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Friday, April 14, 2017

Milton Friedman and free markets


Photo source: Wikimedia Commons, The Friedman Foundation for Educational Choice


Milton Friedman (1912-2006) was a famous economist best known for his support of free markets and libertarian views. He is also famous for his analysis of monetary policy. Friedman is arguably the most influential economist of the 20th century. Economist Paul Krugman said,


"Milton Friedman may well be the world's best-known economist. He has turned his unprepossessing stature and manner into a trademark persona; a feisty conservative David battling the Goliath of Big Government. But his influence is not merely a matter of skill at propaganda. It rests on the long campaign that he waged against the ideas of Keynesian economics, a campaign that eventually bore fruit in radical changes in both economic ideology and real-world economic policy." (Peddling Prosperity, 1994)


Former Chairman of the Federal Reserve Alan Greenspan said,


"His views have had as much, if not more, impact on the way we think about monetary policy and many other important economic issues as those of any person in the last half of the twentieth century." (Federal Reserve Board Speech, 1997)


The rest of this post is some quotes from Friedman.


What should the government provide?


"We need government to enforce the rules of the game. By prosecuting anti-trust violations, for instance. We need a government to maintain a system of courts that will uphold contracts and rule on compensation for damages. We need a government to ensure the safety of its citizens–to provide police protection." (Playboy Interview with Milton Friedman, 1973)


"The proper role of government is exactly what John Stuart Mill said in the middle of the 19th century in On Liberty. The proper role of government is to prevent other people from harming an individual." (America's Drug Forum Interview, 1991)




"I am in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it's possible... because I believe the big problem is not taxes, the big problem is spending. I believe our government is too large and intrusive, that we do not get our money's worth..." (Quoted in Conservatives Betrayed, 2006)


"If I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get. And that’s government." (Interview on Fox News, 2004)


"What are the least bad taxes? In my opinion the least bad tax is the property tax on the unimproved value of land, the Henry George argument of many, many years ago." (Quoted in The Times Herald, Norristown, Pennsylvania, 1978)


Free markets


"The only effective cure is to reduce the scope of government - get government out of the business." (YouTube: Big Business, Big Government)


"The unions might be good for the people who are in the unions but it doesn't do a thing for the people who are unemployed. Because the union keeps down the number of jobs, it doesn't do a thing for them." (Interview with Brian Lamb, 2000)


"The price system works so well, so efficiently, that we are not aware of it most of the time. We never realize how well it functions until it is prevented from functioning, and even then we seldom recognize the source of the trouble." (Free to Choose, 1980)


Monetary policy


"Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output." (The Counter-Revolution in Monetary Theory, 1970)


"I know of no severe depression, in any country or any time, that was not accompanied by a sharp decline in the stock of money and equally of no sharp decline in the stock of money that was not accompanied by a severe depression." (Money Masters, 1995)


"The Federal Reserve definitely caused the Great Depression by contracting the amount of money in circulation by one-third from 1929 to 1933." (National Public Radio Interview, 1995)


"The use of quantity of money as a target has not been a success. I'm not sure that I would as of today push it as hard as I once did." (Quoted in the Financial Times, 2003)


"Over short periods, the relation between growth in money and growth in nominal income is often hard to see." (Money Mischief, 1992)




"The problem in this world is to avoid concentration of power - we must have a dispersion of power." (YouTube: Big Business, Big Government)


"I say thank God for government waste. If government is doing bad things, it's only the waste that prevents the harm from being greater." (Interview with Richard Heffner on The Open Mind , 1975)


"Governments never learn. Only people learn." (The Cynic's Lexicon : A Dictionary Of Amoral Advice‎, 1984)


"Society doesn't have values. People have values." (Free to Choose television series, 1980)


"Because we live in a largely free society, we tend to forget how limited is the span of time and the part of the globe for which there has ever been anything like political freedom: the typical state of mankind is tyranny, servitude, and misery." (Capitalism and Freedom, 1962)


Economic theories


"If we are to use effectively these abstract models and this descriptive material, we must have a comparable exploration of the criteria for determining what abstract model it is best to use for particular kinds of problems, what entities in the abstract model are to be identified with what observable entities, and what features of the problem or of the circumstances have the greatest effect on the accuracy of the predictions yielded by a particular model or theory." (The Methodology of Positive Economics, 1953)


"The construction of hypotheses is a creative act of inspiration, intuition, invention; its essence is the vision of something new in familiar material. The process must be discussed in psychological, not logical, categories; studied in autobiographies and biographies, not treatises on scientific method; and promoted by maxim and example, not syllogism or theorem." (The Methodology of Positive Economics, 1953)