Milton Friedman

American economist (1912–2006), leader of the Chicago School of Economics, winner of the 1976 Nobel Memorial Prize in Economic Sciences, and the twentieth century’s most influential advocate of free-market capitalism and monetary economics.

Friedman entered economics at the University of Chicago just as the Great Depression discredited the field’s dominant institutional-economics establishment. With Anna Schwartz he spent twelve years reconstructing 150 years of US monetary data for A Monetary History of the United States (1963), arguing the Depression was principally a Federal Reserve-caused collapse in the money supply — the ‘Great Contraction’ — rather than a failure of capitalism itself. That work founded monetarism: the theory that inflation is ‘always and everywhere a monetary phenomenon’ and that monetary policy should follow a steady, rule-bound growth rate rather than discretionary central-bank management. His 1967 prediction of stagflation — simultaneous high inflation and high unemployment, then considered theoretically impossible under the standard Phillips Curve — was vindicated by the 1970s and became the episode that moved monetarism from academic heterodoxy to mainstream policy, shaping Paul Volcker’s early-1980s disinflation and the Reagan administration’s economic programme.

Friedman’s moral case for capitalism rests on freedom rather than desert: having concluded that ‘people get what they deserve’ is false (luck and unequal starting endowments falsify it), he settled on individual freedom as the irreducible value capitalism serves. He later split freedom into economic, political, and civic strands after watching Pinochet’s Chile take economic liberalisation without political freedom, and argued — against Friedrich Hayek’s ‘Denationalization of Money’ — that competing private currencies would not displace state money, since societies converge on one currency and the state re-enters whenever the stakes are high enough. Despite his reputation as a small-government libertarian, Friedman proposed a universal negative income tax as early as 1938, administered through the tax system rather than a welfare bureaucracy; it never passed as designed but its logic produced the earned income tax credit. He was also the intellectual force, working through Treasury official George Shultz, behind the United States abandoning the Bretton Woods fixed exchange-rate system for floating currencies in the early 1970s — a direct precursor of financial globalisation.

In the wiki

• Jennifer Burns on Milton Friedman, Ayn Rand, and the History of Free-Market Ideas — full-length treatment of Friedman’s biography, economics, and political influence, drawn from Jennifer Burns’s Milton Friedman: The Last Conservative (2023)
• Monetarism — the economic theory Friedman founded with Anna Schwartz

See also

• Jennifer Burns — his biographer, who discussed him at length with Lex Fridman
• Ayn Rand — a fellow twentieth-century individualist and defender of capitalism, reached by a very different intellectual method