A half century ago, Milton Friedman's advocacy of free markets over government intervention and his prescription for inflation-fighting by central banks were treated as fringe notions by many economists. By the time the Nobel Prize-winning economist died yesterday at the age of 94, his views had helped to reshape modern capitalism.

A diminutive man known for his strong-willed and combative style, Mr. Friedman provided the intellectual foundations for the anti-inflation, tax-cutting and antigovernment policies of President...