Milton Friedman: The Founder of Modern, Free Markets
When it comes to economics, few people have had the impact of Milton Friedman. He is widely considered one of the best economists ever and the most important since the Great Depression. His work reshaped modern economic policy and has influenced governments around the world.
Milton Friedman was born on July 31, 1912, in New York City. He was an excellent student, especially in mathematics, and enrolled at Rutgers University when he was only 16 years old. The Great Depression started during Friedman’s studies, influencing his interest in economics as an undergraduate, notes the Academy of Achievement.
Friedman was inspired by his professors, who taught him that the right economic policies could both solve the current job crisis and prevent another depression from happening. With their encouragement, Friedman continued his studies and earned a master’s degree from the University of Chicago.
After finishing his degree, he found work in Washington, D.C., as an adviser for many of Franklin D. Roosevelt’s New Deal job programs. This gave him a firsthand look at how the government could negatively affect the economy with the wrong policies, and it set the stage for his future economic discoveries. After spending several years working for the government, Friedman earned his doctorate from Columbia University and became an economics professor first for the University of Minnesota and then for the University of Chicago, where he spent most of his career and published the majority of his research.
At the time of the Great Depression, economists and politicians believed the answer to solving the crisis was more government intervention. High levels of government spending were seen as the response to unemployment. If this spending caused inflation and priced out the private sector, politicians considered putting in price and wage controls, which would make it illegal for prices to go up.
Friedman disagreed with this view and thought that the Federal Reserve should be in charge of balancing out economic cycles, not the federal government. With their control of the money supply and interest rates, the Federal Reserve could better handle unemployment without causing inflation, whereas government spending handled improperly during a recession could create even more problems. Friedman also thought price controls would be a disaster because they would encourage people to sell on the black market.
His theories were justified during the oil crisis of the 1970s, when skyrocketing energy prices and inflation caused the highest levels of unemployment since the Great Depression. The government tried spending to end the recession, but this only caused prices to rise even more quickly while unemployment stayed high. In the end, the Federal Reserve put a stop to the recession, but the situation would have improved much more quickly had the government not gotten in the way of the free market.
Awards and Political Influence
Milton Friedman’s ideas made him extremely influential, especially after he correctly predicted the problems of the ’70s. He was a key adviser for Richard Nixon, Ronald Reagan, and Margaret Thatcher, and he helped develop their free market economic plans. Friedman won the Nobel Prize in Economics in 1976 for his work. During his academic tenure, he helped turn the University of Chicago into arguably the best university for economics.
Milton Friedman was an inspiration not just for economists, but for anyone else who believes in the power of free markets. His ideas continue to shape economics worldwide today.