American Oracle: Milton Friedman

Milton Friedman died this week at age 92. Seems like he was just getting started.

Friedman was easily one of the dozen most influential thinkers of the 20th century. He was a founding father of modern monetary policy. In his hugely influential magnum opus A Monetary History of the United States, 1867-1960 written with Anna J. Schwartz, Friedman used historical narrative and reams of supporting data to argue that steady control of the money supply is crucial in steering the economy. The book famously critiqued the Federal Reserve’s performance during the Great Depression and was a major influence on a generation of economists and the Reagan administration.

But that’s not why I liked him — I barely understand that stuff, even though it matters enormously. I liked that Friedman was a feisty crusading public intellectual and that he was, at bottom, the entrepreneur’s economist. In case you never saw him in action, check this, and take pity on his adversaries.

I remember first hearing of Friedman when he was a powerful voice against the draft. Brad DeLong surfaced this gem:

General William Westmoreland, testifying before President Nixon’s Commission on an All-Volunteer [Military] Force, denounced the idea, saying that he did not want to command an army of mercenaries.

Milton Friedman interrupted him: “General, would you rather command an army of slaves?”

Westmoreland got angry: “I don’t like to hear our patriotic draftees referred to as slaves.”

And Friedman got rolling: “I don’t like to hear our patriotic volunteers referred to as mercenaries. If they are mercenaries, then I, sir, am a mercenary professor, and you, sir, are a mercenary general.” And he did not stop: “We are served by mercenary physicians, we use a mercenary lawyer, and we get our meat from a mercenary butcher”

As George Schultz likes to say: “Everybody loves to argue with Milton, particularly when he isn’t there.”

Many Americans don’t know that in his early professional life, Friedman was a fairly conventional liberal. He worked at the US Treasury Department during World War II, where he is credited with having invented and implemented the payroll withholding tax. Prior to Friedman, taxes were not withheld — just paid on March 15 (later moved up a month). I suspect that this was one of those innovations he’d rather not be remembered for.

Friedman often argued for ideas that seemed daft at the time but today seem obvious. He championed the negative income tax and lived to see both Richard Nixon and Bill Clinton advocate for it (and in Clinton’s case, adopt a form of it as the Earned Income Tax Credit). I disagreed with Friedman plenty and still think that his decision to advise Chile’s Pinochet Chile was dubious even if the results were pretty good, but the historic impact of his ideas are hard to ignore.

As Virginia Postrel notes:

“He was a great social scientist, a brilliant popularizer and polemicist, and a mensch. His intellectual influence, on both scholarly economics and the revival of classical liberalism, can hardly be overstated. And, more than any other single person, we can thank him for ending the scourges of the 1970s: inflation and the draft.”

Friedman argued straight, no chaser. A half century ago he penned a take-no-prisoners opening to his most popular book, Capitalism and Freedom:

“President Kennedy said, “Ask not what your country can do for you – ask what you can do for your country.”… Neither half of that statement expresses a relation between the citizen and his government that is worthy of the ideals of free men in a free society.”

Friedman was an outstanding scholar — he not only won both the Nobel Prize and the John Bateson Clark Medal — but he surely could have won them more than once, if such a thing ever happened. Fittingly, his best obituary came from Lawrence Summers, another Clark Medal winner. Notes Summers:

“If John Maynard Keynes was the most influential economist of the first half of the 20th century, then Milton Friedman was the most influential economist of the second half.

“Not so long ago, we were all Keynesians. (“I am a Keynesian,” Richard Nixon famously said in 1971.) Equally, any honest Democrat will admit that we are now all Friedmanites. Mr. Friedman, who died last week at 94, never held elected office but he has had more influence on economic policy as it is practiced around the world today than any other modern figure.

“I grew up in a family of progressive economists, and Milton Friedman was a devil figure. But over time, as I studied economics myself and as the world evolved, I came to have grudging respect and then great admiration for him and for his ideas. No contemporary economist anywhere on the political spectrum combined Mr. Friedman’s commitment to clarity of thought and argument, to scientifically examining evidence and to identifying policies that will make societies function better.”

More, Friedman used economics to agitate for a smarter world. At a White House lunch in 2002, he reportedly told George Bush in no uncertain terms that his unfunded tax cuts were economically imbecilic — at a time when most Republicans were genuflecting before the tax cuts like they were religious icons.

Alone among Republicans, he championed the legalization of drugs on principle. He did not just write theoretical essays on the topic, he jumped in and fought for them. Check this 1990 letter to Bill Bennett:

“You are not mistaken in believing that drugs are a scourge that is devastating our society. You are not mistaken in believing that drugs are tearing asunder our social fabric, ruining the lives of many young people, and imposing heavy costs on some of the most disadvantaged among us. You are not mistaken in believing that the majority of the public share your concerns. In short, you are not mistaken in the end you seek to achieve.

“Your mistake is failing to recognize that the very measures you favor are a major source of the evils you deplore. Of course the problem is demand, but it is not only demand, it is demand that must operate through repressed and illegal channels. Illegality creates obscene profits that finance the murderous tactics of the drug lords; illegality leads to the corruption of law enforcement officials; illegality monopolizes the efforts of honest law forces so that they are starved for resources to fight the simpler crimes of robbery, theft and assault. Drugs are a tragedy for addicts. But criminalizing their use converts that tragedy into a disaster for society, for users and non-users alike. Our experience with the prohibition of drugs is a replay of our experience with the prohibition of alcoholic beverages.”

His marriage to Rose Friedman, an accomplished economist in her own right, was a deep intellectual as well as personal partnership of a sort that is uncommon today and was nearly unheard of when they married almost seven decades ago.

We have lost a wise teacher. Summers summarized it well: .

“…But beyond Milton Friedman the economist, there was Milton Friedman the public philosopher. Ask reformers in any one of the countries behind what we used to call the Iron Curtain where they learned to contemplate alternatives to communism during the closed era before the Berlin Wall fell and they will often tell you about reading Milton Friedman and realizing how different their world could be.”

Milton Friedman and I probably never voted the same way in any election. To my mind, his thinking gave too little weight to considerations of social justice and was far too cynical about the capacity of collective action to make people better off. I believe that some of the great challenges we face today, like rising inequality and global climate change, require that the free market be tempered instead of venerated. And like many economists, I have my list of areas where I believe Mr. Friedman oversimplified or was simply wrong.

Nonetheless, many of us have lost a hero – a man whose success demonstrates that great ideas convincingly advanced can change the lives of people around the world.