Milton Friedman. Eamonn Butler
met Friedman found him impossible to dislike. He was indeed a brilliant, and highly personable, communicator, always smiling, particularly when enjoying a good argument – which was most of the time, since his novel and challenging ideas were so frequently in the minority.
But it is not my purpose here to take Friedman’s side of those arguments against his many critics, or elaborate his case. I wrote this book on the eve of his centenary year, a good moment to take stock of his life’s work and lasting influence. Friedman’s written work amounted to scores of books, both technical and non-technical, and hundreds of articles, not to mention his TV series and countless media appearances and interviews. My ambition is only to distil from all this the essence of Friedman’s ideas and present them systematically and simply.
In doing so, it is natural that I should give slightly greater space to those ideas that seem most relevant for the issues we face today – Friedman’s views on the origins of boom-bust cycles, for example, and how to prevent them. Yet I have also indicated where time has tested his ideas – as in the practical difficulties that the financial authorities found when they did try to control money and inflation as Friedman prescribed.
As for his libertarian social policies – decriminalising drugs, ending the state licensing of doctors and lawyers, getting the government out of hospitals, schools and universities – Friedman remains, as he once put it, “so happily blessed with critics” that I see no point in adding myself to them here.
How this book is structured
The book is not a chronological history of Friedman’s life and work. Rather, it is structured round the key themes of his contributions to economics and politics.
After a short account of Friedman’s upbringing – he was the child of poor Hungarian Jewish immigrants to the US – and of his subsequent, glittering career and continuing influence today, the book moves first to outline his contribution in economics. In particular it sets out his dispute with Keynes over the causes of financial crises such as the Great Depression, his view that ‘stimulus’ packages actually make things worse – an argument that is still very relevant today – and his groundbreaking insights into the causes and cures of inflation and unemployment.
The book goes on to explain Friedman’s criticism of government regulations and controls over commerce, trade and international markets; it then outlines his explanation of why he thought most government programmes are either a failure or a fraud, and recounts his recommendations for rolling back the state.
The book then lays out Friedman’s ideas as the leading advocate of free and largely unregulated markets, and his explanation of why he thought free markets allocated resources so much more efficiently – and fairly – than governments.
This leads on to Friedman’s libertarian views on freedom, equality, the limited but important role of government, and his robust but humane faith in the “genius” of free individuals in a free society.
A Timeline of Milton Friedman’s Life and Work
1912: Milton Friedman born in Brooklyn, New York, to Jewish Hungarian immigrant parents; his father trades goods while his mother sews garments in a New York sweatshop.
1928–32: Reads mathematics at Rutgers University; meets economists Arthur Burns and Homer Jones.
1932–33: At the University of Chicago as a graduate student; influenced by economists Jacob Viner, Frank Knight and Henry Simons; meets his future wife Rose Director; graduates with a master’s degree in economics.
1929: The Wall Street crash heralds a decade of economic turmoil, the Great Depression.
1933–36: Roosevelt’s New Deal attempts to kick-start the US economy.
1933–34: Friedman studies statistics on a fellowship at Columbia University, under prominent economist and statistician Harold Hotelling.
1934–35: Works as research assistant to Henry Schulz at Chicago; meets George Stigler, who would become a lifelong friend and fellow Nobel economist.
1935: Begins work on consumer spending at the National Resources Committee in Washington; this work informs his subsequent book The Theory of the Consumption Function.
1936: Keynes’s General Theory of Employment, Interest and Money is published, introducing concepts such as the multiplier and promoting activist economic management.
1937: Assists Simon Kuznets’ work on professional incomes at the National Bureau of Economic Research; this work informs their book Income from Independent Professional Practice (see 1945).
1938: Marries Rose Director.
1940: Teaches economics at the University of Wisconsin–Madison as assistant professor.
1942–43: Wartime work on tax policy at the US Department of the Treasury; works on the withholding tax system; co-authors Taxing to Prevent Inflation; testifies on taxation and inflation in Congress – without mentioning money.
1943: Wartime work as a statistician at the Division of War Research at Columbia University, where he and colleagues at the Statistical Research Group developed the technique of sequential analysis, still used today.
The Friedmans’ daughter, Janet, is born; their son, David, is born two years later.
1945–6: Teaches at the University of Minnesota, alongside George Stigler; they collaborate on a pamphlet opposing rent controls, Roofs or Ceilings?
1945: Refines and publishes Income from Independent Professional Practice with Simon Kuznets. This work further convinces Friedman of how government regulation can be counterproductive and harmful to the public.
1946: Awarded PhD from Columbia.
Begins a 30-year teaching position in the economics department at the University of Chicago, where he is further influenced by the free-market ideas of Frank Knight and his colleagues; begins his collaboration with economic historian Anna Schwartz; works on the role of money in business cycles at the National Bureau of Economic Research, now headed by Arthur Burns.
1947: At the invitation of F. A. Hayek, Friedman attends the inaugural meeting of the Mont Pelerin Society, with his friend George Stigler and many of the world’s leading liberal scholars.
1948: Friedman’s article ‘A Monetary and Fiscal Framework’ suggests that free-market capitalism is more efficient than socialist alternatives.
1951: Gary Becker, who would subsequently win the Nobel Prize in Economic Science, enters Chicago to study economics – the first of five Nobel laureates who were taught by Friedman.
1951: The American Economic Association awards Friedman the John Bates Clark Medal, the profession’s most prestigious prize.
1953: Essays in Positive Economics argues that the goal of economics is prediction, not the refinement of mathematical models.
1954–55: Fulbright Visiting Fellow at Gonville and Caius College, Cambridge.
1956: Publishes ‘The Quantity Theory of Money: A Restatement’, in Studies in the Quantity Theory of Money, edited by Friedman.
1962: Friedman publishes the bestselling Capitalism and Freedom, which argues for libertarian economic and social policies.
1962–3: Milton and Rose visit 22 countries to study different monetary and political systems.
1963: Publishes A Monetary History of the United States with Anna Schwartz.
1964: