We need a modern-day Milton Friedman (Conservative Home)

Head of Economic Research Ryan Bourne authored an article for Conservative Home on the 100th anniversary of Milton Friedman’s birth. 

“Today would have been the great economist Milton Friedman’s 100th birthday — he was the most significant and effective proponent of free market economics we’ve ever seen. Though he died in November 2006, his ideas have had a lasting effect on the great fight for economic and personal freedom.

Earlier this month, the Centre for Policy Studies hosted a high-profile event to discuss the legacy of his work. It’s easy to forget just how much he achieved. A Nobel prize winner in Economics, Friedman’s work advanced the subject in many areas.  His work on individuals’ consumption patterns remain a cornerstone of almost all applied economics. He advocated floating exchange rates following the collapse of the Bretton-Woods system. He debunked the idea of the Phillips curve — that Governments could manage policy in the long-run by trading off inflation and unemployment — and was subsequently vindicated during the stagflation of the 1970s.

But it is his work on the Great Depression, with the recently departed Anna Schwartz, for which he is best remembered academically. He concluded that a collapse in the broad money supply had exacerbated the Great Depression in the 1930s, and that expansionary monetary policy was the only tool in town in depression-like conditions.

His position on this is often misrepresented in current debates. For Friedman, money mattered. He knew that “inflation is always and everywhere a monetary phenomenon”. He would have been in favour of the initial QE that was undertaken to stop a collapse in the broad money supply and the onset of price deflation. Indeed, Ben Bernanke thanked Friedman in advance of the crisis for his insight, and promised Milton that, having read his great book, he would never let a Great Depression occur again. But his policy prescription after that would have then been to try to keep a constant growth of broad money at a low level. As Deepak Lal explained at our event, instead broad money both here and in the US has been volatile, and Governments and central banks have become obsessed with enhancing credit rather than merely keeping money growth stable.

The breadth of his academic insight shows Friedman’s giant intellect. But it was his ability to popularise and market his free-market ideas that make him stand out. He was a regular presenter on PBS, and presented Free to Choose, a ten part series that aired in the early 80s, which brought the concepts of economic freedom direct to millions of living rooms. He penned a column for Newsweek for an astonishing 18 years. And, as Niall Ferguson explained earlier this mornth, Friedman used his column inches to advocate economically and socially liberal policies, most of which have since been implemented. Whether it be against rent controls or farm subsidies and tariffs, expounding free-trade, suggesting that tradable pollution permits are preferable to crude state intervention, highlighting the failure of state schooling, advancing civil liberties issues ,helping to overturn conscripted armed forces in the US, or calling for the legalisation of drugs, Friedman consistently pursued freedom for the individual.”

To view the full article, continue to Conservative Home.

Date Added: Tuesday 31st July 2012