Milton Friedman’s Century

Though standing around five feet tall, Milton Friedman was a giant among economists in the 20th century. Arguably only John Maynard Keynes walked as easily in the halls of power, academia, newsrooms, and public-speaking venues. Friedman, throughout his career, was recognized as an elite economic scientist, an unusually astute policy analyst, and a prized op-ed writer. He was a highly in-demand public speaker who was as comfortable on popular afternoon TV shows such as The Phil Donahue Show as he was in the classroom at the University of Chicago.

Friedman earned the highest recognitions an economist can receive: the John Bates Clark Medal, the presidency of the American Economic Association, and the Nobel Prize in Economic Sciences. He was also a best-selling author, a popular columnist for Newsweek, a frequent contributor to the Wall Street Journal, and a recipient of the Presidential Medal of Freedom. On December 19, 1969, Friedman’s face graced the cover of Time magazine. When he spoke, his peers, his students, those with political power, and the public listened. He educated an entire generation with his TV series Free to Choose, and when the accompanying book by the same title was published, it became an international best seller, translated into more than two dozen languages and selling over a million copies.

Writing his biography presents a unique challenge owing to the immensity of his professional stature and the duration of his excellence from the 1930s through the early 2000s. Jennifer Burns in Milton Friedman: The Last Conservative is every bit up to the challenge. Deeply researched and beautifully written, her book makes the personal and intellectual life of Friedman jump off the page. Burns not only captures Friedman’s life but conveys in her telling of that story the broader intellectual life of America and the global political and economic order of the 20th century. Her book gives us a history of the Chicago School and monetarism while delineating the methodological, analytical, and ideological battle lines of the economics profession. Along the way, we learn about the broader contours of the intellectual and political movements of the Cold War, among them the tension-filled coalition of free-market classical liberals and conservative anti-communist Republicans, and right-wing extremists from whom Friedman consistently strove to distance himself. And we learn too about the international spread of free-market ideas between 1980 and 2005.

Milton Friedman was born in Brooklyn, N.Y., in 1912 into a Jewish immigrant family and raised in Rahway, N.J. Burns explains that while Friedman was not religiously observant, his identity was undeniably Jewish, and he was keenly aware of the tragic reality of the Holocaust and the strong currents of antisemitism in the U.S., which created barriers to individual progress that should not have been in place. In his lifetime, though, he experienced the continuous diminution of overt discrimination against Jews and the increase of opportunities for hardworking and talented individuals. This experience fueled his optimism about the power of the market to liberate people, as well as to guide their decision-making toward the efficient utilization of scarce resources. Consider, for example, the opening clips of Free to Choose, which stressed the opportunities for a better life that immigrants experienced in the first decades of the 20th century in the U.S. The free mobility of capital and labor led to material improvement in the lives of multitudes and provided a foundation for an expansion of individual freedom.

For Friedman, this optimism was important as a bulwark against the loss of faith in the free-enterprise system that other economists of his generation suffered in the wake of the Great Depression. The experience of the Depression (both its causes and its political consequences) was the other critical factor shaping Friedman’s worldview: Economic instability was not an inherent feature of capitalism but a consequence of policy mismanagement.

Friedman earned his undergraduate degree at Rutgers, where he came under the influence of Arthur Burns, the prominent economist and future chairman of the Federal Reserve. In Burns, Friedman had not only a mentor but a significant supporter strategically placed at the pinnacle of the policy-making world.

In 1932, Friedman enrolled for graduate work at the University of Chicago. There, he was schooled by Frank Knight and Henry Simons in the analytics of the price system, the quantity theory of money, and a commitment to use economic reasoning to solve problems in the world — such as the economic downturn of the Great Depression.

Burns details the potential this group of economists saw in unleashing the competitive market system in general, and the price system in particular, to solve social problems through structuring incentives and communicating vital information by changes in relative prices, and by the profit-and-loss statements recorded by enterprises in the ordinary conduct of commerce. “Economics is the one and all-inclusive science of conduct,” Knight stressed to his students. That science applied not only to trading activity within the market but to any and all choices an individual might make in conducting his life. As Burns describes, Friedman and his cohort of fellow graduate students (most famously George Stigler) would gather in Room 7 of the economics building with Simons and Aaron Director (the brother of Friedman’s future wife, Rose) and pursue the depths and limits of economic reasoning, in the process absorbing the Knight-Simons brand of economics and political economy. The influence of Room 7 would be evident throughout Friedman’s career as an academic and public intellectual.

Jennifer Burns has unearthed many gems in Friedman’s life and career, and among the most fascinating is her discussion of the women economists who worked closely with him. Rose Director Friedman was a constant in his life, and she helped him in both acknowledged and unacknowledged ways with Capitalism and Freedom, Free to Choose, and his Newsweek columns. Rose was also Milton’s connection to the research of Dorothy Brady and Margaret Reid in the fields of consumption economics and home economics. They were the first developers of the permanent-income hypothesis, which posited that consumption patterns were formed from future expectations and consumption smoothing rather than transitory changes in income. This foundational idea cut out one of the legs of the Keynesian argument about consumption behavior and the multiplier effect of government spending on aggregate economic performance. Friedman’s long and productive collaboration with Anna Schwartz led to A Monetary History of the United States, which transformed the economic profession’s view of monetary theory and policy and had a significant impact on central bankers throughout the world. This work also undermined the Keynesian argument that monetary policy was ineffective, and instead demonstrated that sound monetary policy was a critical factor in the wealth or poverty of nations.

Burns does not shy away from highlighting blind spots from which Friedman may have suffered, which included his penchant for viewing economic-policy advice as medicine and economists as analogous to Doctors without Borders. As his fame and reputation grew, he traveled across the globe to free and oppressed nations alike. He was never a paid consultant but traveled as a visiting scholar who was granted audiences with leadership. He told the various political leaders and policy-makers he met with about the distortions caused by monetary-policy mismanagement, the burdens of overregulation, and the power of private property and the price system to ameliorate social problems and promote peace and prosperity. His optimism made him believe that sound economics could save even the sickest economic patient.