Milton Friedman

Lore & Background

Friedman was born in Brooklyn, New York, to Jewish immigrant parents from Carpathian Ruthenia. He graduated from Rahway High School in 1928 and earned a scholarship to Rutgers University, graduating in 1932. He chose to study economics at the University of Chicago, earning a Master of Arts degree in 1933, and later studied statistics at Columbia University. He was influenced by Jacob Viner, Frank Knight, and Henry Simons, and formed lifelong friendships with George Stigler and W. Allen Wallis.

Unable to find academic employment, Friedman worked in Washington, D.C., on New Deal programs and later for the National Bureau of Economic Research, assisting Simon Kuznets. During World War II, he advised the U.S. Treasury on wartime tax policy and helped invent the payroll withholding tax system. He introduced the permanent income hypothesis and consumption smoothing, and argued that the Great Depression was caused by a severe monetary contraction due to banking crises and poor Federal Reserve policy.

Friedman promoted monetarism, arguing for a steady, small expansion of the money supply. He theorized a natural rate of unemployment and predicted stagflation. After retiring from the University of Chicago in 1977, he advised Ronald Reagan and Margaret Thatcher. His 1962 book Capitalism and Freedom advocated volunteer military, school vouchers, and drug liberalization, among other policies.

Reader's Guide

Milton Friedman's significance lies in his role as the intellectual leader of the Chicago school of economics and his development of monetarism, which challenged Keynesian orthodoxy. His permanent income hypothesis and natural rate of unemployment became mainstream concepts. Friedman's ideas on monetary policy, taxation, and deregulation influenced government policies in the 1980s, and his monetary theory affected the Federal Reserve's response to the 2008 financial crisis. A 2011 survey ranked him the second-most popular economist of the 20th century after John Maynard Keynes. Upon his death, The Economist described him as 'the most influential economist of the second half of the 20th century ... possibly of all of it.' His works have had global influence, including in former communist states.

Did You Know?

• Friedman was the first in his family to attend a university.
• He helped invent the payroll withholding tax system while advising the U.S. Treasury during World War II.
• His book A Monetary History of the United States, 1867–1960 argued that the Great Depression was caused by a severe monetary contraction.
• He founded the Friedman Foundation for Educational Choice, later renamed EdChoice, to support school choice.

Notable Quotes (Wikiquote)

"Milton Friedman (31 July 1912 – 16 November 2006) was an American economist noted for his support for free markets and a reduction in the size of government. In 1976 he was awarded a Nobel Prize in Economics." — Milton Friedman "I have no right to coerce someone else, because I cannot be sure that I'm right and he is wrong." — Milton Friedman "Say 'No' to Intolerance", Liberty magazine, vol. 4, no. 6, (July 1991) pp. 17-20." — Milton Friedman "Make politics an avocation, not a vocation." — Milton Friedman