Milton Friedman

Milton Friedman

Born: 1912. Died: 2006.


One of the most highly influential economists, political commentators and essayists of the century, Milton Friedman is one of the best known economists. An ardent opponent of the Keynesian economics, Friedman led the 'Monetarist' incarnation of the Chicago School against the Keynesian orthodoxy in the 1960s and early 1970s.

Milton Friedman's early contributions include the 'Permanent Income Hypothesis' in consumption (1957), his formulation of risk-aversion and risk-proclivity (1948, with L.J. Savage), his use of evolutionary theory in the theory of the firm, and his propositions for a 'positivist' methodology in economics (1953).

Friedman's important criticisms of Keynesian theory began with his attack on the IS-LM dichotomy in his 'restatement' of the Quantity Theory in 1956 - effectively, reminding Keynesians that 'money matters'. This was followed up by a massive historical study with Anna J. Schwartz on the Monetary History of the United States (1963) - leading to a famous debate on money-income causality. In his famous presidential address to the American Economic Association, Friedman (1968) then focused his attention upon the apparent breakdown of the Phillips Curve relationship in the 1970s, proposing to replace it with a Natural Rate of Unemployment (NARU) - a concept later formalized in more detail by the New Classicals.

Friedman wrote much on various aspects of economic policy. In general, he argued that government discretionary fine-tuning of the economy, as had been proposed by Keynesians, ought to be replaced with iron "rules" of policy - notably his famous 'money supply growth' rule. He also wrote several popular volumes advocating laissez-faire policies more generally.

Milton Friedman won the Nobel Memorial prize in 1976.

Major Books of Milton Friedman

- A Monetary History of the United States, 1867-1960, with Anna J. Schwartz, 1963
- A Program for Monetary Stability, 1959
- A Theory of the Consumption Function, 1957
- The Balance of Payments: Free Versus Fixed Exchange Rates, with Robert V. Roosa, 1967
- Bright Promises, Dismal Performance: An Economist's Protest, with William Richard Allen, 1983
- Capitalism and Freedom, 1962
- Comments on Tobin and Buiter, in J. Stein, editor, Monetarism, 1976
- Comments on the Critics, in Gordon, editor, Milton Friedman's Monetary Framework: A Debate with His Critics, 1974
- Contracts and Conveyances of Real Property, 1954
- Contracts and Conveyances of Real Property 1995 Cumulative Supplement, 1995
- The Counter-Revolution in Monetary Theory, 1970
- Dollars and Deficits: Inflation, Monetary Policy and the Balance of Payments, 1968
- Dollars and Deficits: Living With America's Economic Problems, 1968
- Essays in Positive Economics, 1953
- Foreword to Lives at Risk: Single-Payer National Health Insurance Around the World, 2004
- Friedman on Leases, 1974
- Free to Choose: A Personal Statement, with Rose Friedman, 1980
- The Great Contraction, 1929-1933, with Anna J. Schwartz, 1965
- Inflation: Causes and Consequences, 1963
- Monetary Correction: A proposal for escalation clauses to reduce the cost of ending inflation, 1974
- Monetary Policy: Tactics versus strategy, in Moore, editor, To Promote Prosperity, 1984
- Monetary Statistics of the United States: Estimates, Sources, Methods, with Anna J. Schwartz, 1970
- Monetary Trends in the United States and the United Kingdom: Their relations to income, prices and interest rates, 1876-1975, with Anna J. Schwartz, 1982
- Monetary Vs Fiscal Policy, with Walter W. Heller, 1969
- Money Mischief: Episodes in Monetary History?, 1992
- The Optimum Quantity of Money and Other Essays, 1969
- Quantity Theory of Money, in J. Eatwell, M. Milgate, P. Newman, editors, Money: The New Palgrave, 1989
- The Quantity Theory of Money: A restatement, in Friedman, editor, Studies in Quantity Theory of Money, 1956
- Price Theory: A Provisional Text?, 1962
- The Relative Stability of Monetary Velocity and the Investment Multiplier in the United States, 1898-1958, with D. Meiselman, in Stabilization Policies, 1963
- Should There be an Independent Monetary Authority?, in L.B. Yeager, editor, In Search of a Monetary Constitution, 1962
- Some Comments on the Significance of Labor Unions for Economic Policy, in D. McC. Wright, editor, QJE6?ie=UTF8&tag=wisdomsupreme-20&linkCode=as2&camp=1789&creative=390957&creativeASIN=B000JVQJE6" target="_blank">The Impact of the Union, 1951
- The Supply of Money and Changes in Prices and Output, in Relationship of Prices to Economic Stability and Growth, 1958
- Tax Limitation, Inflation and the Role of Government, 1978
- Theory of the Consumption Function, 1957
- There's No Such Thing as a Free Lunch, 1975
- Two Lucky People, with Rose Friedman, 1999
- Tyranny of the Status Quo, with Rose Friedman, 1984
- What Price Guideposts?, in G.P. Schultz, R.Z. Aliber, editors, Guidelines, Informal Controls, and the Market Place: Policy Choices in a Full Employment Economy, 1966
- Why Government Is the Problem, 1993

Major Articles of Milton Friedman

- 1948, Utility Analysis of Choices Involving Risk, with L. Savage, JPE
- 1948, A Monetary and Fiscal Framework for Economic Stability, AER
- 1951, Commodity-Reserve Currency, JPE
- 1952, The Expected-Utility Hypothesis and the Measurability of Utility, with L. Savage, JPE
- 1959, The Demand for Money: Some Theoretical and Empirical Results, JPE
- 1961, The Demand for Money, Proceedings of the American Philosophical Society
- 1961, The Lag in Effect of Monetary Policy, JPE
- 1961, Real and Pseudo Gold Standards, JoLE
- 1961, Vault Cash and Free Reserves, JPE
- 1963, Money and Business Cycles, with A.J. Schwartz, REStat
- 1964, A Reply to Donald Hester, with D. Meiselman, REStat
- 1966, Interest Rates and the Demand for Money, JoLE
- 1968, The Role of Monetary Policy: Presidential Address to AEA, AER
- 1968, Money: the Quantity Theory, IESS
- 1969, The Definition of Money: Net Wealth and Neutrality as Criteria, with Anna J. Schwartz, JMCB
- 1970, Comment on Tobin, QJE
- 1970, A Theoretical Framework for Monetary Analysis, JPE
- 1971, A Monetary Theory of National Income, JPE
- 1972, Have Monetary Policies Failed?, AER
- 1977, Inflation and Unemployment: Nobel lecture, JPE
- 1977, Time Perspective in Demand for Money, The Scandinavian Journal of Economics
- 1982, Interrelations between the United States and the United Kingdom, 1873-1975, with A.J. Schwartz, J Int Money and Finance
- 1983, A Monetarist View, JEE
- 1985, The Case for Overhauling the Federal Reserve, Challenge
- 1986, Has Government Any Role in Money?, with Anna J. Schwartz, JME
- 1986, The Resource Cost of Irredeemable Paper Money, JPE
- 1988, Money and the Stock Market, JPE
- 1997, The Case for Free Trade, with Rose Friedman, Hoover Digest
- 1998, George J. Stigler, 1911-1991: Biographical Memoir, at NAS
- 2000, Monetarist Thoughts, with Robert D. Laurent, JEP
- 2002, The Market Can Transform Our Schools, Hoover Digest
- 2005, A Natural Experiment in Monetary Policy Covering Three Episodes of Growth and Decline in the Economy and the Stock Market, JEP
- 2006, Why Money Matters, Hoover Digest

Quotes from Milton Friedman

- "Fundamentally, there are only two ways of coordinating the economic activities of millions. One is central direction involving the use of coersion -the technique of the army of the modern totalitarian state. The other is voluntary cooperation of individuals -the technique of the market place." (from "Capitalism and Freedom", 1962)

- "History suggests only that capitalism is a necessary condition for political freedom. Clearly it is not a sufficient condition." (from "Capitalism and Freedom", 1962)

- "The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy." (from "Capitalism and Freedom", 1962)

- "The great threat to freedom is the concentration of power." (from "Capitalism and Freedom", 1962)

- "The role of government [in a free society] ... is to do something that the market cannot do for itself, namely, to determine, arbitrate, and enforce the rules of the game." (from "Capitalism and Freedom", 1962)

- "Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible." (from "The Intellectual Provocateur", published in Time, 1969)

- "There's No Such Thing as a Free Lunch" (from "There's No Such Thing as a Free Lunch", 1975)

- "In a bureaucratic system, useless work drives out useful work." (from "Gammon's 'Black Holes'", published in Newsweek, 1977)

- "A society that puts equality -in the sense of equality of outcome- ahead of freedom will end up with neither equality nor freedom. The use of force to achieve equality will destroy freedom, and the force, introduced for good purposes, will end up in the hands of people who use it to promote their own interests." (from " Free to Choose: A Personal Statement", with Rose Friedman, 1979)

- "As it has become politically less attractive to vote higher taxes to pay for higher spending, legislators have resorted to financing spending through inflation, a hidden tax that can be imposed without having been voted, taxation without representation." (from " Free to Choose: A Personal Statement", with Rose Friedman, 1979)

- "How did language develop? In much the same way as economic order develops through the market -out of the voluntary interaction of individuals, in this case seeking to trade ideas or information or gossip rather than goods and services with one another." (from " Free to Choose: A Personal Statement", with Rose Friedman, 1979)

- "Inflation occurs when the quantity of money rises appreciably more rapidly than output, and the more rapid the rise in the quantity of money per unit of output, the greater the rate of inflation. There is probably no other proposition in economics that is as well established as this one." (from " Free to Choose: A Personal Statement", with Rose Friedman, 1979)

- "Inflation yields revenue to the government ... by paying off -or repudiating, if you will- part of the government's debt. Government borrows in dollars and pays back in dollars. But thanks to inflation, the dollars it pays back can buy less than the dollars it borrowed." (from " Free to Choose: A Personal Statement", with Rose Friedman, 1979)

- "[Direct welfare] is a bad program, not because it gives money to the poor, but because it produces poor people, because it encourages people to be on welfare instead of being on wages. I don't blame them. If you and I are fools enough to make ot to their advantage to subsit on welfare rather than work, they would be foolish not to take advantage of it." (from "Bright Promises, Dismal Performance: An Economist's Protest", 1983)

- "Economic freedom is a necessary but not sufficient condition for political freedom. ... Political freedom in turn is a necessary conČdition for the long-term maintenance of economic freedom." (from "Bright Promises, Dismal Performance: An Economist's Protest", 1983)

- "The fundamental value in relations among people is to respect the dignity and the individuality of fellow men, to treat them not as objects to be manipulated for our purposes or in accordance with our values but as persons, with their own rights and their own values -as persons to be persuaded, not coerced, not forced, not bulldozed, not brainwashed." (from "Bright Promises, Dismal Performance: An Economist's Protest", 1983)


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