Milton Friedman was an American economist and statistician best known for his strong advocacy of free-market capitalism. A rare thinker who possessed both academic intellect and common sense, Friedman was the main proponent of the monetarist school of economics and later went on to become an economic advisor to President Ronald Reagan.
Friedman is remembered among Conservatives today for his opposition to Keynesian economics. During a time when most economists believed that inflammatory government policies could reduce unemployment, Friedman dissented, asserting that “fine tuning” the economy would only make the problem of “stagflation”—high inflation combined with unemployment and stagnant demand in a country’s economy, even worse. Friedman frequently spoke about how there is a close and stable association between inflation and the money supply, and that inflation could be avoided with proper regulation of the monetary base’s growth rate.
Although Friedman considered himself a liberal in the original sense of the word—someone who believes in the liberty of the individual, free of government intrusions—he is regarded by many today as a Conservative icon. Rather than pushing policymakers to conserve and expand the welfare state, Friedman proposed changes in policy and institutions ranging from public schools to the Federal Reserve. Friedman believed that an unfettered capitalist economy would produce ultimate prosperity and that it was crucial to cease government intervention in currency markets.
Friedman was also a leader of the Chicago School of Economics and made the University of Chicago the country’s leading center for conservative economics.
In the 1960’s during rising waves of communism and socialism, Friedman wrote about the dangers of these collectivist ideologies, warning Americans of “the submission of the individual to the state”. In 1962, he published Capitalism and Freedom, his most famous work, as a response to the growing scope of the US federal government under Presidents Eisenhower and Kennedy.
July 31st, 2017 would have been Milton Friedman’s 105th birthday. Although he passed away in 2006, Friedman’s ideas are still relevant today, and looking to his body of work can provide us with much-needed economic insight. Here are three of the biggest lessons we can take from Friedman’s work:
- Judge policies by their results, not their intentions.
Milton Friedman’s solutions were always practical and grounded in reality. Friedman famously opposed raising the minimum wage—not out of contempt for the poor, but because he felt it actually harmed young, less-educated, low-skilled workers. Friedman’s approach to economic “fixes” shows a valuable lesson: we should be judging the success of a policy by the outcome rather than the intent behind it.
- Welfare is failing the poor.
Friedman pointed out how much welfare spending was lost to the “leaky bucket” phenomenon, in which social spending gets absorbed by the government providing it rather than its intended recipients. “Suppose I divide the total amount of money spent on these programs by the number of people labeled poor. If that money were really going to the poor, they’d be among the rich”.
- Big government is the problem.
Although liberal pundits often argue that the government is spending too little, the reality is that the government spends too much—this being the root of many economic issues in the country. “The major social problems of the United States—deteriorating education, lawlessness and crime, homelessness, the collapse of family values, the crisis in medical care—have been produced by the well-intended actions of government”, Friedman once wrote, adding “Instead of Lincoln’s government ‘of the people, by the people, for the people’, we now have a government of the people, by the bureaucrats, for the bureaucrats”.
One of the greatest economists of our generation, AMAC remembers and celebrates Milton Friedman and all he has contributed to policy, monetarist theory, and the conservative economic principles that America was built upon.
“Nobody spends somebody else’s money as carefully as he spends his own. Nobody uses somebody else’s resources as carefully as he uses his own. So if you want efficiency and effectiveness, if you want knowledge to be properly utilized, you have to do it through the means of private property.”