Milton Friedman died today. A brilliant man and a pioneer in liberty and free market capitalism.

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Economist Milton Friedman Dies at 94 By JUSTIN M. NORTON Associated Press Writer SAN FRANCISCO — Milton Friedman, a Nobel Prize-winning economist who championed individual freedom, influenced the economic policies of three presidents and befriended world leaders, died Thursday. He was 94. Friedman died in San Francisco, said Robert Fanger, a spokesman for the Milton and Rose D. Friedman Foundation in Indianapolis. He did not know the cause of death. (enlarge photo) Dr. Milton Friedman who won the 1976 Nobel Prize for economics poses for a photo in a 1977 file photo. Friedman has died at age 94, a spokesman for the Milton & D. Rose Friedman foundation says. (AP Photo/Eddie Adams, File) "Milton Friedman revived the economics of liberty when it had been all but forgotten," said former British Prime Minister Margaret Thatcher, one of the politicians and colleagues who lauded Friedman on Thursday. "He was an intellectual freedom fighter. Never was there a less dismal practitioner of a dismal science." In numerous books, a Newsweek magazine column and a PBS show, Friedman championed individual freedom in economics and politics. The longtime University of Chicago professor pioneered a school of thought that became known as the Chicago school of economics. His work is still widely influential in the business world, academia and politics. Friedman's theory of monetarism was adopted in part by the Nixon, Ford and Reagan administrations. It opposed the traditional Keynesian economics that had dominated U.S. policy since the New Deal. He was a member of Reagan's Economic Policy Advisory Board. His work in consumption analysis, monetary history and stabilization policy earned him the Nobel Prize in economics in 1976. "He has used a brilliant mind to advance a moral vision — the vision of a society where men and women are free, free to choose, but where government is not as free to override their decisions," President Bush said in 2002. "That vision has changed America, and it is changing the world." Friedman favored a policy of steady, moderate growth in the money supply, opposed wage and price controls and criticized the Federal Reserve when it tried to fine-tune the economy. A believer in the principles of 18th century economist Adam Smith, he consistently argued that individual freedom should rule economic policy. Friedman saw his theories attacked by many traditional economists such as Harvard's John Kenneth Galbraith. "He, more than any other person, has changed the composition and ideology of the economists' profession," said Paul Samuelson, a 91-year-old professor emeritus of economics at the Massachusetts Institute of Technology who was a contemporary liberal foil to Friedman's conservatism. In an essay titled "Is Capitalism Humane?" Friedman said that "a set of social institutions that stresses individual responsibility, that treats the individual ... as responsible for and to himself, will lead to a higher and more desirable moral climate." Friedman argued that government should allow the free market to operate to solve inflation and other economic problems. But he also urged adoption of a "negative income tax" in which people who earn less than a certain amount would get money back from national coffers. "Milton was one of the great thinkers and economists of the 20th century, and when I was first exposed to his powerful writings about money, free markets and individual freedom, it was like getting hit by a thunderbolt," Governor Arnold Schwarzenegger said in a statement. Friedman lived to see free market reforms spread in the former communist world and Latin America, but played down his own influence. "I hope what I wrote contributed to that, but it was not the moving force," Friedman told The New York Sun in March 2006. "People like myself, what we did was keep these ideas open until the time came when they could be accepted." Born in New York City on July 31, 1912, Friedman began developing his economic theories during the Great Depression when President Franklin D. Roosevelt based his New Deal on the ideas of Britain's John Maynard Keynes, the most influential economist of the time. Keynes argued that the government should intervene in economic affairs to avoid depressions by increasing spending and controlling interest rates. Friedman graduated from Rutgers University in 1932 and earned his master's degree the following year at the University of Chicago. After working for the National Resources Commission in Washington from 1935 to 1937, he served on the staff of the National Bureau of Economics Research in New York from 1937 to 1945 and received his doctorate from Columbia University in 1946. After World War II, he taught at the University of Minnesota, then returned to the University of Chicago. He became a senior fellow at the Hoover Institution at Stanford University in 1977. Friedman married Rose Director in 1938. They had two children, Janet and David, and Rose was co-author of some of his books. Among his most famous books were: "Price Theory," 1962 (with Rose Friedman); "Capitalism and Freedom," 1962 (with Anna J. Schwartz); "An Economist's Protest," 1972 and "There Is No Such Thing As a Free Lunch," 1975. Friedman wrote columns for Newsweek from 1966 to 1983 and was one of the few economists to bridge the gap between academia and the public. He supported Barry Goldwater in 1964 and Richard Nixon in 1968 and served on Nixon's commission for an All-Volunteer Army in 1969 and 1970. "Among economic scholars, Milton Friedman had no peer," Federal Reserve Chairman Ben Bernanke said. "The direct and indirect influences of his thinking on contemporary monetary economics would be difficult to overstate." The Friedmans started the foundation that bears their names in 1996 to promote and advocate parental choice in education. Ed Crane, president of the Cato Institute, a think tank that promotes free market concepts, said that "ultimately, what Milton believed in was human liberty and he took great joy in trying to promote that concept." Friedman is survived by his wife and two children. ___ Associated Press writers Martin Crutsinger in Washington and Mark Jewell in Boston contributed to this report.

No doubting the man's influence on economic policy (particularly in the US and UK under Reagan and Thatcher) but I'm not sure we can say, with hindsight, that his monetarist theories were particularly successful in practice. They led both countries into deep recession, which were only alleviated once his monetarist ideals were, in part, abandoned.

Anyway, perhaps this isn't the time. RIP.

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Originally posted by Renegade Anyway, perhaps this isn't the time. RIP.

its exactly the right time.

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Capitalist pig.

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Perhaps it's not the theories that are to blame, rather the ineptitude of those who tried to implement them into practice?

people say the same thing about communism...

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Originally posted by biznology people say the same thing about communism...

Maybe, but I can vehemently disagree with Communism from a philosophical and idealogical standpoint while the advocations and theories of Friedman speak to my soul.

Rip

Here's another article describing his importance

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An enduring legacy Nov 17th 2006 From Economist.com One of the most influential economists of the 20th century has died MILTON FRIEDMAN won the John Bates Clark Medal, awarded to an outstanding American economist under the age of 40, in 1951. Many consider it harder to win than a Nobel Prize. One of the measures of his greatness is that when he got it, he still had not done any of the work for which he would become most famous. Still to come were the permanent-income hypothesis, his groundbreaking “A Monetary History of the United States” (co-written with Anna Schwartz) and the proposal of a natural rate of unemployment. These works revolutionised the conduct of central banks around the world. But to non-economists Mr Friedman’s great achievement is not his challenge to Keynesian demand management but the popular writings that challenged a consensus favouring ever-greater state intervention in the economy. This work, too, came long after his peers had recognised him as a leading light. At the time of his death on Thursday November 16th, the 94-year-old economist was still working to spread his ideas about free markets, this time through a documentary for American public television. It is another mark of his greatness that so many of the ideas that seemed crazy when he came up with them—from blaming the Depression on bad central-bank policy, to school vouchers and the volunteer army—have gained mainstream acceptance. But Mr Friedman always recognised that his success was fragile; free markets and stable money have lots of enemies, particularly among politicians. He has left us a staggering legacy of economic theory and public-policy prescriptions—but is that inheritance growing or shrinking? Certainly, on the monetary side, Mr Friedman remains a giant. His critics point out that central bankers no longer try to target the money supply directly, but to those who remember the inflationary 1970s it is perhaps more important that futile attempt to push unemployment to zero no longer trigger inflationary spirals. In developed countries politicians may talk like Keynesians, but they behave like monetarists, looking to the central bank, rather than fiscal policy, to stave off inflation and recession. And what of his other crusades? His proposal of a volunteer military force, once rejected as impractical, is now so deeply ingrained in American culture that politicians who proposed bringing back the draft for the war in Iraq were dismissed as crackpots or worse. His quest to replace anti-poverty programmes with a “negative income tax” that would give cash to the working poor has come to fruition in the form of the earned-income tax credit. This is now the favoured policy prescription on both left and right for boosting incomes at the bottom. School vouchers, too, are making progress, albeit slowly. And where they are not, the idea that students should be able to choose between public schools is nonetheless bringing competition to America’s educational system. Even outside his homeland, his ideas continue to make inroads. He was pilloried for briefly advising the Pinochet regime in Chile, where his students, “the Chicago boys”, ran economic policy. Thirty years later that oppressive government is gone but his free-market reforms have made Chile the economic star of Latin America. The World Bank and IMF continue to push for stable financial systems and market-based reforms around the world. Proposals like the negative income tax were forerunners of the consensus growing in Europe (and elsewhere) that governments should provide safety nets through taxation and distribution of cash benefits rather than heavy regulation of markets. But despite Mr Friedman’s work, thickets of regulation thrive in most countries, particularly his homeland. Nor has he succeeded in trimming back the state, which is still growing in many places, including America. Ironically, another legacy may be to blame: income-tax withholding, which he helped to invent during the second world war. The fact that the tax is deducted from most peoples’ pay before it reaches their pockets is perhaps the main reasons why the state has been able to grow so large. Mr Friedman deeply regretted this contribution to economic science—but like his other inventions, it will long outlive him.

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Originally posted by Shakka Maybe, but I can vehemently disagree with Communism from a philosophical and idealogical standpoint while the advocations and theories of Friedman speak to my soul.

No need.
The discrepancy between the differing sides of the Berlin Wall speaks volumes.

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The grey rain-curtain of this world rolls back, and all change to silver glass...and then you see it...
...white shores...and beyond...the far green country under a swift sunrise."

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Originally posted by Shakka Perhaps it's not the theories that are to blame, rather the ineptitude of those who tried to implement them into practice?

Perhaps, but I don't think the facts would support that.

In both the UK and US monetary supplies were tightened under very rigid controls during the early 1980s to bring inflation down (the very basis of monetarist theory) and both lapsed into severe recessions. The US recovered once the Federal Reserve began relaxing these controls (against the advice of monetarists) and Regan began running unprecedented budget deficits (against the wishes of the neo-classicalists). The UK, under Thatcher, implemented neither of these policy changes, stuck with the dogma of M3 monetarist theory and experienced slow growth and high unemployment (double figures) for most of the decade.

The UK had other economic problems admittedly, and Regan abandoned strict monetarist theory very quickly once it became a political liability, so I suppose the case could be made that it wasn't instituted properly in either case, but - as I see it (as an unapologetic Keynesian) - monetarism had its chance and failed the empirical test miserably.

I had to give a talk on this topic (economic policy in the US and the UK in the 1980s) a couple of months ago, so I'd be happy to go into greater detail if anyone is interested.

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I'd certainly say there's another discussion to be had about proper implementation. There was a good repost of a Friedman piece in Friday's WSJ. I too am among those who believe that the government that governs least governs best, and this study provides some interesting conclusions about monetary policy (and no question how and to what extent it was it utilized).

Why Money Matters

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Why Money Matters By MILTON FRIEDMAN November 17, 2006; Page A20 The third of three episodes in a major natural experiment in monetary policy that started more than 80 years ago is just now coming to an end. The experiment consists in observing the effect on the economy and the stock market of the monetary policies followed during, and after, three very similar periods of rapid economic growth in response to rapid technological change: to wit, the booms of the 1920s in the U.S., the '80s in Japan, and the '90s in the U.S. The prosperous '20s in the U.S. were followed by the most severe economic contraction in its history. In our "Monetary History" (1963), Anna Schwartz and I attributed the severity of the contraction to a monetary policy that permitted the quantity of money to decline by one-third from 1929 to 1933. Since 1963, two episodes have occurred that are almost mirror images of the U.S. economy in the '20s: the '80s in Japan, and the '90s in the U.S. All three episodes were marked by a long period of rapid economic growth, sparked by rapid technological change and the emergence of new industries, and accompanied by a stock market boom that terminated in a crash. Monetary policy played a role in these booms, but only a supporting role. Technological change appears to have been the major player. [Friedman] These three episodes provide the equivalent of a controlled experiment to test our hypothesis about what we termed the Great Contraction. In this experiment, the quantity of money is the counterpart of the experimenter's input. The performance of the economy and the level of the stock market are the counterpart of the experimenter's output, i.e., the variables whose relation to input the experimenter is seeking to determine. The three boom episodes all occurred in developed private enterprise market economies, involved in international finance and trade, and with similar monetary systems, including a central bank with power to control the quantity of money. This is the counterpart of the controlled conditions of the experimenter's laboratory. The Money Supply: In addition, history has provided a close counterpart to the kind of variation in input that our hypothetical experimenter might have deliberately chosen. As Fig. 1 shows, monetary policy, as measured by the behavior of the quantity of money, was very similar in the three boom periods, and very different in the three post boom periods, with settings that might be described as low, medium, high. To measure the quantity of money, I use M2 in the U.S. and the conceptually equivalent M2 plus certificates of deposit in Japan. To express the data for the two countries and the widely separated periods in comparable units, I use as an index of the money stock the ratio of the quantity of money to its average value for the six years prior to the cycle peak. The peak quarter of the relevant business cycle is the third quarter of 1929 (29.3) for the earlier U.S. episode; the first quarter of 1992 (92.1) for Japan; and the first quarter of 2001 (01.1) for the second U.S. episode (see Table 1). Finally, the data are plotted to align the dates at the cycle peak. Fig. 1 shows a striking contrast between the period before the cycle peak and the period after the cycle peak. There are some differences before the peak -- money growth is slowest on the average for the earlier U.S. episode, fastest for Japan -- but the differences are small and there is reasonably steady money growth in all three episodes. The contrast with the period after the cycle peak could hardly be greater. Money supply declines sharply after the cycle peak in the first episode, goes from stable to rising mildly in the second, and rises steadily and sharply in the third. Our hypothetical experimenter planned his experiment well. The GDP: The results of the third episode of this natural experiment are now all in. Fig. 2 shows how GDP in nominal terms (dollars or yen in current prices) behaved during the boom and post boom periods. I use nominal GDP rather than real GDP because M2 is also a nominal magnitude. How changes in nominal GDP are divided between prices and output is an important question but one that is not directly relevant to this experiment. One further preliminary comment: I believe the erratic behavior of nominal GNP during the '20s and '30s is largely a statistical artifact. The data for that period are scarce and of poor quality. As in Fig. 1, there is a striking contrast between the boom and the post-boom periods: roughly similar growth during the booms, widely variable growth during the post-boom. Both before and after the cycle peak, nominal GDP growth paralleled monetary growth. During the boom, money and nominal GDP grew most rapidly in Japan, most slowly in the first U.S. episode, and at an intermediate rate in the second U.S. episode. Table 2 shows the ratio of the money stock at the cycle peak to its value six years earlier (the initial date in the figures) and the corresponding ratio for GDP. In the first two rows of the table, the ratios are highest for Japan, lowest for the U.S. 1920s. [Friedman] After the cycle peak, money fell sharply in the first episode and so did nominal GDP; money growth stagnated in the second episode and so did GDP; money grew at a rapid rate in the third episode and, after a brief lag (corresponding to the mild 2001 recession) so did GDP. Table 3 shows the ratio of the money stock at the terminal date plotted to its value at the cyclical peak and the corresponding ratio for GDP. Both ratios are decidedly lowest for the U.S. 1920s, and decidedly highest for the U.S. 1990s. The Stock Market: The peak of the stock market, as measured by S&P's index, coincided with the cycle peak in the first episode, both occurring in the third quarter of 1929 (29.3). However, that was not the case in the later episodes. In Japan, stock prices as measured by the Nikkei peaked in the fourth quarter of 1989 (89.4), nine quarters before the cycle peak. In the second U.S. episode, stock prices as measured by S&P 500 peaked in the third quarter of 2000 (00.3), two quarters prior to the cycle peak. Accordingly, Fig. 3 plots the data to align the series at the stock market peak. The near identity of the three stock market series during the boom is truly remarkable. Yet even the minor deviations that exist reflect to some extent the differences in monetary growth, as Table 2 makes clear. Money growth was highest in Japan, and the Nikkei shows the largest rise in the stock market. The other two do not conform: Money rose more in the '90s than in the '20s, while stock prices rose slightly less, as shown by the ratio of peak to initial value in Table 2. Of more interest for our purpose is what happened after the peak. For a year after, the three stock-price series fell in tandem, responding to the inner dynamics of a collapsing bubble. Then, the differences in monetary policy began to have an effect. Beginning in late 1930, the S&P index started falling away from the others under the influence of a collapsing money stock. For another year and a half, the other two indexes move in tandem. Then the much more expansive policy of the Fed in the '90s than of the Bank of Japan in the '80s takes effect and pulls the S&P 500 away from the Nikkei, which stabilizes in response to the passive monetary policy of the Bank of Japan (as shown by Table 3). The results of this natural experiment are clear, at least for major ups and downs: What happens to the quantity of money has a determinative effect on what happens to national income and to stock prices. The results strongly support Anna Schwartz's and my 1963 conjecture about the role of monetary policy in the Great Contraction. They also support the view that monetary policy deserves much credit for the mildness of the recession that followed the collapse of the U.S. boom in late 2000. Mr. Friedman, who died yesterday, was the 1976 Nobel Laureate in economics. He was a senior research fellow at the Hoover Institution and professor emeritus at the University of Chicago.

Heh its great to see a TA post this. I thought most TAs would have no clue who this man was.

Anyway as a recent MBA I must also say...RIP. From Micro to macro...from business and government to mortgage backed securitied & structured debt...through all the classwork we MBAs must give our repect to all the great economists who have moved on even if we might disagree with them