Milton Friedman: The Life of the World's Most Famous Economist

Milton Friedman was born in Brooklyn, N.Y. on July 31, 1912 to low-income Jewish-Hungarian immigrants. When he was an infant, his parents moved him and his three older sisters to the nearby town of Rahway, N.J. He finished Rahway Public High School in 1928 and, shortly after, received a scholarship from Rutgers University, where he studied until his graduation in 1932. He then was granted, upon the recommendation of one of his Rutgers teachers, a tuition scholarship to the University of Chicago to study in the world-renowned economics department (Friedman 1). Friedman eventually taught economics in Chicago from 1946 to 1976 after conducting research and holding governmental positions with some of his college professors. While teaching, Friedman held several consulting jobs, served as an economic advisor for Barry Goldwater during his presidential campaign, and also for Richard Nixon in the late 1960s. Even while he was an active advisor and professor at the University of Chicago, Friedman was always most dedicated to his scientific work (Friedman 1). After he retired from teaching, Friedman became a member of Ronald Reagan's Economic Policy Advisory Board and wrote constantly about his economic ideas and theories in several enormously popular books (Wikipedia 1).

Friedman's extraordinarily long career in economics afforded him the chance of watching America's economy encounter many different problems and come up with many different solutions. Friedman entered America's economic world at a particularly important time in its history: during World War II. Friedman and the other members of the U.S. Treasury Department at which he worked were faced with the difficult challenge of collecting income taxes from a large war-ravaged population. Friedman recognized the inherent problems with expecting citizens to pay the entirety of their income taxes at one time, in one large payment. To combat this problem, he helped design the tax-withholding system that is still used by the IRS today. Friedman also witnessed The Great Depression firsthand and saw the tragic effects it had on Americans across the nation; this event further motivated Friedman to give his full attention to studying economics in school. Friedman always faulted the government - in particular, the Federal Reserve - for overreacting to the initial financial blow dealt to the economy in 1929 by tightening the money supply and causing nationwide panic; Friedman referred to this as "The Great Contraction" (Wikipedia 1). Friedman also blamed the government for the staggering unemployment rate during the Depression, once saying: "The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy." The high inflation rates in the mid to late '70s pointed out a major weakness of the US economy: its extreme dependence on foreign oil to serve its energy needs. Friedman's economic views were molded by the times in which he lived and the events he watched take place. As he notes in the preface to Capitalism and Freedom, "...the overwhelming defeat of Barry Goldwater in 1964...the overwhelming victory of Ronald Reagan in 1980-two men with essentially the same program and the same message" occurred because Americans' "...pocketbooks were being hit with inflation and high taxes" (Friedman viii). This idea was an irrevocable part of Friedman's economic thinking and beliefs.

Milton Friedman, above all else, was always an adamant supporter of the free and unrestricted market system favored by Adam Smith. Friedman was against government intervention in almost all aspects of the economy, particularly with regard to foreign exchange, where he favored absolutely no government intervention or restrictions on exchange rates. Friedman not only believed that a market economy would best bring wealth to a nation, but that it could also effectively end discrimination based on race because it forced buyers to purchase goods and services from whomever sells them at the lowest price, ignoring their ethnicities or creeds (Buchholz 33). "The most important single central fact about a free market is that no exchange takes place unless both parties benefit," Friedman once said when explaining why he viewed free-market economies as ideal. Friedman discovered - and effectively demonstrated through his economic models - how inflation and the money supply are irreversibly linked, but also recognized that having the Federal Reserve adjust the money supply during each recession or period of inflation would be ineffective and only harmful. He believed that there would be a latency period before adjustments to the money supply would register on America's GNP; since no one can know for sure how long it will take for changes to affect the GNP, Friedman recommended not trying to compensate for changes in the calculation by adjusting the amount of money in circulation (Buchholz 234). Friedman, as recently as 2005, voiced his continued support for the legalization of marijuana, underscoring his constant favoring of legalizing all narcotics. He signed an open letter in 2005 calling for the drug's legalization; the letter stated, among other things, "...legalization would reduce government expenditure by $5.3 billion at the state and local level and by $2.4 billion at the federal level. In addition, marijuana legalization would generate tax revenue of $2.4 billion annually if marijuana were taxed like all other goods". Friedman himself has always discussed the subject, famously saying "I'm in favor of legalizing drugs. According to my values system, if people want to kill themselves, they have every right to do so. Most of the harm that comes from drugs is because they are illegal." His longtime support for decriminalization of drugs and his support of other libertarian policies makes it more than a bit surprising that he was always a member of the Republican Party and served on the economic advisory boards for both Richard Nixon and Ronald Reagan. This irreverence only further proves how unique and innovative Milton Friedman was in his thinking and reasoning.

Milton Friedman became well-versed in classic economic philosophy and learned under the guidance of some of the best professors in the world during his schooling. What Friedman had that past philosophers and even some of his teachers did not was the ability to watch an extremely powerful capitalist economy behave for almost all of the twentieth century. Friedman took some tenets of classic economics, namely Smith's idea of a free and unrestricted market economy, and combined them with what he learned through careful observation and statistical study. His feeling that the government can only harm a nation's economy by adjusting the money supply can be proven by looking at America in the late 1960s through the mid 1970s. "In 1968, the Fed feared a recession. It pressed down hard on the monetary accelerator. But the economy did not feel the effects until after the downturn had passed. The result was high inflation, for the effects came during the recovery. In 1974, the Fed slammed on the monetary brakes to halt inflation. A recession followed in 1975" (Buchholz 234). Just as Friedman had the benefit of using past history to create his economic theories, we now have the benefit of using the more recent past to validate his ideas.

WORKS CITED

Buchholz, Todd G. New Ideas from Dead Economists. New York. December 1990.

"Friedman, Milton" Wikipedia, the Online Encyclopedia. www.wikipedia.org. April 2006.

Friedman, Milton. Captialism and Freedom. Chicago. 1962.