman doctrines was sometimes called the ''vertical Phillips curve'', sometimes the ''accelerationist hypothesis'' and sometimes the ''natural rate of unemployment''. The latter was the level at which the economy would settle once any stable rate of inflation had been established. The name was later changed by some users to the”NAIRU”: the Non-Accelerating Inflation Rate of Unemployment to banish the idea that there was anything natural or inevitable about it.
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It was in fact these ideas related to the NAIRU which caused conversion of many economists from post-war Keynesianism rather than any of Friedman's more technical monetary ideas. The basic propositions are now quite familiar. But at the time they were explosive stuff for the British economic establishment and also for many American economists on the Eastern seaboard.
 
It was in fact these ideas related to the NAIRU which caused conversion of many economists from post-war Keynesianism rather than any of Friedman's more technical monetary ideas. The basic propositions are now quite familiar. But at the time they were explosive stuff for the British economic establishment and also for many American economists on the Eastern seaboard.
  
 
===Quantity theory of money===  
 
===Quantity theory of money===  
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It was in the late 1950 and 1960s that Friedman developed the monetarist doctrines by which he became best known. He treated money as an asset. The public desire to hold this asset depended on incomes, the rate of interest and expected inflation. If more money became available the effect would be initially to raise real output and incomes, but eventually just to raise prices more or less in proportion. Here was where the famous ‘long and variable lags' appeared: typically nine months before real output and income were affected and a further nine months before the main effects on prices came through. These time periods were much cited and much derided; but they were not the heart of Friedman's message.
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It was in the late 1950 and 1960s that Friedman developed the monetarist doctrines by which he became best known. He treated money as an asset. The public desire to hold this asset depended on incomes, the rate of interest and expected inflation. If more money became available the effect would be initially to raise real output and incomes, but eventually just to raise prices more or less in proportion. Here was where the famous ''long and variable lags'' appeared: typically nine months before real output and income were affected and a further nine months before the main effects on prices came through. These time periods were much cited and much derided; but they were not the heart of Friedman's message.
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Characteristically, it began as a by-product of an attempt to establish the factual record of the US money supply, which turned up so many problems and brought to light so much new material that the more ambitious volume more or less suggested itself.
 
Characteristically, it began as a by-product of an attempt to establish the factual record of the US money supply, which turned up so many problems and brought to light so much new material that the more ambitious volume more or less suggested itself.
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The policy conclusion Friedman drew was his famous money supply rule a stable growth of the money supply, year in year out. He accepted that this was not the only policy that could be derived from monetarist findings. But nearly all suggested monetarist strategies became embroiled in difficulties as financial assets proliferated and with them the number of rival definitions of money. In the early 1990s some monetarists were accusing the Fed of depressing the US economy with too tight a policy and at the same time as other monetarists were criticising it for expanding too much.
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[[The policy conclusion Friedman drew was his famous money supply rule a stable growth of the money supply, year in year out.]] He accepted that this was not the only policy that could be derived from monetarist findings. But nearly all suggested monetarist strategies became embroiled in difficulties as financial assets proliferated and with them the number of rival definitions of money. In the early 1990s some monetarists were accusing the Fed of depressing the US economy with too tight a policy and at the same time as other monetarists were criticising it for expanding too much.
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Friedman himself sometimes gave the impression that whatever a central bank did, it could do no right. To gain his favour it had not only to pursue monetary targets, but pursue them by a particular method known as monetary base control; and when the Fed attempted such a method in 1979-82 it was damned for getting the mechanics wrong.
 
Friedman himself sometimes gave the impression that whatever a central bank did, it could do no right. To gain his favour it had not only to pursue monetary targets, but pursue them by a particular method known as monetary base control; and when the Fed attempted such a method in 1979-82 it was damned for getting the mechanics wrong.
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“…Just as banks all around the country were closing, the Fed raised the discount rate; that's the rate they charge for loans to banks. Bank failures consequently increased spectacularly. We might have had an economic downturn in the thirties anyway, but in the absence of the Federal Reserve System—with its enormous power to make a bad situation worse—it wouldn't have been anything like the scale we experienced….” ( Friedman’s interview in Playboy 1973 ). Yet he clearly asserted money’s active role in the following work:
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''...Just as banks all around the country were closing, the Fed raised the discount rate; that's the rate they charge for loans to banks. Bank failures consequently increased spectacularly. We might have had an economic downturn in the thirties anyway, but in the absence of the Federal Reserve System—with its enormous power to make a bad situation worse—it wouldn't have been anything like the scale we experienced''…. Friedman’s interview in ''Playboy'' 1973 ). Yet he clearly asserted money’s active role in the following work:
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===Monetary History of the US ( 1867-1960)  and Monetarism===
 
===Monetary History of the US ( 1867-1960)  and Monetarism===
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The book in which he tried most fully to demonstrate money's active role was A Monetary History of the US, 1867-1960, published in 1963 and written jointly with Anna Schwartz it was one of Friedman's skills that he always found the right collaborator for a particular work. The Monetary History is Friedman's masterpiece. Containing hardly any equations, it has been read with profit and pleasure as history, even by people who have disagreed with, or been indifferent to, the doctrines it was designed to advance. Characteristically, it began as a by-product of an attempt to establish the factual record of the US money supply, which turned up so many problems and brought to light so much new material that the more ambitious volume more or less suggested itself ( Friedman 1963).
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The book in which he tried most fully to demonstrate money's active role was A Monetary History of the US, 1867-1960, published in 1963 and written jointly with Anna Schwartz; it was one of Friedman's skills that he always found the right collaborator for a particular work.  
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The Monetary History is Friedman's masterpiece. Containing hardly any equations, it has been read with profit and pleasure as history, even by people who have disagreed with, or been indifferent to, the doctrines it was designed to advance. Characteristically, it began as a by-product of an attempt to establish the factual record of the US money supply, which turned up so many problems and brought to light so much new material that the more ambitious volume more or less suggested itself ( Friedman 1963).
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==Public policy positions and legacy==
 
==Public policy positions and legacy==
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In the fall of 1950, Friedman spent a quarter in Paris as a consultant to the U.S. governmental agency administering the Marshall Plan. His major assignment was to study the Schuman Plan, the precursor of the common market. This was the origin of his interest in floating exchange rates, since Friedman concluded that a common market would inevitably founder without floating exchange rates. His essay, The Case for Flexible Exchange Rates ( Friedman 1953 ), was one product.
 
  
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Thus in the 1950s, Friedman was much better known for his advocacy of floating exchange rates than for monetarism. The background was the widespread concern about a supposed dollar shortage, which Friedman believed entirely due to overvalued exchange rates in Europe and elsewhere. “Sure,” he would say, “there is a dollar shortage in Britain - in exactly the same way as there is a dollar shortage for every US citizen.” He had the last laugh, as within a few years the supposed dollar shortage had turned into an equally mythical dollar surplus.
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In the fall of 1950, Friedman spent a few months in Paris as a consultant to the U.S. governmental agency administering the Marshall Plan. His major assignment was to study the Schuman Plan, the precursor of the common market. This was the origin of his interest in floating exchange rates, since Friedman concluded that a common market would inevitably founder without floating exchange rates. His essay, ''The Case for Flexible Exchange Rates'' ( Friedman 1953 ), was one product.
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Beginning in the early 1960s, Friedman was increasingly drawn into the public arena, serving in 1964 as an economic adviser to Senator Goldwater in his unsuccessful quest for the presidency, and, in 1968, as one of a committee of economic advisers during Richard Nixon's successful quest. In 1966, I began to write a triweekly column on current affairs for Newsweek magazine, alternating with Paul Samuelson and Henry Wallich.
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Bob Chitester persuaded all of them them to join him in producing a major television program presenting my economic and social philosophy. The resulting effort, spread over three years, proved the most exciting adventure of our lives. The end result was “Free to Choose” ( Friedman 1980), ten one-hour programs, each consisting of a half-hour documentary and a half-hour discussion. The first of the ten programs appeared on PBS (Public Broadcasting System) in January 1980. Since then, the series has been shown in many foreign countries.  
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Thus in the 1950s, Friedman was much better known for his advocacy of floating exchange rates than for monetarism. The background was the widespread concern about a supposed dollar shortage, which Friedman believed entirely due to overvalued exchange rates in Europe and elsewhere. “...Sure,” he would say, “...there is a dollar shortage in Britain - in exactly the same way as there is a dollar shortage for every US citizen....”  
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It is,  perhaps without too much exageration  quite possible that Milton Friedman’s influence ─ throughout of these programs aimed at ordinary people in not so democratic and the outright Communist countries alike, where they were clandestine reproduced and run for mass audiences, by preaching that the world recognized the need of free markets, trade and limited governments changed the political history of Central and Eastern Europe and USSR and, to certain extend, in Asia more than any other political exercise.  
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“…For us, who lived in the communist world, Milton Friedman was the greatest champion of freedom, of limited and unobtrusive government and of free markets. Because of him I became a true believer in the unrestricted market economy….” (V. Klaus 2007). Hence, this is by far Milton Friedman’s  greatest and most important legacy far surpassing even his giant scientific endeavours.  
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He had the last laugh, as within a few years the supposed dollar shortage had turned into an equally mythical dollar surplus.
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Milton Friedman  continued to be active in public policy since 1977. I continued my tri-weekly column in Newsweek until it was terminated in 1983. Since then, I have published numerous op-eds in major newspapers. I served as an unofficial adviser to Ronald Reagan during his candidacy for the presidency in 1980, and as a member of the President's Economic Policy Advisory Board during his presidency. In 1988, President Reagan awarded me the Presidential Medal of Freedom and in the same year I was awarded the National Medal of Science.
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He had traveled extensively since 1977, including a trip through Eastern Europe in 1990, where we filmed a documentary on former Soviet satellites. The documentary was included in a shortened reissue of Free to Choose ( Friedman1980 ).
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Beginning in the early 1960s, Friedman was increasingly drawn into the public arena, serving in 1964 as an economic adviser to Senator Goldwater in his unsuccessful quest for the presidency, and, in 1968, as one of a committee of economic advisers during Richard Nixon's successful quest. In 1966, I began to write a triweekly column on current affairs for Newsweek magazine, alternating with [[Paul Samuelson]] and [[Henry Wallich]].
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Bob Chitester persuaded all of them them to join him in producing a major television program presenting my economic and social philosophy. The resulting effort, spread over three years, proved the most exciting adventure of our lives. The end result was ''Free to Choose'' ( Friedman 1980), ten one-hour programs, each consisting of a half-hour documentary and a half-hour discussion. The first of the ten programs appeared on PBS (Public Broadcasting System) in January 1980. Since then, the series has been shown in many foreign countries.
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It is,  perhaps without too much exageration, quite possible that Milton Friedman’s influence via these programs --- aimed at ordinary people in not so democratic and the outright Communist countries alike (where they were clandestine reproduced and run for mass audiences) by preaching that the world recognized the need of free markets, trade and limited governments --- changed the political history of Central and Eastern Europe and USSR and, to certain extend, in Asia more than any other political exercise of force.  
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“…For us, who lived in the communist world, Milton Friedman was the greatest champion of freedom, of limited and unobtrusive government and of free markets. Because of him I became a true believer in the unrestricted market economy….” (Czech president Vaclav Klaus 2007).
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Hence, this might as well be by far Milton Friedman’s  greatest and most important legacy, far surpassing even his other giant scientific endeavours.
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Milton Friedman  continued to be active in public policy since 1977. He continued his tri-weekly column in Newsweek until it was terminated in 1983. Since then, he has published numerous op-eds in major newspapers. He served as an unofficial adviser to Ronald Reagan during his candidacy for the presidency in 1980, and as a member of the President's Economic Policy Advisory Board during his presidency. In 1988, President Reagan awarded Milton Friedman the Presidential Medal of Freedom and in the same year he was awarded the National Medal of Science.
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He had traveled extensively since 1977, including a trip through Eastern Europe in 1990, where we filmed a documentary on former Soviet satellites. The documentary was included in a shortened reissue of Free to Choose ( Friedman 1980 ).
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Perhaps the most notable foreign travel consisted of three trips to China: one in 1980 when he gave a series of lectures under the auspices of the Chinese government; one in 1988 when he attended a conference in Shanghai on Chinese economic development and one in 1993 when I traveled with a group of Chinese friends from Hong Kong throughout the country. The three visits covered a period of revolutionary economic growth and development, the first stage of a shift from an authoritarian, centrally planned economy to a largely free market economy.
 
Perhaps the most notable foreign travel consisted of three trips to China: one in 1980 when he gave a series of lectures under the auspices of the Chinese government; one in 1988 when he attended a conference in Shanghai on Chinese economic development and one in 1993 when I traveled with a group of Chinese friends from Hong Kong throughout the country. The three visits covered a period of revolutionary economic growth and development, the first stage of a shift from an authoritarian, centrally planned economy to a largely free market economy.
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One of his down-to-earth examples with which he connected to ordinary people  goes like this :
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“….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….” ( Fox News interview, May 2004)  
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One of his down-to-earth examples with which he connected to ordinary people  goes like this:
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“….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….” ( ''Fox News'' interview, May 2004)
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===Other honors and recognition===
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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.
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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...."
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According to Harry Girvetz and Kenneth Minogue, Friedman was co-responsible with Friedrich von Hayek for providing the intellectual foundations for the revival of classical liberalism in the 20th century.
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==Other honors, recognition, and influence==
 
==Other honors, recognition, and influence==
 
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 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.  
 
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."  
 
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."  
 
According to Harry Girvetz and Kenneth Minogue, Friedman was co-responsible with Friedrich von Hayek for providing the intellectual foundations for the revival of classical liberalism in the 20th century.  
 
According to Harry Girvetz and Kenneth Minogue, Friedman was co-responsible with Friedrich von Hayek for providing the intellectual foundations for the revival of classical liberalism in the 20th century.  
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==Selected References==
 
==Selected References==
 
*Friedman, M. ,Taxing to Prevent Inflation: Techniques for Estimating Revenue Requirements, (Columbia U.P. 1943, 236 pp) with Carl Shoup and Ruth P. Mack  
 
*Friedman, M. ,Taxing to Prevent Inflation: Techniques for Estimating Revenue Requirements, (Columbia U.P. 1943, 236 pp) with Carl Shoup and Ruth P. Mack  
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*Friedman,M.,"Commodity-Reserve Currency," Journal of Political Economy Vol. 59, No. 3 (Jun., 1951), pp. 203-232 JSTOR
 
*Friedman,M.,"Commodity-Reserve Currency," Journal of Political Economy Vol. 59, No. 3 (Jun., 1951), pp. 203-232 JSTOR
 
*Friedman, M.,"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  
 
*Friedman, M.,"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  
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*Friedman, M. “The Case for Flexible Exchange Rates” in , Essays in Positive Economics , Chicago: University of Chicago,1953  
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*Friedman, M. “The Case for Flexible Exchange Rates” in , Essays in Positive Economics , Chicago: University of Chicago,1953  
 
*Friedman, M., Essays in Positive Economics, University of Chicago Press1953
 
*Friedman, M., Essays in Positive Economics, University of Chicago Press1953
 
*Friedman,M.,"Choice, Chance, and the Personal Distribution of Income," Journal of Political Economy, vol. 61, No. 4 (Aug., 1953), pp. 277-290 JSTOR  
 
*Friedman,M.,"Choice, Chance, and the Personal Distribution of Income," Journal of Political Economy, vol. 61, No. 4 (Aug., 1953), pp. 277-290 JSTOR  
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*Lindbeck, Assar , ed.,  Nobel Lectures, Economics 1969-1980, Editor, World Scientific Publishing Co., Singapore, 1992
 
*Lindbeck, Assar , ed.,  Nobel Lectures, Economics 1969-1980, Editor, World Scientific Publishing Co., Singapore, 1992
 
*Stigler, George, “A Personal Reminiscence”, Journal of Political Economy Vol. 101, No. 5 (Oct., 1993), pp. 768-773 JSTOR  
 
*Stigler, George, “A Personal Reminiscence”, Journal of Political Economy Vol. 101, No. 5 (Oct., 1993), pp. 768-773 JSTOR  
−
*Stigler, George, 1911-1991: Biographical Memoir, (National Academy of Sciences: 1998), online
+
*Stigler, George, 1911-1991: Biographical Memoir, (National Academy of Sciences: 1998), online  
−
 
 
−
==Scholarly contributions==
 
−
Friedman was best known for reviving interest in the money supply as a determinant of the nominal value of output, that is, the [[quantity theory of money]]. [[Monetarism]] is the set of views associated with modern quantity theory. Its origins can be traced back to the 16th century [[School of Salamanca#money.2C value.2C and price|School of Salamanca]] or even further but Friedman's contribution is largely responsible for its modern formulation. He co-authored, with [[Anna Schwartz]], ''A Monetary History of the United States'' (1963), which sought to examine the role of the money supply and [[economy of the United States|economic activity]] in U.S. history. A striking conclusion of their research was one regarding the role of money supply fluctuations as contributing to economic fluctuations. Or, as a Federal Reserve official ([[Ben Bernanke]]) expressed it on the occasion of Friedman's 90th birthday in 2002: "Regarding the [[Great Depression]]. You're right, we did it. We're very sorry." Several regression studies with David Meiselman in the 1960s suggested the primacy of the money supply over investment and government spending in determining consumption and output. These challenged a prevailing but largely untested view on their relative importance. Friedman's empirical research and some theory supported the conclusion that the short-run effect of a change in the money supply was primarily on output but that the longer-run effect was primarily on the price level.
 
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Friedman was the leading proponent of the [[monetarism|monetarist]] school of economic thought. He maintained 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 rejected the use of [[fiscal policy]] as a tool of [[demand]] management; and he held 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 (economics)|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."<ref>(''Two Lucky  People, p 233)</ref> Friedman also argued for the cessation of government intervention in [[Foreign exchange market|currency markets]], thereby spawning an enormous literature on the subject, as well as promoting the practice of freely floating [[exchange rate]]s. 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 [[Rational expectations|theory of rational expectations]], a newer approach developed by [[Robert Lucas, Jr.|Robert Lucas]], also at the University of Chicago."<ref>Stigler, p 34</ref>
 
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−
Friedman was also known for his refinement of the consumption function, the [[permanent income hypothesis]] (1957). It is considered by some academic economists as the greatest application of his own methodological position (see below). Other important contributions include his critique of the [[Phillips curve]] and the concept of the [[natural rate of unemployment]] (1968). Each of these has implications for the effect of monetary and fiscal policy on output in the short run and the long run.
 
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−
Friedman's essay "[[Essays in Positive Economics|The Methodology of Positive Economics]]" (1953) set the epistemological course for his own subsequent research and to a degree that of the [[Chicago school (economics)|Chicago School of Economics]]. There he argued that economics as ''science'' should be free of value judgments for it to be objective. Moreover, a useful economic theory should be judged not by its descriptive realism (hair color, etc.) but by its simplicity and fruitfulness as an engine of prediction.
 
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−
==Other public policy positions==
 
−
Friedman also supported various [[libertarianism|libertarian]] policies such as decriminalization of [[recreational drug|drugs]] and [[prostitution]]. In addition, he headed the Nixon administration committee that researched the possibility of a move towards a paid/volunteer armed force, and played a big role in the abolition of the [[Conscription in the United States|draft]] that took place in the 1970s in the U.S. He would later state that his role in eliminating the draft was his proudest accomplishment.<ref>http://www.reason.com/news/show/29691.html</ref> He served as a member of President 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 said that he was a libertarian philosophically, but a member of the U.S. [[Republican Party (United States)|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 said, "I think the term [[classical liberalism|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."<ref>[http://queensjournal.ca/article.php?point=vol129/issue37/features/lead1 ''Friedman and Freedom''], Interview with Peter Jaworski. ''The Journal'', Queen's University, March 15, 2002 - Issue 37, Volume 129</ref>
 
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−
Friedman made headlines by proposing a [[negative income tax]] to replace the existing [[Welfare (financial aid)|welfare]] system and then opposing the bill to implement it because it merely supplemented the existing system rather than replace it. In recent years, Friedman devoted much of his effort to promoting [[Education voucher|school vouchers]] that can be used to pay for tuition at both [[education in the United States|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 was that vouchers would allow private schools to compete with the public school monopoly.
 
−
 
 
−
In 2005, Friedman and more than 500 other economists called for discussions regarding the economic benefits of the [[legal issues of cannabis|legalization of marijuana]].<ref>[http://www.prohibitioncosts.org/endorsers.html An open letter], via Prohibitioncosts.org</ref>
 
−
 
 
−
[[Michael Walker]] of the [[Fraser Institute]] and Friedman hosted a series of conferences from 1986 to 1994. The goal was to create a clear definition of [[Economic freedom]] and a method for measuring it. Eventually this resulted in the first report on worldwide economic freedom, ''Economic Freedom in the World''. These annual report has since provided data for numerous peer-reviewed studies and has influenced policy in several nations.
 
−
 
 
−
==Other honors, recognition, and influence==
 
−
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]].
 
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−
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."<ref>Formaini, Robert L. [http://www.dallasfed.org/research/ei/ei0202.html ''Milton Friedman—Economist as Public Intellectual'']. ''Economic Insights'' Volume 7, Number 2. [[Federal Reserve Bank of Dallas]]. 2002.</ref>
 
−
 
 
−
According to [[Harry Girvetz]] and [[Kenneth Minogue]], Friedman was co-responsible with [[Friedrich von Hayek]] for providing the intellectual foundations for the revival of classical liberalism in the 20th century.<ref name="Britannica">Girvetz, Harry K. and Minogue Kenneth. [http://www.britannica.com/eb/article-9117288?query=liberalism&ct=eb ''Liberalism''], Encyclopedia Britannica (online), p. 16, retrieved May 16,2006</ref>
 
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−
===Hong Kong===
 
−
Friedman once said "if you want to see capitalism in action, go to [[Hong Kong]]." He believed the [[economy of Hong Kong|Hong Kong economy]] is the best example of a [[laissez-faire]] capitalism economy.
 
−
 
 
−
One month before his death, he wrote the article '''Hong Kong Wrong - What would Cowperthwaite say?''' in the [[Wall Street Journal]], criticizing [[Donald Tsang]], Chief Exective of Hong Kong, for abandoning "positive noninterventionism." <ref name=wsj_20061006>"http://www.opinionjournal.com/editorial/feature.html?id=110009051" Dr. Milton Friedman, ''[[Wall Street Journal - Opinion Journal]]. October 6, 2006</ref> Tsang later said he was merely changing the slogan to "big market, small government," where small government is defined as less than 20% of GDP.
 
−
 
 
−
Just before he died, he criticised Hong Kong's [[School voucher#Hong Kong|kindergarten voucher]] system as "not properly structured."
 
−
 
 
−
===Chile===
 
−
 
 
−
Friedman visited [[Chile]] in 1975 during the military government of President [[Augusto Pinochet]]. Invited by a private foundation, he gave a series of lectures on economics. Several professors from the University of Chicago became advisors{{fact}} to the Chilean government and several Ph.D. graduates from the same university &ndash; known as "the [[Chicago boys]]" &ndash; served in Chilean ministries. Friedman met with Pinochet during his visit to Chile, but he did not serve as a formal 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 said that the "the emphasis of that talk was that free markets would undermine political centralization and political control."<ref>[http://www.pbs.org/wgbh/commandingheights/shared/minitextlo/ufd_reformliberty_full.html Interview with Jeffery Sachs on the "Miracle of Chile"] PBS.org</ref>
 
−
 
 
−
In an interview on the PBS program ''[[Commanding Heights: The Battle for the World Economy#Documentary|Commanding Heights]]'' in 2000, Friedman attributed the demonstrations to communists seeking to discredit anyone with only the slightest connection to Pinochet—such as himself—by opponents he recognized from earlier occasions, adding that "there was no doubt that there was a concerted effort to tar and feather me."<ref>[http://www.pbs.org/wgbh/commandingheights/shared/minitextlo/int_miltonfriedman.html Milton Friedman interview PBS.org]</ref>
 
−
 
 
−
Friedman defended 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 the eventual constitutional transition to a democratic government in 1990. He also stressed that the lectures he gave in Chile were the same lectures he later gave in [[People's Republic of China|China]] and other [[Socialism|socialist]] states.<ref>Friedman and Friedman, ''Two Lucky People:Memoirs'', p.600-601</ref> In the 2000 PBS documentary ''The Commanding Heights'', Friedman also noted that this criticism was misdirected and missed his main point. Friedman advocated that freer markets led to free people, and that Chile had an unfree economy, which led to the military government, which then implemented open economy policies and voluntarily legislated a transition to a full democracy.
 
−
 
 
−
===Iceland===
 
−
:
 
−
Friedman visited [[Iceland]] in the autumn of 1984, met with prominent Icelanders and gave a lecture at the University of Iceland on the Tyranny of the Status Quo. He participated in a lively television debate 31 August with leading socialist intellectuals, including [[Ólafur Ragnar Grímsson]]. When they complained that a fee was charged for attending his lecture at the University and that hitherto lectures by visiting scholars had been free-of-charge, Friedman replied that of course previous lectures had not been free-of-charge in a meaningful sense: There were always costs attached to lectures. What mattered was whether those who attended the lecture, were charged, or those who did not attend. He himself thought that it was fairer that only those who attended, paid. When Friedman was introduced, at a luncheon, to a governor of Iceland’s Central Bank with the words, that this person would become unemployed if Friedman’s theories were implemented in Iceland, Friedman immediately responded: "No, you would not become unemployed. You would only have to move to a more beneficial kind of employment."
 
−
 
 
−
Friedman made a great impact on a group of young intellectuals in the [[Independence Party (Iceland)|Independence Party]], including [[Davíð Oddsson]] who became Prime Minister in 1991 and began a radical programme of monetary and fiscal stabilisation, ambitious privatisation, reduction of taxes (e.g. the corporate incomes tax from 50% to 18%), the definition of exclusive use rights in the fisheries, abolition of various government funds for aiding loss-making enterprises and liberalisation of currency transfers and capital markets. In 1975, Iceland had the 53rd freest economy in the world, whereas in 2004, it had the 9th freest economy, according to the [[Indices of Economic Freedom|Economic Freedom Index]] designed by Canada’s [[Fraser Institute]]. According to the index designed by the [[Heritage Foundation]], Iceland has the 5th freest economy in the world. Davíð Oddsson was Prime Minister for thirteen and a half years, to 2004. [[Geir H. Haarde]] who followed him as leader of the Independence Party and who is at present Prime Minister, follows the same policies.<ref>[http://courses.wcupa.edu/rbove/eco343/040Compecon/Scand/Iceland/040129prosper.htm Article on Icelandic economic miracle by [[Hannes Hólmsteinn Gissurarson|H.H.Gissurarson]] in [[Wall Street Journal]] 2004].</ref>
 
−
 
 
−
===Estonia===
 
−
 
 
−
Although Friedman never visited [[Estonia]], his book ''[[Free to Choose]]'' exercised a great influence on the then 32-year-old prime minister of Estonia [[Mart Laar]], who has claimed that it was the only book on economics he had read before taking office.  Laar's reforms are often credited with responsibility for transforming Estonia from an impoverished Soviet Republic to the "Baltic Tiger."  A prime element of Laar's program was introduction of the [[flat tax]].  Laar won the 2006 [http://www.cato.org/special/friedman/laar/ Milton Friedman Prize for Advancing Liberty], awarded by the [[Cato Institute]].
 
−
 
 
−
==Works==
 
−
<div class="references-small" style="-moz-column-count:2; column-count:2;">
 
−
=== 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 0-226-26401-7 (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|Free to Choose: A personal statement]]'', with Rose Friedman, (1980)
 
−
* "The Case for Overhauling the Federal Reserve, 1985, ''Challenge'' magazine article
 
−
* ''The Essence of Friedman'', essays edited by Kurt R. Leube, (1987)  (ISBN 0-8179-8662-6)
 
−
* ''Economic Freedom, Human Freedom, Political Freedom'' ISBN 1-883969-00-X (1992), short pamphlet
 
−
* "The Drug War as a Socialist Enterprise," in Arnold S. Trebach, ed.  ''Friedman and Szasz on Liberty and Drugs: Essays on the Free Market and Prohibition'' (Drug Policy Foundation Press: 1992)
 
−
* ''Two Lucky People: Memoirs'' (with Rose Friedman) ISBN 0-226-26414-9 (1998)
 
−
* ''George Stigler: A Personal Reminiscence'', ''Journal of Political Economy'' Vol. 101, No. 5 (Oct., 1993), pp. 768-773 [http://links.jstor.org/sici?sici=0022-3808%28199310%29101%3A5%3C768%3AGSAPR%3E2.0.CO%3B2-T JSTOR]
 
−
* ''George J. Stigler, 1911-1991: Biographical Memoir'', (National Academy of Sciences: 1998), [http://darwin.nap.edu/html/biomems/gstigler.html online]
 
−
* ''Money Mischief: Episodes in Monetary History'' (1994) ISBN 0-15-162042-3, 28 6pp.
 
−
* "The Case for Free Trade" with Rose Friedman, 1997, ''Hoover Digest'' magazine article
 
−
* "Reflections on A Monetary History," ''The Cato Journal'', Vol. 23, 2004, essay
 
−
* J. Daniel Hammond and Claire H. Hammond, ed., ''Making Chicago Price Theory: Friedman-Stigler Correspondence, 1945-1957''. Routledge, 2006. 165 pp. ISBN 0-415-70078-7.
 
−
 
 
−
===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 [http://links.jstor.org/sici?sici=0033-5533%28193511%2950%3A1%3C151%3APPMFME%3E2.0.CO%3B2-4  JSTOR]
 
−
* "Marginal Utility of Money and Elasticities of Demand," ''The Quarterly Journal of Economics'' Vol. 50, No. 3 (May, 1936), pp. 532-533 [http://links.jstor.org/sici?sici=0033-5533%28193605%2950%3A3%3C532%3AMUOMAE%3E2.0.CO%3B2-3 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 [http://links.jstor.org/sici?sici=0162-1459%28193712%2932%3A200%3C675%3ATUORTA%3E2.0.CO%3B2-3 JSTOR]
 
−
* "The Inflationary Gap: II. Discussion of the Inflationary Gap," ''American Economic Review'' Vol. 32, No. 2, Part 1 (Jun., 1942), pp. 314-320 [http://links.jstor.org/sici?sici=0002-8282%28194206%2932%3A2%3C314%3ATIGIDO%3E2.0.CO%3B2-O JSTOR]
 
−
* "The Spendings Tax as a Wartime Fiscal Measure," ''American Economic Review'' Vol. 33, No. 1, Part 1 (Mar., 1943), pp. 50-62 [http://links.jstor.org/sici?sici=0002-8282%28194303%2933%3A1%3C50%3ATSTAAW%3E2.0.CO%3B2-T 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 [http://links.jstor.org/sici?sici=0002-8282%28194609%2936%3A4%3C613%3ALOPFAE%3E2.0.CO%3B2-I JSTOR]
 
−
* "Utility Analysis of Choices Involving Risk" with Leonard Savage, 1948, ''Journal of Political Economy'' Vol. 56, No. 4 (Aug., 1948), pp. 279-304 [http://links.jstor.org/sici?sici=0022-3808%28194808%2956%3A4%3C279%3ATUAOCI%3E2.0.CO%3B2-% JSTOR]
 
−
*  "A Monetary and Fiscal Framework for Economic Stability," 1948, ''American Economic Review,'' Vol. 38, No. 3 (Jun., 1948), pp. 245-264 [http://links.jstor.org/sici?sici=0002-8282%28194806%2938%3A3%3C245%3AAMAFFF%3E2.0.CO%3B2-0 JSTOR]
 
−
* "A Fiscal and Monetary Framework for Economic Stability," ''Econometrica'' Vol. 17, Supplement: Report of the Washington Meeting (Jul., 1949), pp. 330-332 [http://links.jstor.org/sici?sici=0012-9682%28194907%2917%3C330%3AAFAMFF%3E2.0.CO%3B2-0 JSTOR]
 
−
* "The Marshallian Demand Curve," ''The Journal of Political Economy'' Vol. 57, No. 6 (Dec., 1949), pp. 463-495 [http://links.jstor.org/sici?sici=0022-3808%28194912%2957%3A6%3C463%3ATMDC%3E2.0.CO%3B2-T JSTOR]
 
−
* "Wesley C. Mitchell as an Economic Theorist," ''The Journal of Political Economy'' Vol. 58, No. 6 (Dec., 1950), pp. 465-493 [http://links.jstor.org/sici?sici=0022-3808%28195012%2958%3A6%3C465%3AWCMAAE%3E2.0.CO%3B2-O 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 [http://links.jstor.org/sici?sici=0022-3808%28195106%2959%3A3%3C203%3ACC%3E2.0.CO%3B2-A 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 [http://links.jstor.org/sici?sici=0002-8282%28195205%2942%3A2%3C612%3APIAMCI%3E2.0.CO%3B2-2 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 [http://links.jstor.org/sici?sici=0022-3808%28195212%2960%3A6%3C463%3ATEHATM%3E2.0.CO%3B2-L JSTOR]
 
−
* [http://www.lib.pku.edu.cn/webcourse/new_econ/readings/Methodology.pdf 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 [http://links.jstor.org/sici?sici=0022-3808%28195308%2961%3A4%3C277%3ACCATPD%3E2.0.CO%3B2-1 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 [http://links.jstor.org/sici?sici=0022-3808%28195702%2965%3A1%3C64%3AASIIJK%3E2.0.CO%3B2-B  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 [http://links.jstor.org/sici?sici=0022-3808%28195908%2967%3A4%3C327%3ATDFMST%3E2.0.CO%3B2-A 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 [http://links.jstor.org/sici?sici=0013-0079%28196104%299%3A3%3C267%3AMDANIE%3E2.0.CO%3B2-D JSTOR]
 
−
* "The Lag in Effect of Monetary Policy," ''Journal of Political Economy''Vol. 69, No. 5 (Oct., 1961), pp. 447-466 [http://links.jstor.org/sici?sici=0022-3808%28196110%2969%3A5%3C447%3ATLIEOM%3E2.0.CO%3B2-V JSTOR]
 
−
* ''Price Theory'' ISBN 0-202-06074-8 (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 [http://links.jstor.org/sici?sici=0162-1459%28196212%2957%3A300%3C729%3ATIOTSB%3E2.0.CO%3B2-4 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 [http://links.jstor.org/sici?sici=0034-6535%28196302%2945%3A1%3C32%3AMABC%3E2.0.CO%3B2-U 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 [http://links.jstor.org/sici?sici=0002-8282%28196509%2955%3A4%3C753%3ARTAAMA%3E2.0.CO%3B2-A JSTOR]
 
−
* "Interest Rates and the Demand for Money," ''Journal of Law and Economics'' Vol. 9 (Oct., 1966), pp. 71-85 [http://links.jstor.org/sici?sici=0022-2186%28196610%299%3C71%3AIRATDF%3E2.0.CO%3B2-U 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 [http://links.jstor.org/sici?sici=0022-2186%28196710%2910%3C1%3ATMTAPO%3E2.0.CO%3B2-3 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 [http://links.jstor.org/sici?sici=0002-8282%28196803%2958%3A1%3C1%3ATROMP%3E2.0.CO%3B2-6 JSTOR] presidential address to American Economics Association
 
−
*  "Money: the Quantity Theory," 1968, IESS
 
−
* "The Definition of Money: Net Wealth and Neutrality as Criteria" with Anna J. Schwartz, ''Journal of Money, Credit and Banking'' Vol. 1, No. 1 (Feb., 1969), pp. 1-14 [http://links.jstor.org/sici?sici=0022-2879%28196902%291%3A1%3C1%3ATDOMNW%3E2.0.CO%3B2-C JSTOR]
 
−
* '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," ''Journal of Political Economy'' Vol. 78, No. 2 (Mar., 1970), pp. 193-238 [http://links.jstor.org/sici?sici=0022-3808%28197003%2F04%2978%3A2%3C193%3AATFFMA%3E2.0.CO%3B2-O JSTOR]
 
−
*  ''The Counter-Revolution in Monetary Theory'' 1970.
 
−
* "A Monetary Theory of National Income," 1971, ''Journal of Political Economy''
 
−
* "Government Revenue from Inflation," ''Journal of Political Economy'' Vol. 79, No. 4 (Jul., 1971), pp. 846-856 [http://links.jstor.org/sici?sici=0022-3808%28197107%2F08%2979%3A4%3C846%3AGRFI%3E2.0.CO%3B2-F JSTOR]
 
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* "Have Monetary Policies Failed?" ''American Economic Review'' Vol. 62, No. 1/2 (1972), pp. 11-18 [http://links.jstor.org/sici?sici=0002-8282%281972%2962%3A1%2F2%3C11%3AHMPF%3E2.0.CO%3B2-7 JSTOR]
 
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* "Comments on the Critics," ''Journal of Political Economy'' Vol. 80, No. 5 (Sep., 1972), pp. 906-950 [http://links.jstor.org/sici?sici=0022-3808%28197209%2F10%2980%3A5%3C906%3ACOTC%3E2.0.CO%3B2-V 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)
 
−
* ''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. [http://links.jstor.org/sici?sici=0022-3808%28197706%2985%3A3%3C451%3ANLIAU%3E2.0.CO%3B2-V JSTOR]
 
−
*  "Interrelations between the United States and the United Kingdom, 1873-1975.," with A.J. Schwartz, 1982, ''J Int Money and Finance''
 
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*  ''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: Theory and Practice," ''Journal of Money, Credit and Banking'' Vol. 14, No. 1 (Feb., 1982), pp. 98-118 [http://links.jstor.org/sici?sici=0022-2879%28198202%2914%3A1%3C98%3AMPTAP%3E2.0.CO%3B2-U JSTOR]
 
−
*  "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)
 
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* "Money and the Stock Market," ''Journal of Political Economy'' Vol. 96, No. 2 (Apr., 1988), pp. 221-245 [http://links.jstor.org/sici?sici=0022-3808%28198804%2996%3A2%3C221%3AMATSM%3E2.0.CO%3B2-O JSTOR]
 
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* "Bimetallism Revisited," ''Journal of Economic Perspectives'' Vol. 4, No. 4 (Autumn, 1990), pp. 85-104 [http://links.jstor.org/sici?sici=0895-3309%28199023%294%3A4%3C85%3ABR%3E2.0.CO%3B2-M JSTOR]
 
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* "The Crime of 1873," ''Journal of Political Economy'' Vol. 98, No. 6 (Dec., 1990), pp. 1159-1194 [http://links.jstor.org/sici?sici=0022-3808%28199012%2998%3A6%3C1159%3ATCO1%3E2.0.CO%3B2-C JSTOR]
 
−
* "Franklin D. Roosevelt, Silver, and China," ''Journal of Political Economy'' Vol. 100, No. 1 (Feb., 1992), pp. 62-83 [http://links.jstor.org/sici?sici=0022-3808%28199202%29100%3A1%3C62%3AFDRSAC%3E2.0.CO%3B2-2 JSTOR]
 
−
 
 
−
===About Friedman===
 
−
 
 
−
*Frazer, William. 1997. ''The Friedman System: Economic Analysis of Time Series'' Praeger Publishers. ISBN 0275958434
 
−
*Hirsch, Abraham, and Neil de Marchi. ''Milton Friedman: Economics in Theory and Practice'' 1992. University of Michigan Press. ISBN 0472081675
 
−
*Stigler, George Joseph. 2003. ''Memoirs of an Unregulated Economist'' University Of Chicago Press. ISBN 0226774406
 
−
*Wahid, Abu N. M. (editor) 2002 ''Frontiers of Economics: Nobel Laureates of the Twentieth Century.'' Greenwood Press. pp 109-15. ISBN 031332073X
 
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</div>
 
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==References==
 
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<div class="references-small">
 
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<references/>
 
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==External links==
 
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===Interviews===
 
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*[http://www.youtube.com/watch?v=Se_TJzB9-z0 Interviewed on America's Drug Forum] about his criticism of the [[War on Drugs]]
 
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*[http://www.newmedia.ufm.edu.gt/miltonross/ Interview with Rose & Milton Friedman] at the Francisco Marroquín University
 
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*[http://reason.com/9506/FRIEDMAN.jun.shtml "Best of Both Worlds"], interview in ''[[Reason (magazine)|Reason]]'' by [[Brian Doherty (journalist)|Brian Doherty]]
 
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*[http://video.google.com/videoplay?docid=6813529239937418232&q=milton+friedman A classic video presentation of Friedman on freedom and the government]
 
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*[http://e-rooster.gr/friedman/interview_en/ Milton Friedman interviewed on Greek website (September 2006)]
 
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*[http://www.booktv.org/InDepth/archive_2000.asp Video of September 3, 2000 BookTV 'In Depth' interview]
 
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*[http://www.uncommonknowledge.org/99winter/324.html Uncommon Knowledge interview on Libertarianism] - Transcript and Video
 
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*[http://video.google.com/videoplay?docid=6711886648853095886&hl=en Milton Friedman and Rose Friedman in a video link speaking to the ACT New Zealand 2003 conference]
 
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===Obituaries===
 
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* [http://securitydilemmas.blogspot.com/2006/11/milton-friedman-rip.html  Obituary by Noble, Holcomb B. "Milton Friedman, a Leading Economist, Dies at 94, ''New York Times" November 16, 2006, obituary.]
 
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*[http://www.ft.com/cms/s/cb74eef8-7599-11db-aea1-0000779e2340.html Obituary] by Samuel Brittan in the Financial Times
 
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*[http://www.washtimes.com/commentary/20061119-102614-1128r.htm Elegy for the Master] - Bruce Bartlett
 
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*[http://www.nytimes.com/2006/11/16/business/17friedmancnd.html?em&ex=1163826000&en=8b5029be80145b14&ei=5087%0A New York Times Obituary]
 
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*[http://www.reason.com/news/show/116778.html Reason writers remember the iconic libertarian economist]
 
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*[http://video.google.com/videoplay?docid=8977870551875984425  A reflection on the life of Milton Friedman from his friend and colleague Leo Melamed]
 
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===Organizations===
 
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*[http://www.friedmanfoundation.org/ The Friedman Foundation]
 
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*[http://pricetheory.uchicago.edu The Becker Center on Chicago Price Theory]
 
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*[http://freetochoose.net Free to Choose]
 
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*[http://www.freetochoosemedia.org/ Free to Choose Media]
 
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===Lectures===
 
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*[http://fora.tv/fora/showthread.php?t=296 Milton Friedman addresses the American Legislative Exchange Council], ''[[C-Span]]'', July 21, 2006
 
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*[http://www.isi.org/lectures/lectures.aspx?SBy=lecture&Sfor=463835cf-f922-4c6a-b4f8-84b68e3b472e Historical Audio Lecture by Dr. Milton Friedman (1960s) - "Role of Government in Our Society"]
 
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*[http://freetochoose.net/media_02_1_abstract.html George Shultz on Milton Friedman]
 
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===Biographies===
 
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*[http://www-hoover.stanford.edu/bios/friedman.html Home page of Milton Friedman]
 
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*[http://www.nobel-winners.com/Economics/milton_friedman.html About Milton Friedman]
 
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*[http://www.pbs.org/wgbh/commandingheights/shared/minitext/int_miltonfriedman.html PBS interview, profile and video]
 
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*[http://nobelprize.org/nobel_prizes/economics/laureates/1976/friedman-autobio.html Nobel Prize biography]
 
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===Articles===
 
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*[http://www.cato.org/pubs/policy_report/v21n2/friedman.html March/April 1999 - The Business Community's Suicidal Impulse] (talks about protectionism, bank regulation, privatized schooling, antitrust laws, bureaucracy, government burden)
 
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*[http://www.fff.org/freedom/0292d.asp Fair versus Free]
 
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*[http://www.pbs.org/wgbh/commandingheights/shared/minitext/int_miltonfriedman.html#10 His view of the Chilean government]
 
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*[http://www-hoover.stanford.edu/publications/digest/974/bckr3.html Gary Becker on Friedman's influence in South America]
 
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*[http://www.isi.org/programs/conferences/indy06/kemp.pdf The Political Economy of Milton Friedman (Modern Age, Winter 1978)]
 
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*[http://www.counterpunch.org/kwong10072006.html Friedman and China's "Economic Miracle"]
 
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*[http://www.counterpunch.org/grandin11172006.html November 17, 2006 "Milton Friedman and the Economics of Empire: The Road from Serfdom"]
 
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*[http://www.opinionjournal.com/extra/?id=110009267 Friedman's Sampler] - A selection of writings from [[The Wall Street Journal]]
 
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Revision as of 13:58, 15 April 2007


File:MiltonFriedman2.JPG
Milton Friedman

Milton Friedman (July 31, 1912 – November 16, 2006) was an American economist and intelectual who made major contributions to the fields of macroeconomics, microeconomics, economic history and statistics while advocating laissez-faire capitalism. In 1976, he was awarded the Nobel Memorial Prize for his achievements in the fields of consumption analysis, monetary history and theory and for his demonstration of the complexity of stabilization policy.

Biography

He was born in New York City in 1912 to a working-class family of Jewish immigrants from Austria-Hungary, more specifically from Bergsaß/Beregszász (Berehove) in nowadays Slovakia. After his father's death the family moved to Rahway, New Jersey. He was awarded a scholarship to Rutgers University from which he graduated in 1932. Afterwards, the Chicago University Economics Department offered Friedman a tuition scholarship. He spent the year there, obtaining M.A. in 1933. While in Chicago, he met extremely bright fellow economics student, Rose Director, whom he married six years later. After Chicago, he then went, on a fellowship arranged by Henry Schultz and Harold Hotelling, to Columbia University.

After the year at Columbia, Friedman returned to Chicago, spending a year as research assistant to Henry Schultz, who was then completing his classic, The Theory and Measurement of Demand, and forming a lifelong friendship with two fellow students, George J. Stigler and W. Allen Wallis.

When Wallis went first to New Deal Washington, Friedman followed in the summer of 1935, working at the National Resources Committee on the design of a large consumer budget study. This was one of the two principal components of his later Theory of the Consumption Function. The other came from his next job - at the National Bureau of Economic Research, where he went in the fall of 1937 to assist Simon Kuznets in his studies of professional income. The end result was our jointly published Incomes from Independent Professional Practice, which also served as his doctoral dissertation at Columbia ( Lindbeck, 1992 ).

He spent 1941 to 1943 at the U.S. Treasury Department, working on wartime tax policy, and 1943-45 at Columbia University in a group headed by Harold Hotelling and W. Allen Wallis, working as a mathematical statistician on problems of weapon design, military tactics, and metallurgical experiments. In 1945, Friedman joined George Stigler at the University of Minnesota, from which he had been on leave. After one year there, he accepted an offer from the University of Chicago to teach economic theory, a position opened up by Jacob Viner's departure for Princeton. Chicago has become his intellectual home ever since (Lindbeck, 1992).

Milton Friedman served as Professor of Economics at the University of Chicago 1946-76, 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. He spent the academic year 1953-54 as a Visiting Fellow at Gonville and Caius College, Cambridge. In 1976, he won the Nobel 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." From 1977, Friedman was affiliated with the Hoover Institution at Stanford University. In 1988 he received the National Medal of Science and Presidential Medal of Freedom. He died at the age of 94 in San Francisco on November 16, 2006 of heart failure. Friedman's son is the philosopher and economist David D. Friedman.

Major Works

Income Hypothesis in Consumption

Friedman's early contributions include the "Permanent Income Hypothesis" in consumption (1957), his formulation of risk-aversion and risk-proclivity (1948, with L.J. Savage), his use of evolutionary theory in the theory of the firm, and his propositions for a "positivist" methodology in economics (1953).

His major achievement was his Theory of the Consumption Function ( Friedman 1957 ), which was the work most prominently mentioned in the citation for the Nobel Prize he won in 1974. His investigation was touched off by a well known paradox. Cross-section data appeared to show that the percentage of income saved, increased as income rose. On the other hand, time series data showed much less change in the savings proportion over the years. The resolution of the puzzle was that spending and savings decisions depended on people's views of their long-term (“permanent”) income; but they were much less inclined to adjust to transitory income variations in either direction.

Critique of the Phillips Curve

Other important contributions include his critique of the Phillips curve and the concept of the natural rate of unemployment (1968). Each of these has implications for the effect of monetary and fiscal policy on output in the short run and the long run.

Some economists would argue that Friedman's most important contribution to macroeconomics lay, not in his technical monetary work, but in his 1967 presidential address to the American Economic Association. Here he demonstrated that the idea of a stable trade-off between inflation and unemployment which held sway under the name of the Phillips curve and which seemed to give policymakers a menu of choices was invalid. Suppose that a Government or central bank tried to raise output and employment at the expense of accepting higher inflation. Once market participants started to take into account inflation in their behaviour, the economy would eventually end up with the same rate of unemployment as before but a higher rate of inflation. If the authorities none the less persisted in trying to achieve an over-ambitious target unemployment rate, the result would not be merely inflation, but accelerating inflation, with which no society could live for long.

This family of Friedman doctrines was sometimes called the vertical Phillips curve, sometimes the accelerationist hypothesis and sometimes the natural rate of unemployment. The latter was the level at which the economy would settle once any stable rate of inflation had been established. The name was later changed by some users to the”NAIRU”: the Non-Accelerating Inflation Rate of Unemployment to banish the idea that there was anything natural or inevitable about it.

It was in fact these ideas related to the NAIRU which caused conversion of many economists from post-war Keynesianism rather than any of Friedman's more technical monetary ideas. The basic propositions are now quite familiar. But at the time they were explosive stuff for the British economic establishment and also for many American economists on the Eastern seaboard.

Quantity theory of money

It was in the late 1950 and 1960s that Friedman developed the monetarist doctrines by which he became best known. He treated money as an asset. The public desire to hold this asset depended on incomes, the rate of interest and expected inflation. If more money became available the effect would be initially to raise real output and incomes, but eventually just to raise prices more or less in proportion. Here was where the famous long and variable lags appeared: typically nine months before real output and income were affected and a further nine months before the main effects on prices came through. These time periods were much cited and much derided; but they were not the heart of Friedman's message.

Characteristically, it began as a by-product of an attempt to establish the factual record of the US money supply, which turned up so many problems and brought to light so much new material that the more ambitious volume more or less suggested itself.

The policy conclusion Friedman drew was his famous money supply rule a stable growth of the money supply, year in year out. He accepted that this was not the only policy that could be derived from monetarist findings. But nearly all suggested monetarist strategies became embroiled in difficulties as financial assets proliferated and with them the number of rival definitions of money. In the early 1990s some monetarists were accusing the Fed of depressing the US economy with too tight a policy and at the same time as other monetarists were criticising it for expanding too much.

Friedman himself sometimes gave the impression that whatever a central bank did, it could do no right. To gain his favour it had not only to pursue monetary targets, but pursue them by a particular method known as monetary base control; and when the Fed attempted such a method in 1979-82 it was damned for getting the mechanics wrong.

...Just as banks all around the country were closing, the Fed raised the discount rate; that's the rate they charge for loans to banks. Bank failures consequently increased spectacularly. We might have had an economic downturn in the thirties anyway, but in the absence of the Federal Reserve System—with its enormous power to make a bad situation worse—it wouldn't have been anything like the scale we experienced…. Friedman’s interview in Playboy 1973 ). Yet he clearly asserted money’s active role in the following work:

Monetary History of the US ( 1867-1960) and Monetarism

The book in which he tried most fully to demonstrate money's active role was A Monetary History of the US, 1867-1960, published in 1963 and written jointly with Anna Schwartz; it was one of Friedman's skills that he always found the right collaborator for a particular work.

The Monetary History is Friedman's masterpiece. Containing hardly any equations, it has been read with profit and pleasure as history, even by people who have disagreed with, or been indifferent to, the doctrines it was designed to advance. Characteristically, it began as a by-product of an attempt to establish the factual record of the US money supply, which turned up so many problems and brought to light so much new material that the more ambitious volume more or less suggested itself ( Friedman 1963).

Public policy positions and legacy

In the fall of 1950, Friedman spent a few months in Paris as a consultant to the U.S. governmental agency administering the Marshall Plan. His major assignment was to study the Schuman Plan, the precursor of the common market. This was the origin of his interest in floating exchange rates, since Friedman concluded that a common market would inevitably founder without floating exchange rates. His essay, The Case for Flexible Exchange Rates ( Friedman 1953 ), was one product.

Thus in the 1950s, Friedman was much better known for his advocacy of floating exchange rates than for monetarism. The background was the widespread concern about a supposed dollar shortage, which Friedman believed entirely due to overvalued exchange rates in Europe and elsewhere. “...Sure,” he would say, “...there is a dollar shortage in Britain - in exactly the same way as there is a dollar shortage for every US citizen....”

He had the last laugh, as within a few years the supposed dollar shortage had turned into an equally mythical dollar surplus.

Beginning in the early 1960s, Friedman was increasingly drawn into the public arena, serving in 1964 as an economic adviser to Senator Goldwater in his unsuccessful quest for the presidency, and, in 1968, as one of a committee of economic advisers during Richard Nixon's successful quest. In 1966, I began to write a triweekly column on current affairs for Newsweek magazine, alternating with Paul Samuelson and Henry Wallich.

Bob Chitester persuaded all of them them to join him in producing a major television program presenting my economic and social philosophy. The resulting effort, spread over three years, proved the most exciting adventure of our lives. The end result was Free to Choose ( Friedman 1980), ten one-hour programs, each consisting of a half-hour documentary and a half-hour discussion. The first of the ten programs appeared on PBS (Public Broadcasting System) in January 1980. Since then, the series has been shown in many foreign countries.

It is, perhaps without too much exageration, quite possible that Milton Friedman’s influence via these programs --- aimed at ordinary people in not so democratic and the outright Communist countries alike (where they were clandestine reproduced and run for mass audiences) by preaching that the world recognized the need of free markets, trade and limited governments --- changed the political history of Central and Eastern Europe and USSR and, to certain extend, in Asia more than any other political exercise of force.

“…For us, who lived in the communist world, Milton Friedman was the greatest champion of freedom, of limited and unobtrusive government and of free markets. Because of him I became a true believer in the unrestricted market economy….” (Czech president Vaclav Klaus 2007).

Hence, this might as well be by far Milton Friedman’s greatest and most important legacy, far surpassing even his other giant scientific endeavours.

Milton Friedman continued to be active in public policy since 1977. He continued his tri-weekly column in Newsweek until it was terminated in 1983. Since then, he has published numerous op-eds in major newspapers. He served as an unofficial adviser to Ronald Reagan during his candidacy for the presidency in 1980, and as a member of the President's Economic Policy Advisory Board during his presidency. In 1988, President Reagan awarded Milton Friedman the Presidential Medal of Freedom and in the same year he was awarded the National Medal of Science.

He had traveled extensively since 1977, including a trip through Eastern Europe in 1990, where we filmed a documentary on former Soviet satellites. The documentary was included in a shortened reissue of Free to Choose ( Friedman 1980 ).

Perhaps the most notable foreign travel consisted of three trips to China: one in 1980 when he gave a series of lectures under the auspices of the Chinese government; one in 1988 when he attended a conference in Shanghai on Chinese economic development and one in 1993 when I traveled with a group of Chinese friends from Hong Kong throughout the country. The three visits covered a period of revolutionary economic growth and development, the first stage of a shift from an authoritarian, centrally planned economy to a largely free market economy.

One of his down-to-earth examples with which he connected to ordinary people goes like this:

“….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….” ( Fox News interview, May 2004)

Other honors and recognition

Friedman allowed theCato 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.

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...."

According to Harry Girvetz and Kenneth Minogue, Friedman was co-responsible with Friedrich von Hayek for providing the intellectual foundations for the revival of classical liberalism in the 20th century.


Other honors, recognition, and influence

Friedman allowed theCato 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. 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." According to Harry Girvetz and Kenneth Minogue, Friedman was co-responsible with Friedrich von Hayek for providing the intellectual foundations for the revival of classical liberalism in the 20th century.

Selected References

  • Friedman, M. ,Taxing to Prevent Inflation: Techniques for Estimating Revenue Requirements, (Columbia U.P. 1943, 236 pp) with Carl Shoup and Ruth P. Mack
  • Friedman, M. , Income from Independent Professional Practice ( with Simon Kuznets ,1945, Friedman's PhD thesis) , Lindbeck 1992
  • Friedman,M., Roofs or Ceilings?: The Current Housing Problem with George J. Stigler. (Foundation for Economic Education, 1946), 22 pp.
  • Friedman,M., "A Monetary and Fiscal Framework for Economic Stability", 1948, American Economic Review, Vol. 38, No. 3 (Jun., 1948), pp. 245-264; JSTOR
  • Friedman,M.,"The Marshallian Demand Curve," The Journal of Political Econom, vol. 57, No. 6 (Dec., 1949), pp. 463-495 JSTOR
  • Friedman,M.,"Commodity-Reserve Currency," Journal of Political Economy Vol. 59, No. 3 (Jun., 1951), pp. 203-232 JSTOR
  • Friedman, M.,"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
  • Friedman, M. “The Case for Flexible Exchange Rates” in , Essays in Positive Economics , Chicago: University of Chicago,1953
  • Friedman, M., Essays in Positive Economics, University of Chicago Press1953
  • Friedman,M.,"Choice, Chance, and the Personal Distribution of Income," Journal of Political Economy, vol. 61, No. 4 (Aug., 1953), pp. 277-290 JSTOR
  • Friedman, M.,"The Quantity Theory of Money: A restatement", 1956, in Friedman, editor, Studies in Quantity Theory. pp. 277-290 JSTOR;
  • Friedman, M., A Theory of the Consumption Function, NBER, Princeton, 1957
  • Friedman,M. & Gary S. Becker "A Statistical Illusion in Judging Keynesian Models" Journal of Political Economy Vol. 65, No. 1 (Feb., 1957), pp. 64-75 JSTOR
  • Friedman, M., "The Supply of Money and Changes in Prices and Output", 1958, in Relationship of Prices to Economic Stability and Growth.
  • Friedman, M.,"The Demand for Money: Some Theoretical and Empirical Results," Journal of Political Economy Vol. 67, No. 4 (Aug., 1959), pp. 327-351 JSTOR
  • Friedman,M.,"Monetary Data and National Income Estimates," Economic Development and Cultural Change Vol. 9, No. 3, (Apr., 1961), pp. 267-286 JSTOR
  • Friedman,M.,"The Lag in Effect of Monetary Policy," Journal of Political EconomyVol. 69, No. 5 (Oct., 1961), pp. 447-466 JSTOR
  • Friedman,M.,"Money and Business Cycles," The Review of Economics and Statistics Vol. 45, No. 1, Part 2, Supplement (Feb., 1963), pp. 32-64 JSTOR
  • Friedman,M.,"The Role of Monetary Policy." American Economic Review, Vol. 58, No. 1 (Mar., 1968), pp. 1-17 JSTOR presidential address to American Economics Association
  • Friedman,M., Social Security: Universal or Selective? with Wilbur J. Cohen, 1972
  • Friedman, M., & R. Friedman, Free to Choice: A personal statement, Richardson & Snyder, 1980, paperback
  • Friedman, M., Money Mischief: Episodes in Monetary History, 1994; ISBN 0-15-162042-3, 286 pp.
  • Friedman, M. & R. Friedman"The Case for Free Trade", 1997, Hoover Digest magazine article
  • Klaus, V.,”Remarks at Milton Friedman Memorial Service”, University of Chicago, Rockefeller Chapel, Monday, January 29, 2007
  • Leube, Kurt R. ed. , The Essence of Friedman, 1987, (ISBN 0-8179-8662-6)
  • Lindbeck, Assar , ed., Nobel Lectures, Economics 1969-1980, Editor, World Scientific Publishing Co., Singapore, 1992
  • Stigler, George, “A Personal Reminiscence”, Journal of Political Economy Vol. 101, No. 5 (Oct., 1993), pp. 768-773 JSTOR
  • Stigler, George, 1911-1991: Biographical Memoir, (National Academy of Sciences: 1998), online


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