Great social thinkers almost always start out as polarizing figures, admired by some and scorned by others, until their radical challenge to how we understand the world finally prevails. Milton Friedman was a giant among modern social thinkers for at least two reasons. First, he profoundly influenced not only his own field of economics, but also the social sciences more broadly. Second, judging by historical experience, his influence on public opinion and economic policymaking improved countless lives for the better.
For decades, Friedman remained stranded in the intellectual wilderness, spurning the postwar Keynesian consensus that governments should use fiscal policy to manage aggregate demand – a view that sustained statist economic policies through the 1970’s. Indeed, in the context of his age, Friedman was a true intellectual revolutionary, combining rigorous academic research and gracefully written popular books and journalism to argue for free-market policies – and to affirm the link, defended by writers from Adam Smith to Friedrich von Hayek, between economic freedom and political liberty.
In economics, Friedman revived and developed the monetarist theory that the quantity of money in circulation is the main determinant of how economies perform. In his masterpiece A Monetary History of the United States, 1867-1960 (written with Anna Schwartz), he famously attributed recessions, including the Great Depression of the 1930’s, to a decline in the money supply. Likewise, he argued that it was an oversupply of money that caused inflation.
In the 1960’s, Friedman showed that Keynesian demand management through government spending constantly increased the money supply, accelerating wage and price growth. Together with Edmund Phelps – this year’s Nobel Prize laureate – he proved that there is no stable tradeoff between unemployment and inflation. Any attempt to use expansionary government policies to drive unemployment below a certain level, they demonstrated, would fuel inflationary expectations and undermine both economic growth and employment. That analysis both anticipated and explained the combination of rising inflation and rising unemployment of the 1970’s that came to be known as “stagflation.”
Friedman was the catalyst for a profound shift in how governments conduct economic policy. Rather than fiscal stimulation and control, the main tool of economic management nowadays is monetary policies conducted by independent central banks. Keynesian demand management was thus displaced by a new understanding – which we owe largely to Friedman – that pursuing fiscal discipline and price stability is the best guarantee of macroeconomic sustainability.
Equally important were Friedman’s contributions to influencing public opinion through works that addressed the role of the state in society. Alongside Hayek, his colleague at the University of Chicago, Friedman launched a more general intellectual assault on Keynesianism, arguing that any government permitted to regulate the economy in the name of equality posed a threat to individual liberty.
In his Newsweek columns published between 1966 and 1983, and in his books Capitalism and Freedom , Free to Choose , and The Tyranny of the Status Quo (written with his wife, Rose), Friedman offered a vision of liberty that was both appealing and achievable. Indeed, Free to Choose – later the basis of a popular television series that he hosted – was published illegally in Poland in the 1980’s, helping to inspire me, and many others, to dream of a future of freedom during the darkest years of communist rule. With remarkable clarity, his popular writings advanced a compelling political philosophy, together with concrete policy proposals. For example, he pioneered the idea of school vouchers, arguing that private competition would ensure better educational performance than government systems.
Friedman’s views made him a guiding light for economic conservatives worldwide. His influence on Margaret Thatcher’s government helped transform Britain from a post-industrial basket case dominated by class struggle into Europe’s dominant economic power. When Vietnam launched free-market reforms in the 1980’s, senior government officials pored over his writings. He also initiated the now common practice of measuring and comparing political and economic freedom across countries, helping to shape opinion in countries that are viewed as limiting freedom.
But Friedman’s consistent anti-statism also led him to embrace positions that ran afoul of many conservatives’ political sensibilities, underscoring the intellectual honesty that was the hallmark of his career. For example, his opposition to governments’ authority to prohibit or regulate human behavior extended to licensing requirements for doctors and car drivers, as well as to anti-drug laws, which he believed operated as a subsidy to organized crime. Likewise, he expended considerable effort agitating against America’s military draft.
Although he did not win all his intellectual battles, rarely can it be said with as much certainty that a man was great, and that the work that he has left behind will retain enduring influence. I live in a Poland that is now free, and I consider Milton Friedman to be one of the main intellectual architects of our liberty.
Read more from our "Milton Friedman at 100" Focal Point.