It's Milton Friedman's World: We're Just Living Freely in It
The economist who advocated "Power to the People"
When celebrated public intellectuals of Nobel-prize-winning heft die, the newspapers are packed with encomiums on their brilliance and importance. It isn't always obvious, though, where the rubber of their lofty scholarly words hits the road of our day-to-day life. With Dr. Milton Friedman, winner of the 1976 Nobel in economics, most celebrated figure of the Chicago School of economics, author of the 1980 nonfiction bestseller Free to Choose, seeing his (invisible?) hand in the workaday world isn't all that hard.
If you or your children have not been forced into the armed services in the past three decades—which you haven't—thank Friedman. He was the intellectual sparkplug for the Nixon-era Gates Commission that convinced Nixon a volunteer army is both workable and the right thing to do.
If the dollars in your pocket are worth somewhere close to what they were a year ago, not 8 percent or more less, thank Dr. Friedman. His work as an economist convinced Federal Reserve chiefs, after the grim late 1970s dominated by stagflation (high inflation combined with recession), that we should strive to keep money supply growth low to restrain both inflation and unemployment. While the world's central banks haven't followed every technical detail of his plan, the old and destructive belief that government can tax and spend and inflate our way to prosperity is gone, and Friedman is why.
Friedman's image may have been square—economics professor, PBS TV show host, advisor to Republican politicians from Goldwater to Nixon to Reagan. But what he stood for is as groovy as can be: Power to the people, man.
At the heart of all of Friedman's scholarship and activism was the idea in the title of his famous book and TV series: that all of us should be free to choose. From who should have to serve in the military to who should decide what a dollar is worth, Friedman has been 100 percent for taking power out of the hands of elites and government and handing it to the decentralized decisionmaking of everyone, everywhere.
Who should decide where our kids go to school, and who should control the money used to pay for it? We should. Thus, Friedman's advocacy for decades on behalf of school choice and education vouchers, which became his main policy focus during his later years through the efforts of the Milton and Rose Friedman Foundation.
Who should decide what we can eat and how we enjoy ourselves? We should. Thus Friedman's controversial arguments for ending the war on drugs.
Who should decide how we get to spend our money? We should. Thus, Friedman's writing and speaking on behalf of tax and spending cuts anywhere and everywhere. The day he won the Nobel in 1976, he was schlepping himself around to a talk in Detroit on behalf of a Michigan state level amendment to limit state government spending. He did this sort of thing tirelessly for over 50 years, agitating for liberty and choice in venues both exalted and everyday, never thinking that any audience was too small or unimportant. His belief in the propriety and effectiveness of personal control over our own resources always energized his plumping for Social Security reform to give us more personal control over our retirement savings.
Who should decide the value of currencies in relation to other currencies—national governments, or the decentralized decisionmaking of all economic players? Friedman of course believed the latter, even when the idea was considered outrageous, writing scholarly defenses of it from the 1950s until 1973 when floating exchange rates, to a large degree thanks to his explaining their benefits, became a reality. This is yet another constitutive part of the world we live in that Friedman can be credited with. ("Floating exchange rates" means applying the basic free-market logic about price controls to international currencies—that governments should not attempt to dictate what their currencies sell for in terms of other currencies, but allow the price to be set freely by market forces.)
When it came to how government should best try to help citizens in need, Friedman made some concessions that upset the more hardcore doctrinaire among his libertarian comrades, from Henry Hazlitt to Murray Rothbard. He called, not for a complete end to any government income floor, but for a "negative income tax," an idea that helped influence the earned income tax credit. But even here, Friedman was, within the limits of political reality as he saw it, fighting for individual autonomy, saying "no" to countless social services and targeted, managed giveaways that treated the poor as if other people knew what was best for them. The negative income tax just gave the needy money and let them decide for themselves what was best for them and how to craft their lives.
Friedman won vital policy victories on the draft and the money supply. He was less successful (though no less right) on his other efforts to empower the individual. This is to be expected—he was a radical, and radicals aren't going to win all their fights. (He once referred to one of his heroes, Adam Smith, as "a radical and a revolutionary in his time—just as those of us who preach laissez-faire are in our times.") But through a combination of his piercing intelligence, his academic successes, and his unparalleled ability to explain complicated ideas in understandable terms (honed during his nearly two decades writing a column on economics forNewsweek, from 1966-84, and coming to fruition with Free to Choose), he was the most successful purely intellectual radical of the 20th century.
We live in Friedman's World, to a delightful degree—though of course not entirely. Even beyond his specific policy victories, on the meta-level we have seen in his lifetime communism, the antithesis of Friedman's economic and social beliefs, die (and smuggled, clandestine copies of his writings helped inspire and educate dissidents in the former Soviet bloc).
But the whole point of his intellectual and polemical project is that this world belongs to all of us. And it should thus be shaped by our free choices, in economics and our private lives. Even the highly technical economics work of which he was most proud—his work on the consumption function and his "permanent income hypothesis"--had important implications about why we should be free from government economic management. His theorizing on that topic, which has held up well in the field, implied that government fiscal manipulations for short-term macroeconomic benefit aren't apt to work, since people make their consumption and saving decisions not based on their immediate income but on a conception of a long-term "permanent income."
It is for Friedman's insistence that we should be able to run our own lives free of busybody manipulations in the economic and personal realms that he was so well loved (and, alas, in some circles so passionately hated)--the love manifest in the many personal tributes from his comrades in the free-market fight. He tended to be personally respectful and mindful of them all, great and small. We recognized that everything Friedman did was based on belief in us—all of us—and an urgently felt desire that we should be as free as it is possible for us to be. As the old song goes, Milton Friedman truly lived to make men free.
I have had, luckily for me, my own Friedman Encounters, thought I don't have any particularly colorful tales to tell of them. He was a helpful, generous, and methodical interview subject, unfailingly gracious and helpful for the three hours over two winter afternoons we spent together in his elegant San Francisco home way back in 1995 for my forthcoming book Radicals for Capitalism (portions of that interview were printed in Reason in our June 1995 issue), all the way to the hour on the phone he gave me on Reason's behalf late this August on the Federal Reserve, which was used in our November issue interview roundtable. He was unfailingly willing to give his time and his sharp intellect in the furtherance of spreading his ideas, from start to finish, to Reason or in any forum.
He was an economist of the Chicago school, and thus believed in empiricism: he always argued, methodologically, that theories should be judged, as per his famous 1953 essay "The Methodology of Positive Economics," on their ability to predict, not on whether their assumptions seemed to be true. He thought theories should be tested always against reality. Despite that fact that most of his political writings were based in this sort of pragmatic argument based on observable results, he believed ultimately, as he said in a 1990 speech in Jerusalem, that "the free market's main justification is, in my opinion, its moral strength, not its superior efficiency, though that is now proven."
Milton Friedman was never a politician. He could never make things happen. He could only explain why they should, and let us decide. But still, to a large degree because of him, the world is a different, and better, place.
When his first major work on politics, Capitalism and Freedom, came out in 1962, many of the best and brightest among us still believed that the controlled economies of the Soviet bloc might indeed someday bury us, and that government fiscal manipulations a la Keynes were the key to a lasting and unmarred prosperity—mostly by fooling people into misunderstanding what was really going on in the economy by the fake bursts of prosperity that inflation can create in the short term (but never, as Friedman helped prove, in the long term). Friedman foresaw the 70s stagflation crisis, and his monetarist ideas helped guide the Federal Reserve policy that have mostly curbed inflation since the early 1980s. With nothing but persuasion on his side, he's steered the ship of the world in a better direction.
To the extent that we choose to heed Friedman in the future, we'll have more even choices we can make for ourselves--and be richer for it.
Senior editor Brian Doherty (Bdoherty@reason.com) is author of This is Burning Man and the forthcoming Radicals for Capitalism.
