Born: July 31, 1912, in Brooklyn, New York; Died: November 16, 2006, in San Francisco, California; American; monetary policy, price theory, public policy, monetary history, Nobel Prize (1976); Major Works: A Theory of the Consumption Function (1957), Capitalism and Freedom (1962), A Monetary History of the United States, 1867–1960 (1971).
Milton Friedman is considered one of the most influential economists of the twentieth century for his abilty to explain and defend the merits of free markets and individual freedom. Friedman was also considered the embodiment of the Chicago School of economics with an emphasis on monetary policy, free markets, and less government intervention. Friedman was instrumental in the economic policies of President Ronald Reagan and Prime Minister Margaret Thatcher. Milton Friedman won the Nobel Prize in Economics in 1976 and President Reagan honored him with the Presidential Medal of Freedom in 1988. Friedman died in 2006.
Milton Friedman was born in Brooklyn, New York, on July 31, 1912. Growing up in New Jersey in the home of immigrant Hungarian parents, young Friedman graduated from the public high school when he was 15, a month before his 16th birthday. He was destined for college, but the untimely death of his father during his senior year narrowed his college direction to Rutgers University. Financing his own education, along with a small scholarship, Friedman graduated from Rutgers University in 1832. Originally a mathematics major planning on becoming an acturary, he became interested in economics. Friedman graduated from Rutgers with double majors in mathematics and economics.
Encouraged to pursue graduate work in economics, Friedman accepted a scholarship to the University of Chicago. His early experiences at the University of Chicago framed his economics and research philosophies. During this time at the University of Chicago, he met the woman who would become his wife and lifelong working professional partner, Rose. After one year at the University of Chicago, Friedman recieved a fellowship to Columbia University. Even though he returned to the University of Chicago after only one year at Columbia, he received his PhD in economics from Columbia in 1946.
In 1935, Friedman was recruited by his friend W. Allen Wallis to Washington, DC, to join him on the National Resources Committee. Friedman's role on the committee was to continue earlier work on a consumer budget study. It was this work on the consumer budget study that became the basis for one of the two key components for his later groundbreaking work, Theory of the Consumption Function.
In 1937, Friedman accepted a position with the National Bureau of Economic Research (NBER). At NBER he worked with Simon Kuznets, publishing Incomes from Independent Professional Practice. Kuznets and Friedman introduced the concepts of permanent and transitory income. They also initiated a debate among Washington bureaucrats asserting that the incomes of physicians were higher than dentists due to the monopoly power of physicians. For Friedman, this study also provided the second key component to his own later work on the consumption function.
Friedman continued his work in Washington during World War II. From 1941 to 1943, Friedman directed his efforts on tax policy at the U.S. Treasury. In 1943, he joined his friend Wallis again, this time at Columbia University applying his mathematical and statistical expertise on military tactics, design, and metals. After one year at the University of Minnesota, Friedman returned to the University of Chicago in 1946. He would remain at the University of Chicago till his retirement from active teaching in 1977. Another close friend, Arthur Burns, who was directing NBER, persuaded Friedman to rejoin NBER. Friedman remained with NBER till 1981.
In 1953, Friedman wrote “The Methodology of Positive Economics.” He argued that the validity of economic theories should be based on the ability to predict human behavior. He followed this in 1957 with his classic, A Theory of the Consumption Function. Friedman's case was that it was necessary to think of individuals making rational spending and saving decisions over a lifetime. The basis was a return to his earlier work with Kuznets and the permanent-income hypothesis. His thesis in A Theory of the Consumption Function was also a return to classical economic thinking, which had been replaced in the middle of the twentieth century by the economic philosophies of John Maynard Keynes.
Friedman's launching of the Money and Banking Workshop at the University of Chicago set the academic and research foundation for his next target in economic research: monetary policy. The research and publications that originated from the workshop highlighted the Chicago School of economics’ emphasis on the role of monetary policy as the key determinant to inflation and business cycles.
Friedman's work explaining the role of the money supply and monetary policy on an economy earned him an international reputation. His monetary policy theories were highlighted in 1969 with The Optimum Quantity of Money and Other Essays. The workshop provided the environment for many contributors and researchers to generate significant work on monetary policy. Through his work with the workshop and NBER, he began a collaboration with economic historian Anna J. Schwartz. In 1971, they wrote the classic A Monetary History of the United States, 1867–1960.
Another groundbreaking accomplishment in economic theory for Milton Friedman came when he suggested that the popular inflation-unemployment rate trade-off was not necessarily a long-run trade-off as most assumed. In 1967, while he acknowledged a short-run trade-off, he asserted that government intervention to keep inflation high to promote low unemployment would eventually fail, with ultimately both unemployment and inflation rising. This argument would later be proven correct in the 1970s and the ensuing period that became known as stagflation.
In 1976, Milton Friedman was awarded the Nobel Prize in Economics for his scientific work on consumption, monetary history, and stabilization policy. In 1988, Milton Friedman received both the Presidential Medal of Freedom from President Reagan and the National Medal of Science. Earlier in 1986 he had received the Japanese government's Grand Cordon of the First Class Order of the Sacred Treasure.
After his retirement from active teaching, he became involved in public affairs and public policy. He assisted presidential candidates Barry Goldwater, Richard Nixon, and Ronald Reagan as an economic adviser during their campaigns. He would later serve as an economic adviser to both presidents Nixon and Reagan. He also began writing columns for the popular news magazine Newsweek promoting the virtues of individual freedom and markets unfettered from government intervention.
In 1981, he served on President Reagan's Economic Policy Advisory Board. Friedman is given significant credit for the economic philosophies of President Reagan and Prime Minister Margaret Thatcher in the 1980s and later decades of the twentieth century. Friedman was viewed as the opposition to the popular theories of John Maynard Keynes that dominated economic thought and political economic policy from post–World War II through the 1970s.
Milton Friedman's popularity with the general public reached its pinnacle in 1980 with the release of the popular 10-part series, Free to Choose. Coauthored with his wife, Rose, the series was accompanied by a book of the same name. The book was the nonfiction bestseller in 1980, a rare occurrence for one with the high academic stature of Milton Friedman. Since its release, the series and book have been translated into 14 languages and the series can be seen in many foreign countries.
Milton Friedman concluded his career at the University of Chicago as the Paul Snowden Russell Distinguished Service Professor Emeritus of Economics. He also served the Hoover Institution at Stanford University as a senior research fellow.
Milton Friedman died on November 16, 2006, in San Francisco, California.
See also: Burns, Arthur; Keynes, John Maynard; Kuznets, Simon
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