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Milton Friedman in 1976.

Not to be confused with Thomas Friedman.

“ ” A society that puts equality before freedom will get neither. A society that puts freedom before equality will get a high degree of both. —Milton Friedman.

Milton Friedman (1912—2006) was an American economist who won the Nobel Memorial Prize in Economics Science from the Swedish Central Bank for his work on consumption analysis and to monetary theory and history.[1] He held a libertarian point of view that was in favor of a strong private sector without government intervention — the free market cures all ills. He is generally ranked as one of the most important economists of the 20th century.[2] His economic ideas were also partially implemented in the United States by Ronald Reagan, in the United Kingdom by Margaret Thatcher, and in Chile by Augusto Pinochet during the 1970s and 1980s.

Change of views [ edit ]

In 1946, Friedman was a supporter of the Keynesian economic system. He was a staunch advocate for the New Deal and the higher taxes that came with it. However, in the 1960s, he saw the error of his ways and came to believe that there was in fact a "natural rate of unemployment" that the central government (as opposed to other ones) had no control over. He thought that the Keynesian system would lead to the stagflation of the 1970s, which had nothing to do with Nixon's '71 wage and price controls or the '73 OPEC constraint of the oil supply. The basis behind this idea was rational expectations. As the government pushed unemployment, through old Keynesian stimulus, below the natural rate, inflation went up. However, since unemployment reverted back to normal over the long run due to the neutrality of demand side stimulus, inflation remained high due to the population expecting inflation to be high.

The public first noticed him when the 1950 Congressional Buchanan Commission on illegal lobbying highlighted a deal, signed in 1946, between the Foundation for Economic Education (revealed by them as nothing but a front group for business) and a real estate lobbying group by which the latter paid the former so that it would publish a Friedman-authored anti-rent control panflet, distributing 500,000 copies through realtor waiting halls.[3]

The laissez-faire President [ edit ]

Friedman sat on Ronald Reagan's Economic Policy Advisory Board for the whole of the administration. Reagan even went so far as to give him the Presidential Medal of Freedom, an honor which Reagan himself had bestowed upon him in 1988.[4] The policies of Reagan's administration created many historical achievements, creating a long-lasting economic recovery with:

Dramatic increases in defense spending, causing large deficits. Friedman was opposed to this.[5] The Savings and Loan crisis.[6] The stock market crash of 1987.[7] Raising the national debt from $700 billion to $3 trillion in a matter of only eight years. Friedman was opposed to this in the manner it was implemented and he once said, "I would rather have a $1 trillion budget that is way out of balance than a $2 trillion budget that is in balance.[8] Changing the U.S. from the world's largest creditor to the world's largest debtor.[9] Friedman is criticized by conservatives for having been a globalist in this sense. [1]

Chile and the Chicago Boys [ edit ]

Friedman claimed himself as the reason for Chile's economic turnaround, the "Miracle of Chile," in the 1970s and 1980s. Friedman also believed that his ideas were ultimately responsible for the end of the repressive dictatorship of Augusto Pinochet. Who, in the first place, was supported/funded by America/CIA to dethrone the then democratically elected Marxist physician Salvador Allende, and thus destroying 150 years of Chilean democratic tradition, all after first choking Chilean economy in 1970 - 72 ("Make the economy scream!" - Richard M. Nixon) [10]:

What Friedman leaves out is the fact that at its ultimate extent, the "Miracle of Chile" failed in the '82 monetarist crisis, causing the government to severely intervene in the economy and to bail out several banks and enterprises. It was largely a miracle for the upper classes as the gap between the rich and poor exploded, monopolies and oligopolies became rampant, and the country took on large amounts of debt from the IMF.[12] Putting freedom before equality did not work out as Milton imagined, as the rich became super rich, people living below the poverty line still represented 45 percent of the population in 1987. Further reduction of taxes and government expenditures in 1988 had a further negative impact in social policies, which was later saved by "aggressive social policies". [13]

Friedman said he never supported nor advised Pinochet. He once had a roughly 45-minute talk with Pinochet – on his six-day trip to Chile in March 1975 – however he never accepted a penny from the Chilean regime and turned down two honorary degrees from Chilean universities that received government funding, because it could be interpreted as support of the junta. He wrote Pinochet a formal letter afterward, arguing for a plan to end hyperinflation and liberalize the economy, similar to those letters he sent to communist dictators in the USSR, China, and Yugoslavia.[14][15][16]

Spiro Latsis case study [ edit ]

In 1972, Spiro Latsis, a student of philosopher of science Imre Lakatos, launched a critique of Friedman's economics. Latsis used Friedman's economics as a case study to attack neo-classical economics in general. Latsis claimed that the research program had failed to make any predictions of novel facts, making it pseudoscientific by the standards of Lakatos' philosophy. Latsis also put forth a program of "economic behaviorism,"[17] and went on to organize a conference around methodology in economic research programs and his criticisms have sparked an ongoing debate over the nature of economic research.[18]

In fairness [ edit ]

Friedman's contribution to economics is often buried by his extreme libertarian philosophy. His Monetary History of the United States (written with Anna Schwartz) is still considered an (if not the) authoritative work on the history of the Federal Reserve.[19] When stagflation hit, Friedman made mathematically rigorous revisions to Keynesian models, specifically the Phillips Curve (i.e. how inflation and unemployment could be balanced), that were later accepted by Keynesians and incorporated into their thought.

He also came up with concepts and advocated policies that would be considered downright socialist.[20] For example, he believed that welfare programs ought to be replaced with the negative income tax, i.e. a minimum income for all those who didn't qualify for the lowest tax bracket, which is similar to the way the Earned Income Tax Credit works. His permanent income hypothesis predicts that consumers will spend based on long-term income patterns, implying that rich people would continue to spend at the same rates despite a temporary tax break. This contradicted the simplistic trickle-down policy of George W. Bush and, ironically, Bush ended up proving Friedman correct.

Friedman's academic work tended to be far more nuanced than his policy prescriptions.[21]

Influence on libertarianism [ edit ]

Milton Friedman is a leading light in the "Chicago school" of economics, which is distinct from the Austrian school of Ludwig von Mises. The two competing schools are the source of one of the main splits in the libertarian movement. As a rule, the more radical Austrian schoolers — many of whom are anarcho-capitalists and anarchists in other ways as well (i.e. anti-war, anti-police state) — view Chicago schoolers as "Beltway libertarians" and stealth Reaganites whose utilitarian approach lacks a broader critique of the state beyond merely cutting spending and regulation. Indeed, Austrian "scholar" Walter Block concluded Milton Friedman to be a socialist.[22] Make of that what you will.

Despite this, or perhaps because of it, Milton Friedman and the Chicago school have been much more influential on real world government policy, having guided the policies of Reagan, Thatcher, and several other countries at various points in time. That Reagan, Thatcher, and Pinochet could apply Friedman's economics stripped of anything else remotely libertarian may indicate the Austrians have a point. The real world influence of Austrian school economics, meanwhile, has been limited to occasional small-time politicians like Ron Paul. Another main difference is the Chicago school holds to the classical microeconomic model of supply and demand while the Austrian school rejects such mathematical models in favor of a strictly narrative study of human action they term "praxeology."

Religion [ edit ]

Friedman called himself an agnostic, though he defined atheism in the strong sense, so his views were similar to those of weak atheism. He also subscribed to the view of morality put forth by evolutionary psychology.[23]

Family [ edit ]

Friedman is the father of David D. Friedman, who is, believe it or not, more far-out than his father on economics, being an anarcho-capitalist and the author of a seminal book in that field entitled The Machinery of Freedom. David Friedman is one of the few anarcho-capitalists to adhere to the Chicago school and a utilitarian view of morality (many, perhaps the majority, are Austrian schoolers, and many adhere to a natural rights view.) This is a reason for much back and forth between Friedman's utilitarian versus the natural rights versions of anarcho-capitalism of Murray Rothbard, Morris and Linda Tannehill and others, as well as a source of some interesting, some would say way out there, ideas on the part of David Friedman, such as polycentric law being enforced by competing private courts.

See also [ edit ]