The Little Giant: Milton Friedman, 1912-2006

Posted: Nov 27, 2006 12:01 AM
The Little Giant: Milton Friedman, 1912-2006

A confession: It took me quite a while to see anything much to this Milton Friedman fellow. Back in 1980, his capitalist manifesto, "Free to Choose," struck me as only a slightly updated and upgraded version of Barry Goldwater's "Conscience of a Conservative," a popular political tract the senator had put his name to 20 years before. Both little books seemed so simple, their prose so smooth and unchallenging, that I suspected they'd been ghostwritten by some slick pro. (Goldwater's was.)

What I'd failed to understand was the distinction between simplistic and simple. Dr. Friedman's ideas were the distillation of years of economic scholarship before and during his reign at the University of Chicago. What would become known as the Chicago School of economics would first rival and then surpass the all too conventional Keynesian wisdom that Milton Friedman would dethrone. His popular writing was so clear and simple because it was based on so much research.

While more conventional economists were proposing future programs, young Friedman realized he was staring at a great experiment that had already been conducted-the past-and he set out to organize and present its results. By the time he finished, he not only had toppled John Maynard Keynes, who was seldom if ever simple, but replaced him as the guiding intellectual force of modern economics.

Milton Friedman did it by discovering not new but old ideas and old thinkers. For example, the importance of money to economics (talk about something too obvious for the sophisticates to grasp!) and good old Adam Smith. The key to Milton Friedman's genius as an economist-well, one of the keys-was that he was also an historian.

Dr. Friedman's "Monetary History of the United States, 1867-1960," which he co-wrote with Anna Jacobson Schwartz in 1963, was not exactly a rip-roaring best-seller. But looking back, which Milton Friedman was very good at it, that study would be the basis of his monetarist theories about the future, and they proved uncannily accurate. They allowed him to see the stagflation of the Nixon and Carter years coming long before it even had a name, and to prescribe a remedy: a stable money supply and a free market.

The fashionable experts then in charge of the American economy (and who were making a muck of it) dismissed Milton Friedman's ideas as hopelessly antiquated. Imagine: Someone who still believed in the free market in the Age of Keynes!

As Richard Nixon commented at the time, in one of his many misapprehensions, we're all Keynesians now. Mr. Nixon certainly was, and it showed in his inability to get a grip on economic reality. His idea of an economic remedy was to order wage-and-price controls, which proved about as effective as using leeches on a dead man.

Not until Ronald Reagan came along were Milton Friedman's ideas put into practice. In the rosy afterglow of the long-running economic boom that the Reagan tax cuts launched, it is easy to forget what a shock Dr. Friedman's ideas produced when the Fed first put them into effect under Paul Volcker and, later, by the now sainted Alan Greenspan. The immediate result of Dr. Friedman's ideas was the Reagan Recession and the near-hysterical reaction to it.

It took courage to stick with Dr. Friedman's ideas, but courage was just what Ronald Reagan brought to the presidency, and it eventually paid off. Eventually can be a long, cruel time when the intellectual elite are constantly warning that these new ideas, or rather old ones, will never work. When they did, no one was more surprised than conventional economists. Some were so surprised they could never admit it. John Kenneth Galbraith, for example, would never wholly renounce his Keynesian faith.

Doctors Friedman and Galbraith were personal friends despite their profoundly different ideas. These two boon companions would on occasion stage one of their Mutt-and-Jeff debates. The 6-foot-8 Dr. Galbraith would tower over the 5-foot-3 Dr. Friedman until the debate started. Then it would soon become clear who towered over whom. In the world of economists, Milton Friedman proved to be the little giant.

When he began propounding his old/new ideas, established economists either ignored Dr. Friedman or denounced him. Here is Lawrence Summers, the former secretary of the Treasury in the Clinton administration, but a fair and candid man nevertheless, on the subject of Milton Friedman: "He was the devil figure of my youth. Only with time have I come to have large amounts of grudging respect. And with time, increasingly ungrudging respect." Much like the rest of the world.

By the time of his death at 94, Milton Friedman bestrode the world of economics the way Keynes had before him. The next great figure in that field will have to displace Friedman as he displaced Keynes. It's hard to imagine such a thing ever happening, imprisoned as each generation is in its own time. But whatever Milton Friedman's reputation in the years ahead, it will always be tied to the one great idea and ideal to which he devoted a vigorous mind, an indomitable spirit, and a most civil manner: the freedom of man.