I depart from the normally local focus of this Blog to note and mourn the passing and celebrate the career of one of the great minds of the 20th Century, Milton Friedman. By sheer force of intellect, this Nobel Prize winning economist effected more fundamental change in the course of secular history than anyone I can think of who never held significant public office.
He won the Nobel for undermining the Keynesian macroeconomics that had guided policy until then. Friedman disassembled a theory called the Phillips Curve, holding that inflation was an inverse function of unemployment. Friedman held inflation to result from expansionist monetary policy. Since his theory correctly predicted, among other things, the stagflation of the 70s, which Nixon compounded with Keynesian prescriptions, the Phillips Curve is now an historical footnote to the “dismal science”, and restrained monetary policy is axiomatic in any healthy economy.
Friedman's book, “Capitalism and Freedom”, now in its fortieth anniversary printing, put forth a host of thoroughly goofy ideas. They included an all volunteer army, floating currency exchange rates, lower barriers to international trade, private accounts for retirement, school vouchers and other unthinkable proposals. Friedman laid the groundwork for Paul Volcker and Alan Greenspan to build on and give us the healthiest 25 years economy in American history. Anyone holding today's economy to be ruinous has to have forgotten the twin killers of 18% prime interest rate combined with double digit unemployment of the 70s.
In one of the last interviews I saw with him, Friedman was asked about his best and worst calls. He unhesitatingly named as his worst product payroll withholding of income tax, in that it hid from less astute taxpayers the real cost of government. He named as his proudest, the progress he had made towards making school vouchers acceptable. In his last few years, he dedicated nearly all his effort to expanding the pockets of success on vouchers.
The world of economics had not been so utterly turned upside down since the fever dreams of Karl Marx gained acceptance. A fundamental difference is that Marxism never controlled except by force of arms under totalitarian dictatorship and has mostly collapsed of its own weight of error even then. Friedman, who shunned political power his whole life “ruled” only by being consistently and demonstrably right.
In the heyday of this debate, many collectivist academics sought to belittle Friedman by referring to him as “Uncle Milty”, comparing him, one supposes, to the goofy comic Milton Berle. This actually appealed to Friedman's sense of humor, and became an inside joke and term of affection among his followers. Always a gentleman, never one to resort to the personal ad hominem, this great man won his stature by sheer force of intellect. Godspeed, Uncle Milty.