Milton Friedman: Usually right, and usually victorious

  • Share
  • Read Later

My last conversation with Milton Friedman–who died today at the age of 94–was in October 2005. I was working on an article about monetary policy after the impending retirement of Alan Greenspan and I figured it couldn’t hurt to consult the most important monetary economist of the past half century. (The most important monetary economist of the whole century was Friedman’s idol, Irving Fisher–but Fisher didn’t have nearly as much success as Friedman in winning central bankers over to his ideas.)

Getting Friedman (I’m sorely tempted to refer to him as Uncle Miltie, but that doesn’t seem appropriately respectful) on the phone wasn’t a difficult endeavor; he was about the most accessible major public figure on the planet. I’d usually e-mail to ask him when and where I should call (until recently, when he and his wife Rose moved full-time to their apartment in San Francisco, he split his time between there and a house on the coast in Sea Ranch). My colleague Shawn Tully preferred to call and leave a message–Friedman invariably called him back collect.

Friedman came through for me on that interview 13 months ago. He reeled off a list of other countries that had experienced high economic growth and low inflation during the Greenspan era. Then he said,

Have all these countries found a genius like Greenspan? What the foreign experience suggests is, you don’t need a genius. You just need someone willing to make fighting inflation his top priority.

That’s how Friedman talked. No gobbledy gook, no hemming and hawing. Just a clear voice (he didn’t sound a day over 60) speaking in tones of remarkable certainty. That certainty was maddening to some, especially when Friedman seemed to be wrong–and he certainly could be that. He wanted central bankers, for example, to do nothing but target the growth of the money supply. This was impractical, as current Fed Chairman Ben Bernanke said in a speech last week, because the money supply can’t be reliably measured.

But Friedman’s big-picture message that keeping prices steady is the only thing a central bank can do and do well was both correct and, happily, persuasive. And so it went with most of his big ideas. Sure, he often got the details wrong. But on the major issues Friedman was not only usually right but also had the tide of history with him.

Friedman was, most importantly, one of the great intellectual champions of the return to unfettered markets that began in the late 1970s. His 1962 book Capitalism and Freedom helped begin the discussion; his and Rose’s 1980 PBS show Free to Choose helped push his side to victory.

The products of Friedman’s libertarian worldview were more varied than this thumbnail account might lead you to believe, though. He was an influential voice in calling for the end of the military draft. He was the first to broach the idea of school vouchers in polite conversation. His idea of a “negative income tax” for the poor is now partially embodied in the form of the Earned Income Tax Credit.

Then there was his famous statement, in a 1970 New York Times Magazine article, that the job of a CEO is to run things in accordance with the desires of a company’s owners, “which generally will be to make as much money as possible while conforming to the basic rules of the society.” This profits-first argument was a bombshell at the time, and acceptance of it has waxed and waned since. But it is telling that nowadays even outspoken advocates of “corporate responsibility” usually make the case that what they’re really trying to do is maximize long-run shareholder value. Chalk up another victory for Uncle Miltie.