Milton Friedman stands as one of the most influential economists of the 20th century, a towering figure whose ideas reshaped economic policy, academic thought, and public discourse. Born on July 31, 1912, in Brooklyn, New York, to Jewish immigrant parents from what is now Ukraine, Friedman’s journey from humble beginnings to global intellectual prominence is a testament to both his brilliance and his unrelenting commitment to the principles of individual liberty and free markets. Over his long career, Friedman challenged prevailing economic orthodoxies, notably Keynesianism, and championed a return to classical liberal ideals that emphasized limited government, personal freedom, and the power of markets to solve societal problems. His contributions earned him the Nobel Memorial Prize in Economic Sciences in 1976, but his influence extends far beyond academia into the realms of politics, culture, and everyday life.
Early Life and Education
Friedman’s story begins in the working-class neighborhood of Brooklyn, where his parents, Sára Ethel and Jenő Saul Friedman, eked out a modest living. His father worked as a small-scale merchant and trader, while his mother took on sewing jobs to support the family. The Friedmans were part of a wave of Eastern European immigrants who arrived in the United States seeking opportunity, and their values of hard work and perseverance left a lasting imprint on young Milton. The family later moved to Rahway, New Jersey, where Friedman attended public schools and displayed an early aptitude for mathematics and analytical thinking.
Tragedy struck when Friedman’s father died during his teenage years, plunging the family into financial hardship. Despite this, Friedman excelled academically and earned a scholarship to Rutgers University, where he enrolled in 1928 at the age of 16. At Rutgers, he initially intended to become an actuary, but his exposure to economics professors Arthur Burns and Homer Jones sparked a passion for the dismal science. Burns, who would later become Chairman of the Federal Reserve, introduced Friedman to rigorous economic analysis, while Jones encouraged him to pursue graduate studies.
After graduating from Rutgers in 1932 with a dual degree in economics and mathematics, Friedman faced a challenging job market amid the Great Depression. He briefly worked as a research assistant before securing a fellowship to the University of Chicago, an institution that would become synonymous with his name. At Chicago, Friedman studied under luminaries like Frank Knight, Jacob Viner, and Henry Simons, who instilled in him a deep appreciation for price theory and the classical liberal tradition. He earned his master’s degree in 1933 and later completed his Ph.D. at Columbia University in 1946, though much of his doctoral work was shaped by his Chicago experience.
Early Career and the Great Depression
Friedman’s early career unfolded against the backdrop of the Great Depression, a period that profoundly influenced his thinking. After brief stints at the National Bureau of Economic Research (NBER) and the U.S. Treasury Department, he joined the faculty at the University of Wisconsin-Madison in 1940, only to leave after a year due to antisemitic tensions among colleagues. This experience reinforced his skepticism of institutional authority and collectivism, themes that would recur throughout his work.
During World War II, Friedman worked for the federal government, contributing to wartime tax policy and statistical analysis. While some critics later accused him of hypocrisy for collaborating with the state he so often criticized, Friedman defended these efforts as pragmatic responses to extraordinary circumstances. His wartime work on withholding taxes, for instance, laid the groundwork for the modern payroll tax system—a practical innovation he later acknowledged with mixed feelings, given his broader aversion to government overreach.
In 1946, Friedman returned to the University of Chicago as a professor, joining a faculty that was already a hotbed of economic innovation. Alongside colleagues like George Stigler and Friedrich Hayek, he helped establish the “Chicago School” of economics, a movement defined by its rigorous empirical methods, skepticism of government intervention, and faith in free markets. It was here that Friedman began to articulate the ideas that would define his legacy.
The Monetarist Revolution
Friedman’s most enduring contribution to economics is his development of monetarism, a theory that challenged the Keynesian consensus dominating mid-20th-century policy. John Maynard Keynes had argued that governments could stabilize economies through fiscal policy—adjusting taxes and spending to manage demand. Friedman, however, believed that monetary policy, specifically the control of the money supply, was the true driver of economic stability.
In his seminal 1963 book, A Monetary History of the United States, 1867-1960, co-authored with Anna Schwartz, Friedman presented a meticulous empirical analysis of money’s role in the economy. The book’s most famous chapter argues that the Great Depression was not a failure of capitalism, as Keynesians claimed, but a consequence of the Federal Reserve’s mismanagement of the money supply. By allowing the money stock to contract sharply between 1929 and 1933, Friedman contended, the Fed turned a manageable downturn into a catastrophic collapse. This reinterpretation shifted blame from market forces to central bankers and bolstered Friedman’s case for rules-based monetary policy over discretionary intervention.
Friedman’s monetarist framework rested on a simple yet powerful equation: MV = PY, where M is the money supply, V is its velocity (the rate at which money circulates), P is the price level, and Y is real output. Known as the Quantity Theory of Money, this model posits that changes in M primarily affect P (inflation) in the long run, rather than Y (real economic growth). To prevent inflation or deflation, Friedman advocated a fixed annual increase in the money supply, a proposal that stood in stark contrast to the activist policies of his Keynesian rivals.
The 1970s provided a real-world test of Friedman’s ideas. As stagflation—a combination of high inflation and stagnant growth—gripped Western economies, Keynesian models faltered. Friedman’s prediction that excessive money growth would fuel inflation without boosting output proved prescient, and policymakers began to take notice. Central banks, including the Federal Reserve under Paul Volcker, adopted tighter monetary controls in the late 1970s and early 1980s, helping to tame inflation and lending credence to monetarist principles.
Free Markets and Individual Liberty
Beyond monetarism, Friedman’s intellectual legacy is inseparable from his advocacy for free markets and limited government. In his 1962 bestseller Capitalism and Freedom, he argued that economic freedom is a prerequisite for political freedom. Drawing on Adam Smith and Friedrich Hayek, Friedman posited that competitive markets, not central planners, are the most efficient allocators of resources and protectors of individual choice. Government, he warned, often creates more problems than it solves, whether through bureaucratic inefficiency or the erosion of personal liberties.
Friedman’s policy prescriptions were as bold as they were controversial. He proposed replacing the welfare state with a negative income tax, a system that would provide cash payments to the poor while minimizing administrative overhead and preserving work incentives. He advocated abolishing the draft in favor of an all-volunteer military, a reform realized in the United States in 1973 with his intellectual support. He also called for school vouchers to introduce competition into education, a concept that remains a flashpoint in policy debates today.
Perhaps most provocatively, Friedman opposed government licensure of professions like medicine, arguing that such regulations restrict supply, raise costs, and infantilize consumers by assuming they cannot judge quality for themselves. His libertarian streak extended to drug legalization and the abolition of the Federal Reserve—positions that, while not always politically viable, underscored his commitment to principle over expediency.
Public Persona and Media Influence
Friedman was not content to remain in the ivory tower. He believed economists had a duty to engage the public, and he excelled at translating complex ideas into accessible arguments. His 1980 PBS series Free to Choose, co-produced with his wife Rose Friedman, brought his philosophy to millions of viewers. Accompanied by a bestselling book of the same name, the series critiqued government overreach—from welfare to education—and celebrated the virtues of markets. With his avuncular demeanor and knack for clear explanation, Friedman became a household name, a rare feat for an academic economist.
His debates with opponents, such as the Keynesian Paul Samuelson or the socialist Michael Harrington, showcased his rhetorical skill. Friedman wielded data and logic with precision, often disarming critics with a blend of charm and intellectual rigor. A famous exchange with Phil Donahue in 1979 encapsulates his style: when Donahue asked who would care for the poor under capitalism, Friedman replied, “The record of history is absolutely crystal clear: there is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system.”
Controversies and Criticism
Friedman’s ideas were not without detractors. Critics accused him of oversimplifying complex problems and ignoring the human cost of market-driven policies. His association with Chile’s Pinochet regime, where “Chicago Boys” implemented free-market reforms amid authoritarian repression, remains a lightning rod. Friedman met with Pinochet once, in 1975, and offered technical advice on controlling inflation, but he never endorsed the dictatorship. Nonetheless, opponents argue that his ideas enabled neoliberal excesses, from deregulation to inequality.
Within economics, Friedman’s monetarism faced challenges as well. The 1980s revealed that money supply growth was harder to control than he had assumed, as financial innovation blurred the lines between “money” and other assets. Critics like James Tobin argued that Friedman underestimated the role of fiscal policy and overstated money’s causal power. By the 1990s, a synthesis of monetarist and Keynesian ideas—embodied in the New Keynesian school—had overtaken pure monetarism in academic circles.
Personal Life and Legacy
Friedman’s partnership with Rose Director Friedman, an economist in her own right, was a cornerstone of his life. They met as graduate students at Chicago, married in 1938, and collaborated on numerous projects, including Free to Choose. Their intellectual synergy mirrored their personal devotion, and their two children, Janet and David (the latter a prominent anarcho-capitalist philosopher), inherited their passion for ideas.
Friedman remained active into his later years, writing columns for Newsweek and advising policymakers like Ronald Reagan and Margaret Thatcher, whose administrations embraced his emphasis on deregulation and monetary restraint. He died on November 16, 2006, at the age of 94, leaving behind a legacy that continues to shape economic thought and policy.
Friedman’s Enduring Impact
Today, Milton Friedman’s influence is inescapable. Central banks worldwide prioritize inflation control, a direct echo of his monetarist insights. The spread of school choice programs, tax simplification efforts, and free-trade agreements all bear his imprint. Yet his vision of a radically minimal state remains unrealized, tempered by political realities and public demand for safety nets.
Friedman’s career reminds us that economics is not merely a technical discipline but a battleground of ideas with profound moral stakes. He saw markets as engines of freedom and prosperity, not just efficiency, and he fought tirelessly to convince the world of that vision. Whether one views him as a prophet of liberty or a polarizing ideologue, his mark on the 20th century—and beyond—is indelible.
