David Warsh: About the economics giant Milton Friedman

Milton Friedman in 2004.

SOMERVILLE, Mass.

The appearance of a long-awaited biography of Milton Friedman (1912-2006) has afforded me just the opportunity for which my column, Economic Principals (EP), has been looking. Milton Friedman: The Last Conservative (Farrar, Straus, 2023), by historian Jennifer Burns, of Stanford University, offers a chance to turn away from the disagreeable stream of  daily news, in order to think a little about the characters who have populated the stage in the fifty years in which my column, EP has been following economics.

None was more central in that time than Friedman. We first met in his living room, in April, 1975, on a morning when he and his wife were packing for a week-long trip to Chile. We talked for an hour about the history of money. I left for my next appointment. Eighteen months later, Friedman was recognized with a Nobel Prize. I have followed his career ever since.

Ms. Burns’s book is a thoughtful and humane introduction to the life of an economist “who offered a philosophy of freedom that made a tremendous political impact on a liberty-loving country.”  Standing little more the five feet tall, Friedman managed to influence policy, not just in the United States, but around the world: Europe, Russia, China, India, and much of Latin America.

How?  Well, that’s the story, isn’t it?

Friedman grew up poor in Rahway, N.J.  His father, an unsuccessful merchandise jobber, died when he was nine. His mother supported their four children with a series of small businesses, instilling in each child a strong work ethic.  Ebullient and precocious, Milton was the youngest.

A scholarship to nearby Rutgers University put him in touch with economist Arthur Burns, then a 27-year-old economics instructor, forty years later Richard Nixon’s chairman of the Federal Reserve Board. Burns took Friedman under his wing and pointed him toward the University of Chicago. He arrived in the autumn of 1932, as the Great Depression approached its nadir.

Ms. Burns unpacks and explains the doctrinal strife that shaped Friedman and their friends encountered there. They include Rose Director, a Reed College graduate from Portland, Ore., who, improbably in those hard times, had enrolled as a economics graduate student at the same time.  The two became friends; they parted for a year, while Milton studied at Columbia University and Rose considered her options in Portland; then returned to Chicago, becoming a couple, as members of the “Room Seven Gang” in the campus’s new Social Science building.  Other members included Rose’s older brother, Aaron, a future dean of the university’s law school; George Stigler, who would become Friedman’s best friend; and Allen Wallis, an important third musketeer.

Distinctly not a member of that gang of graduate students was Paul Samuelson, a prodigy who had enrolled as an undergraduate, at 16, nine months before Friedman arrived to begin his graduate studies.  Already tagged by his professors as a future star, Samuelson was clearly brilliant, but impressed the Room Seven crowd as being somewhat toplofty.

All this, rich in details and explication, is but preface to the story. Ms. Burns follows the Friedmans to New Deal Washington, where they marry and work for a time; to New York, where Milton pursues a Ph.D. at Columbia and Rose drops out to start a family (neither undertaking turned out to be easy); to Madison, Wis., where the couple spent a difficult year while Friedman taught at the University of Wisconsin, before returning to wartime Manhattan, to be reunited with Stigler and Wallis, working at Columbia’s Statistical Research Group.

In 1945, the major phases of the story lay ahead: Friedman’s return to Chicago, to form a faculty group sufficiently cohesive to become recognized as a “second Chicago school,” significantly differentiated in important ways from the first; his embrace of monetary economics; his battles with other research groups seeking to shape the future of the profession.  These included the Keynesians and organizational economists in Cambridge, Mass., the game theorists in Princeton, the mathematical social scientists at Stanford and RAND Corp., in California.

By 1957, Friedman had opened a political front. Lectures given at Wabash College in 1957 become a book, Capitalism and Freedom, in 1962.  The book earned well, and the couple named “Capitaf,” their Vermont summer house for it. A Monetary History of the United States, with Anna Schwartz, all 860 unorthodox pages of it, appeared the same year. In 1964 Friedman was invited to become chief economic adviser to presidential candidate Barry Goldwater, much as Paul Samuelson had advised John F. Kennedy four years before,

The Bretton Woods Treaty, a hybrid gold standard arrangement negotiated in 1944, by Harry Dexter White and John Maynard Keynes, began to crumble; Friedman was ready with an alternative: flexible exchange rates determined in international currency markers. Distaste with the war in Vietnam exploded. Friedman proposed an all-volunteer army: that is, market-based wages for soldiers.  Inflation grew out of control in the Seventies; Friedman had a ready answer, simply control the money supply. Just ahead are Margaret Thatcher, Paul Volcker, and Ronald Reagan. Free to Choose: A Personal Statement, by Milton and Rose Friedman, a 10-part public television series, appears in 1980, becoming an international best-seller, followed by a book.

But that is getting ahead of the story here. Ms. Burns relates all this and its surprising conclusion with grace and attention to detail. No wonder it took nine years to write! In the end it offers a seamless account.  But in that very seamlessness lies a rub.

Ms. Burns is a cultural historian, concerned with rise of the American right, which in the 1950s seemed to come out of nowhere: The Road to Serfdom, by Friedrich Hayek (Chicago, 1944); Sen Joe McCarthy; the John Birch Society; God and Man at Yale: The Superstitions of “Academic Freedom” (Regnery, 1951),  by William F. Buckley Jr.; The Conscience of a Conservative (Victor, 1960), by Arizona Sen. Barry Goldwater, and the subsequent Goldwater presidential candidacy, and all that. Goddess of the Market: Ayn Rand and the American Right (Oxford, 2009) was her previous book. She knows Friedman’s influence on economics was great – too great to cover adequately in her book. Even the subtitle raises more questions than the book itself can answer.

Therefore, as I continue to peruse Milton Friedman: The Last Conservative, I intend to write over the next nine weeks about nine different books, each of which covers some aspect of Friedman’s story from a different angle. Trust me, the story is worth it: you’ll see.  Meanwhile, if you get tired of reviewing the last seventy-five years, there is always the dismal news in the newspapers today.

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In a rush last week to get something into pixels about the American Economic Association meetings in San Antonio, I committed an embarrassing error.

Michael Greenstone, of the University of Chicago, delivered the AEA Distinguished Lecture, not Emmanuel Saez.  You can find “The Economics of the Global Climate Challenge” here. If you care about climate warming, or simply want a glimpse of where the economics profession is headed, Mr. Greenstone’s lecture is well worth the hour it takes to watch.

That the Princeton Ph.D. and former MIT professor is today the Milton Friedman Distinguished Service Professor and former director of the Becker-Friedman Institute adds authority to his message.

David Warsh, a veteran columnist and an economic historian, is proprietor of Somerville-based economicprincipals.com, where this column originated.