Milton Friedman, 1912-2006
Economist Touted Laissez-Faire Policy
Friday, November 17, 2006
Milton Friedman, 94, the Nobel Prize-winning economist whose tireless advocacy of unfettered free markets reshaped the nation's economic policies, died Nov. 16 of a heart ailment at St. Francis Memorial Hospital in San Francisco.
One of the most influential economists of the 20th century, Friedman championed individual choice on topics ranging from Social Security to the military draft. He revived conservative economic theory after the big-government era of the 1940s, 1950s and 1960s, leading the movement that says government's proper role in the market is to stabilize the growth of the money supply -- and stay out of the way.
His views gained traction in the 1970s when a combination of high unemployment and inflation, known as "stagflation," sharply ended the long post-World War II boom.
"Inflation is always and everywhere a monetary phenomenon," he often said.
"Friedman's monetary framework has been so influential that, in its broad outlines at least, it has nearly become identical with modern monetary theory," Ben S. Bernanke, now chairman of the Federal Reserve, said in a 2003 speech at the Federal Reserve Bank of Dallas.
A 5-foot, 2-inch scholar with a dry wit, the bald, bespectacled Friedman joked that he'd lost an inch because of the weight of the world on his shoulders. He was widely respected as an academic who also expressed himself in ways that could be understood by those who were interested, but unschooled, in economic theory. He took his theories to television, starring in a 10-week series on economics that aired on public television in the 1980s, and he wrote a column for Newsweek from 1966 to 1983. He published nearly two dozen books.
Friedman, an economic adviser to presidents Richard M. Nixon and Ronald Reagan, was awarded the Presidential Medal of Freedom and the National Medal of Science in 1988. He won the Nobel Prize in economics in 1976.
His laissez-faire ideas went from maverick to mainstream during his lifetime. He began graduate studies in economics during the Great Depression as the theories of British economist John Maynard Keynes were revolutionizing his profession. Keynes believed that government intervention was necessary to help smooth out the boom-bust cycles in the economy. That theory became the rock against which Friedman pushed for decades until it moved.
One of his most famous arguments dealt with the causes of the Depression. It was prompted not by changes in tariff laws or by the stock market crash, he said, but by the Federal Reserve Board's decisions to shrink the money supply for fear of inflation in 1929 and again in 1936. Those choices choked the life out of the economy and exacerbated a bad situation, he stated in "A Monetary History of the United States, 1867-1960," (1963) co-written with Anna J. Schwartz. The book is considered the definitive history of the nation's money supply.
Friedman's ideas were not initially hailed, and they remain controversial, especially among those who believe government should be a more active player in the economy, a position epitomized by the late Harvard University economist John Kenneth Galbraith.
Richard Parker, a Galbraith biographer, wrote last year in the Boston Globe that Friedman's "passionate calls for financial and securities market deregulation played no small role in ushering in the half-trillion dollar S&L fiasco of the 1980s and the deeply corrupt Wall Street stock market boom of the 1990s. His tax-reduction-at-all-costs policies helped lead to the nation's yawning budget deficits."
But the core of Friedman's work -- that controlling the money supply is a major key to economic health -- was embraced widely across the political spectrum.