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Milton Friedman was an American economist and statistician who believed in free-market capitalism and was regarded as a leader of the Chicago School of monetary economics.
In 1976, he earned the Nobel Prize in economic sciences for his research on consumption analysis, monetary history and theory, and the complexity of stabilization policy.
Friedman is the author of several books, including Capitalism and Freedom. He was awarded the Presidential Medal of Freedom in 1988.
Milton Friedman died on Nov. 16, 2006.
Milton Friedman was born on July 31, 1912, in Brooklyn, New York. After earning a bachelor's degree from Rutgers University, Friedman completed a master's degree at the University of Chicago and a Ph.D. at Columbia University,
In 1935, he joined the Natural Resources Committee conducting a consumer budget survey, a position that would later spur his book, A Theory of the Consumption Function.
In 1941, Milton Friedman joined the U.S. Treasury Department, working on wartime tax policy during the first two years of World War II. Friedman once noted that his wife "has never forgiven me for the part I played in devising and developing withholding for the income tax."
As part of a think tank that brought about income tax withholding as a "temporary" measure to help fund the war, Friedman never questioned the necessity of it in wartime, citing "there is no doubt that it would not have been possible to collect the amount of taxes imposed during World War II without withholding taxes at the source."
Friedman later regretted having forced withholding on Americans and was appalled when the government made the emergency measure a permanent part of its peacetime taxation.
Following the end of WWII, Friedman joined the faculty at the University of Chicago in 1946, and became a full professor in 1948.
At the university, Friedman led the postwar challenge to the theories of John Maynard Keynes, the British economist who maintained that governments must help capitalist economies through periods of recession and prevent boom times from exploding into high inflation.
Milton Friedman argued that the government stay out of the economy and let the free market work. Where Keynesians may support short-term solutions to spur consumer spending and the economy, by offering a temporary tax break or stimulus check, Friedman theorized that people adjust their spending habits in response to real changes in their lifetime income, not temporary changes to their current income.
In 1957, Friedman challenged Keynesian thinking with A Theory of the Consumption Function, his book on consumer spending.
Milton Friedman and others at the Chicago school garnered several Nobel Prizes in economic science for their work in dismantling Keynesian concepts, including Friedman's 1976 Prize for his achievements in the fields of consumption analysis, monetary history, and theory demonstration of the complexity of stabilization policy.
Regarded as a leader of the Chicago School of monetary economics, Friedman stressed the importance of the quantity of money as an instrument of government policy and a determinant of business cycles and inflation.
His monetarism theory proposed that money supply changes have immediate and long-term effects. In his 1963 book, A Monetary History of the United States, Milton Friedman, and co-author Anna Schwartz argued it was monetary policy, and not a failure of free-market capitalism, that led to the Great Depression.
Surveying a century of monetary policy during crashes, booms, recessions, and depressions, Friedman concluded that the Federal Reserve was a main cause of the depression because it curtailed the money supply by 30% between 1929 and 1933. This contraction caused a crash that extended into a depression.
An economic theory which focuses on controlling and changing the money supply as the main way to affect the economy.
Following the Second World War, a new version of the gold standard was enacted. Under the agreement reached at Bretton Woods, the United States agreed that dollars could be exchanged for gold at $35 per ounce. Milton Friedman took an active dislike to the Bretton Woods Agreement, due to its fixing of the dollar's value, rather than allowing the currencies value to be free and flexible.
When the Keynesian system buckled under stagflation in the 1970s, academics began to take Friedman's anti-inflation policies seriously. Monetarism eclipsed Keynesian solutions.
Former Federal Reserve chairman, Alan Greenspan observed that Friedman came along as it became clear that the Keynesian consensus, which had worked well from the 1930s, could not explain the stagflation of the 1970s. In 1979, Paul Volcker became Chairman of the Federal Reserve. Milton Friedman sent him a hostile and condescending letter, predicting his failure and doubting his ability to control inflation. Volcker would prove Friedman wrong, and is remembered for getting inflation under control.
Friedman became a guiding force for economic policies espoused by President Ronald Reagan in the United States and Prime Minister Margaret Thatcher in Britain.
Milton Friedman conceived many innovations in economic theory during the 20th century. His work explaining monetary supply and its effect on economic and inflationary shifts garnered him worldwide respect.
A Friedman collaborator, Edmund Phelps, was the 2006 Nobel Prize winner in economics for a theory the two Nobelists developed in the 1960s regarding unemployment and inflation, a theory that continues to be used as a practical guide among the world's major central banks, including the U.S. Federal Reserve.
Friedman served as a senior fellow at the Hoover Institution from 1977 until 2006. He became a professor at the University of Chicago in 1946 and quickly became a full professor in 1948. In 1963, Friedman was named the Paul Snowden Russell Distinguished Service Professor of Economics by the university. Milton Friedman was a member of the research staff of the National Bureau of Economic Research from 1937 to 1981.
Friedman acted as president of the American Economic Association, the Western Economic Association, and the Mont Pelerin Society. He also was a member of the American Philosophical Society and the National Academy of Sciences.
Milton Friedman was a senior research fellow at the Hoover Institution from 1977 to 2006. Based at Stanford University, it is a public policy think tank that seeks to improve the human condition by advancing ideas that promote economic opportunity and prosperity.
Capitalism and Freedom was a commentary on public policy with an emphasis on the preservation and extension of individual freedom. The book espoused the free-market solutions to many economic issues, such as proposing a negative income tax for those under a certain income level and school vouchers to improve the education system.
Milton Friedman is associated with the Chicago School, which believes that government should have limited involvement in free-market activities and that the best outcomes result when markets freely allocate resources in an economy.
Milton Friedman was an American economist and Nobel Laureate. Regarded as the founder of monetarism, his work and theories influenced economic policies in the United States and abroad. Friedman is remembered as a leader of the Chicago school of monetary economics and an advocate for free-market capitalism.
