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Thank You, Milton Friedman

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Milton Friedman, the Nobel Prize-winning economist who died at 94 last week, told the economics profession and the public many things they needed to hear.

After World War II, thanks to the theories of John Maynard Keynes, most economists and policymakers believed that government should manage the economy through broad discretionary powers over the money supply and the budget. Friedman went against the grain and showed the dangers that lay in permitting such powers to fallible government officials. He pointed out that economic fine-tuning through inflation would do no good in the long run and a lot of harm by reducing people’s buying power. While he did not favor ending the Federal Reserve System and the government’s control of money and banking, he opposed discretionary power, understanding that politicians and bureaucrats could never know enough to run an economy.

He also understood that inflation was purely a government creation. While some blamed generally rising prices on businessmen, workers, or consumers, Friedman insisted, “Inflation is always and everywhere a monetary phenomenon.” Without new money being created, consumers couldn’t possibly bid up all prices. And since government controls the monetary system, inflation was therefore a political phenomenon. In his work with Anna Schwartz, he went further and showed empirically that Federal Reserve polices caused the Great Depression. He said this at a time when mainstream economists blamed the free market for that catastrophe.

Friedman was one of the great public intellectuals, teaching noneconomists that nothing could improve individual and social well-being as dramatically as free markets. Through his Newsweek column, which ran from 1966 to 1983, and his 1980 television series, Free to Choose, he clearly explained how economic freedom, competition, and the profit-and-loss system make life better for everyone. When President Nixon imposed wage and price controls in 1971, no one was better at showing the disastrous effects of that policy than Friedman. Government decrees, he said, can’t repeal the laws of economics. For example, he added, if government forbids the price of candy bars to rise when economic conditions require it, there inevitably will be more air and less chocolate in the candy than before. So the real price will be higher despite the regulation.

He applied this impeccable economic reasoning to issues across the board, including the minimum wage. Considering that people still think government should set the minimum wage, it’s clear that the lessons of economics have to be taught to each generation. That’s one reason Friedman will be missed.

He was nothing if not courageous. What else would you say about a University of Chicago economist and advisor to Republican presidential candidates who opposed the war on drugs, as well as medical and other occupational licensing?

And speaking of courage, Milton Friedman was an indispensable part of the effort to end the military draft in the 1970s. At the height of the Vietnam War, when the government was forcing young men to fight, kill, and die thousands of miles from home in a conflict with people who had done them no harm, Friedman put his prestige on the line and demanded that conscription be stopped. He did this publicly and also as a member of Nixon’s Commission on an All-Volunteer Force.

As Brad DeLong related on Salon.com., when Gen. William Westmoreland, who commanded American forces in Vietnam, testified in favor of the draft before the commission, he said he did not wish to command “an army of mercenaries.” Friedman retorted, “General, would you rather command an army of slaves?” Westmoreland took umbrage, replying “I don’t like to hear our patriotic draftees referred to as slaves.” An undaunted Friedman shot back, “I don’t like to hear our patriotic volunteers referred to as mercenaries.”

His advocacy of the all-volunteer army was powerful and perhaps even crucial. The draft was abolished and hasn’t been revived. Everyone to this day who would have been at risk of being drafted should say “thank you” to Milton Friedman.

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    Sheldon Richman is vice president of The Future of Freedom Foundation and editor of FFF's monthly journal, Future of Freedom. For 15 years he was editor of The Freeman, published by the Foundation for Economic Education in Irvington, New York. He is the author of FFF's award-winning book Separating School & State: How to Liberate America's Families; Your Money or Your Life: Why We Must Abolish the Income Tax; and Tethered Citizens: Time to Repeal the Welfare State. Calling for the abolition, not the reform, of public schooling. Separating School & State has become a landmark book in both libertarian and educational circles. In his column in the Financial Times, Michael Prowse wrote: "I recommend a subversive tract, Separating School & State by Sheldon Richman of the Cato Institute, a Washington think tank... . I also think that Mr. Richman is right to fear that state education undermines personal responsibility..." Sheldon's articles on economic policy, education, civil liberties, American history, foreign policy, and the Middle East have appeared in the Washington Post, Wall Street Journal, American Scholar, Chicago Tribune, USA Today, Washington Times, The American Conservative, Insight, Cato Policy Report, Journal of Economic Development, The Freeman, The World & I, Reason, Washington Report on Middle East Affairs, Middle East Policy, Liberty magazine, and other publications. He is a contributor to the The Concise Encyclopedia of Economics. A former newspaper reporter and senior editor at the Cato Institute and the Institute for Humane Studies, Sheldon is a graduate of Temple University in Philadelphia. He blogs at Free Association. Send him e-mail.