By Patricia Sullivan and Carlos Lozada
Washington Post Staff Writers
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.
His landmark 1962 work, "Capitalism and Freedom," listed common governmental activities in the United States and other Western societies that he considered unjustifiable under his economic principles. These included price supports for agriculture; restrictions on international trade; rent controls; legal minimum wage rates; detailed regulation of industries such as banking or transportation; control of radio and television by the Federal Communications Commission; Social Security (which he called a Ponzi scheme); licensing restrictions on any enterprise, occupation or profession; public housing programs; the military draft; the legal prohibition against carrying mail for profit; and publicly owned and operated toll roads.
"This list is far from comprehensive," Friedman added.
He was a hero to libertarians for advocating the legalization of drugs and prostitution and for promoting the idea of school choice. He also served on a presidential commission that urged Nixon in 1970 to end the military draft.
"No public-policy activity that I have ever engaged in has given me as much satisfaction," he wrote in "Two Lucky People," the 1998 memoir he wrote with his wife. The most dramatic moment, he wrote, was when Gen. William Westmoreland testified that he did not want to command an army of mercenaries. "I stopped him and said, 'General, would you rather command an army of slaves. . . . If they are mercenaries, then I, sir, am a mercenary professor, and you, sir, are a mercenary general, and we are served by mercenary physicians, we use a mercenary lawyer and we get our meat from a mercenary butcher.' "
Milton Friedman was born in Brooklyn, N.Y., on July 31, 1912, the son of Jewish Austro-Hungarian immigrants. He grew up in nearby Rahway, N.J., where his parents ran a garment shop, a dry goods store and an ice cream parlor.
Friedman enrolled in Rutgers University and worked as a waiter, department store clerk and tutor. He started small businesses selling clothes and secondhand books.
After graduating in 1932, he moved to the University of Chicago, where he earned a master's degree in economics in 1933. That's also where he met and later married Rose Director Friedman, his wife of 68 years, who is also an economist and with whom he wrote many books. They had two children, who survive him.
Later, Friedman became a federal employee with the National Resources Committee, a New Deal agency of the kind that he would later criticize so fervently. Part of his work there and at other agencies involved designing the federal withholding tax system.
He received a doctoral degree in economics from Columbia University in 1946 and joined the University of Chicago, where he became known as the leader of the Chicago School of free-market economists. As a believer in the principles espoused by 18th-century economist Adam Smith, Friedman argued vigorously that economic freedom was necessary for political freedom.
Upon retiring in 1977, he became a senior research fellow at Stanford University's Hoover Institution.
The idea of the world's foremost laissez-faire economist living in one of the nation's most liberal cities struck many as unlikely. Asked why he chose San Francisco, he responded with his trademark wit, "Not much competition here."