Stanford historian Jennifer Burns joins the hosts to discuss her biography of Milton Friedman, exploring his radical ideas, his variety of libertarianism, and his respect for women. They delve into Friedman's views on regulation, the Federal Reserve, and civil rights, as well as his role in the economic transformation of Chile. The chapter analyzes Friedman's legacy and his impact on economics.
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Quick takeaways
Milton Friedman's upbringing and personal experiences shaped his radical ideas and advocacy of libertarianism.
Friedman's major contribution lies in his development of monetarism and emphasis on the role of the Federal Reserve in managing the money supply.
Despite his association with libertarianism, Friedman showed openness to certain government interventions and addressing poverty as part of defending capitalism.
Friedman's involvement with the Pinochet regime in Chile raised controversy, but his visit primarily focused on addressing economic challenges, not endorsing human rights abuses.
Deep dives
Friedman's Early Life and Career
Milton Friedman grew up in Roway, New Jersey, in a Jewish immigrant family. He initially planned to become an actuary but was drawn to economics during the Great Depression. He studied at the University of Chicago and Columbia University, where he absorbed the ideas of his teachers, including a focus on the banking and financial sector as a cause of the Great Depression. Friedman's research with Anna Schwartz led to the development of monetarism, which emphasized the importance of the quantity of money in the economy. He argued for steady growth in the money supply and a rule that would bind the Federal Reserve. Friedman's approach to economics was influenced by both pragmatism and purism, as he sought practical solutions while advocating for pure libertarian principles.
Views on Government Intervention and Equality
Despite being associated with libertarianism, Friedman was open to certain forms of government intervention and addressing poverty and inequality. He expressed support for a version of universal basic income and believed in addressing questions of poverty as part of defending capitalism. However, he also emphasized the importance of individual economic initiative and was wary of excessive government intervention and control. Friedman's views on government and equality were shaped by his experiences with antisemitism, both personally and in his analysis of economic institutions like the American Medical Association. He rejected social Darwinism and sought ways to defend capitalism without promoting inequality or the survival of only the fittest.
Monetary Theory and Contributions
Milton Friedman's major contribution was in the field of monetary theory and his promotion of monetarism. Together with Anna Schwartz, he conducted extensive research on the role of money in the economy, challenging the prevailing view that money was merely a veil over economic forces. Their analysis, which showed the causal relationship between changes in the money supply and economic fluctuations, posed a challenge to Keynesian economics. Friedman argued for a stable, steady growth in the money supply as a means of achieving steady economic growth. He advocated for a rule-based approach to monetary policy, specifying steady growth rates for the money supply. His focus on monetarism and the role of the Federal Reserve in managing the money supply established him as a key figure in the field of economics.
Evolution of Friedman's Ideas and Impact
Over time, Milton Friedman's ideas evolved, and he became associated with the neoliberal movement. While he initially emphasized the importance of limited government and market forces, he was also pragmatic in his approach and willing to compromise on certain issues. However, as he witnessed the growth of the state and the expansion of government intervention, particularly during the Nixon administration, Friedman became more opposed to government growth and more committed to his libertarian principles. He took on a more aggressive stance in opposing government expansion and advocated for shrinking the size of government. Friedman played a role in building the reputation of the University of Chicago's economics department, known as the Chicago School, and became a prominent academic and public figure promoting free market principles.
The Volcker Fund and its Impact on Friedman's Work
The Volcker Fund played a significant role in funding Friedman's various projects at the University of Chicago. Initially established as a local charity, the Volcker Fund came under the control of Harold Luftnau, who was inspired by Friedrich Hayek's book 'The Road to Serfdom.' Hayek's arguments against government growth resonated with Luftnau and many small business owners during a time of rethinking wartime regulations and interventions. Luftnau enlisted Hayek to write a popular version of his book for the United States, which eventually led to the establishment of the Institute of Political Economy at the University of Chicago, funded by the Volcker Foundation. This funding allowed for the development of economic research and the training of economists who would later contribute to the case for capitalism in the second half of the 20th century.
Friedman's Stance on Civil Rights and Goldwater
Friedman's views on civil rights were explored through his association with Barry Goldwater, a noted conservative figure. While Friedman and Goldwater shared certain political values, including opposition to racial segregation, Friedman's criticism of civil rights legislation centered on his belief in market analysis of prejudice. Drawing on the work of his student Gary Becker, Friedman argued that discrimination was a taste that would incur a social and economic cost. However, this perspective failed to acknowledge the unique experiences and systemic nature of racism faced by Black Americans. Friedman's alignment with Goldwater's stance on civil rights, opposition to the Civil Rights Act, and support for school vouchers further raised questions about his understanding of racial inequities and the impact of his economic ideas on marginalized communities.
Friedman's Involvement in Chile and Pinochet's Regime
Friedman's involvement with the Pinochet regime in Chile during the tumultuous period following the military coup has been a subject of controversy. While Friedman's visit to Chile was primarily aimed at assisting with economic challenges, critics have sought to associate him with Pinochet's autocratic rule. However, it is essential to understand the context and motivations behind his visit. The Chicago Boys, a group of Chilean economists educated at the University of Chicago, sought the endorsement of their neoliberal economic policies, which clashed with the prevailing economic approach in Chile. Friedman's advice to reduce inflation and advocate for liberalization aligned with their agenda. Despite the negative implications linked to his association with Pinochet, it is important to recognize that Friedman's visit was primarily focused on addressing economic issues, and his involvement should not be synonymous with endorsing the regime's human rights abuses.
In this episode, Matt and Sam are joined by Stanford historian Jennifer Burns to discuss her new biography of Milton Friedman, the Nobel Prize-winning economist whose influence would reach far beyond the academy when, during his last decades, he became one of the most effective popularizers of libertarian ideas—in books, columns, and even a ten-part PBS program, Free to Choose. How did the son of Jewish immigrants in New Jersey come to hold the often radical ideas that made him famous? How does Friedman's variety of libertarianism differ from, say, that of Mises or Hayek? What made Friedman, unusually for the times, someone who valued the intellects and work of the women around him? And what should we make of Friedman now, as Trump and elements of the conservative movement and Republican Party supposedly jettison the "fusionism" of which Friedman's free markets were a part?
As mentioned in the episode's introduction, listeners might want to revisit episode 16 with economist Marshall Steinbaum for a broader, and more critical, look at the Chicago school.
