Friedman, Milton (1912–2006)

Milton Friedman, born in New York City in 1912, was one of the 20th century's most famous and influential economists, renowned for his depth of analysis, his innovative capacity, his practical outlook, and his simple, persuasive style. However, he is probably best known for the political repercussion of his ideas. The son of an immigrant, he studied at Rutgers (B.A. 1932), Chicago University (M.A. 1933), and Columbia (Ph.D. 1946). Married to Rose Director, he spent most of his professional life at Chicago University and was awarded the Nobel Prize for Economics in 1976.

Friedman conceived economics as a positive science. Value judgments are consigned to private life and must not interfere with scientific proposals: There is no place for moral criteria in economics. The economists' task is to provide theoretical arguments that enable predictions to be made about reality but not to give opinions about the results of their predictions.

Friedman's methodology is drawn from John Dewey's pragmatism. The role of theory is to provide a framework for the formulation of explanations and predictions. Theory is not validated by the realism of its assumptions but by its ability to generate predictions that are not refuted by facts.

Liberalism (or classical liberalism) is perhaps the trait that best defines his economic policy proposals. Friedman upheld freedom (conceived as an indivisible whole) as a basic moral principle in the shaping of society and maintained that the market is the system of economic organization demanded by that freedom. His liberalism was individualistic: There are no reference values outside of the individual; ethics is strictly private. The role of the State is to create the framework in which the individuals perform their free activities. This led to some of his best-known proposals, including those against price controls, in favor of the education voucher and negative income tax, etc.

Friedman's content and method helped define the Chicago School, characterized by a solid grounding in the principles of neoclassic economics, strict logic in the development of these principles, and emphasis on empirical verification. For example, his statement that the firm's sole purpose is to maximize profits was a logical consequence of neoclassical economics in the pursuit of maximum economic efficiency.

In macroeconomics, Friedman is known as a key figure in monetarism: Money influences output and employment in the short term (money matters), but this effect is not lasting; in the long term, money only influences prices. Monetary policy is powerful. However, it should not be practiced discretionally but in accordance with simple rules (a constant growth rate of the [Page 961]money supply). The capitalist economy is basically stable, and therefore it is not desirable to implement active stabilizing policies, which may be dangerous (monetary policy) or ineffective (fiscal policy).