Milton Friedman

Introduction

This book tells the story of Milton Friedman, a famous economist who believed in free markets and less government. He did a lot of research on different topics and helped start a new way of thinking in America. He was very important for the conservatives, but he also affected other people’s views.

Some people loved him and some people hated him. In 2020, when Joe Biden was running for president, he said that Milton Friedman was not in charge anymore. Who was this man who made people feel so strongly, even after he died?

Milton Friedman was not very tall and he wore glasses. He might not look like someone who would change the world. But he did. He had many ideas about how the economy should work. He made a big difference in how people thought about money and freedom.

This summary will show you how Milton Friedman became who he was. We will learn about his life and what influenced him. Then we will see what he did and how he affected the world.

Lesson 1 Early life

Milton Friedman was a boy from a small town in New Jersey. He became a very important economist in the 1900s. How did he do that?

Milton was very smart in school. He liked many subjects, but he liked economics the most. Economics is the study of money and how people use it.

Milton’s parents came from Hungary. They were Jewish and poor. They had a small shop in Rahway, where Milton grew up with his three sisters. Milton’s parents were kind and supportive.

But when Milton was in high school, his father died. Milton was very sad, but he did not give up. He went to college at Rutgers and wanted to be an actuary. An actuary is someone who calculates risks and insurance.

In college, Milton took a class on economics. He liked it a lot. Two of his teachers, Arthur Burns and Homer Jones, encouraged him to study more economics. They told him to go to Chicago for his master’s degree.

Milton became friends with Burns and Jones. They talked a lot about economics. This was during the Great Depression, a time when many people were poor and jobless. They wanted to understand why this was happening and how to fix it.

Milton went to Chicago in 1932. He did not know what he wanted to do exactly. He met Rose Director, another student of economics. She had a brother who was a teacher at Chicago. Rose was also not sure about her future.

Milton and Rose had some tough teachers, like Jacob Viner and Frank Knight. They asked hard questions about the economy and how it works. They taught Milton and Rose about price theory. Price theory is a way of using math to explain how markets work.

Milton and Rose did very well in their classes. They became close friends. They also liked each other romantically.

Milton got a scholarship to go to Columbia for his PhD. He left Chicago and went to New York. There, he started to develop his own ideas about economics. He wanted to find out the best ways to deal with economic problems.

Lesson 2 Columbia, Washington, and beyond

Milton Friedman went to Columbia in 1933. He studied economics there. But Columbia was very different from Chicago. Columbia liked big government and detailed plans. Chicago liked free markets and less interference.

Milton was still working on his PhD. He got a job in Washington, DC. He helped with a big survey on how families spent money. He was good at statistics. Simon Kuznets noticed him. He was a famous economist. Milton moved to New York and married Rose Director. She was his friend and partner in economics.

Milton had some problems. His PhD research was about doctors. He said that the doctors’ group was making doctors scarce and rich. This made his bosses at the NBER angry. The NBER was a research center. They said Milton was too extreme. He wanted free markets for everything.

Milton argued with the NBER. Meanwhile, economics changed. John Maynard Keynes wrote a new book. He said that the government should spend more money to help the economy. Many economists agreed with him. But Milton did not. He taught price theory at Chicago. He doubted that the economy had to go up and down.

Milton got a chance to leave. He became a professor at Wisconsin. But he had more trouble there. The economics department was divided. Some people did not like Milton. They attacked him for his views on statistics. The dean supported Milton. But Milton decided to quit.

Milton felt bad. He did not know what to do. He had to choose between working for the government or teaching. He also had a personal loss. Rose had a baby that died.

Milton went to work for the Treasury. It was during the war. He had a great idea for testing weapons. He worked with Abraham Wald on sequential analysis. This made testing faster and cheaper. It helped the war effort. It also became an important tool for statistics.

Milton did well in the government. But he still had not finished his PhD. He still fought with the NBER. They did not want to publish his research. It took him almost ten years to win. He finally published his thesis.

The war ended. Many soldiers came back. They went to college. Milton got a job as a teacher. Then he got a great opportunity. He could go back to Chicago. They had an opening for him.

This was a turning point for Milton. He became a famous and influential economist. He had a new idea called monetarism. He challenged Keynesianism. He changed economics in the 1970s.

Lesson 3 The return to Chicago

Milton Friedman went back to Chicago. He met his old friends there. They were George Stigler, Allen Wallis, and Rose, his wife. They all liked Frank Knight’s ideas. They did not like other ideas like institutionalism.

Milton learned a lot at Chicago. He used price theory to solve social problems. He did not follow the popular ideas like institutionalism. He also made friends with other people who liked free markets. They had a common goal. They wanted to challenge the New Deal. The New Deal was a big government program by Franklin Roosevelt.

One day in 1946, Milton saw Henry Simons. He was Milton’s teacher and supporter. He helped Milton get a job at Chicago. Milton was happy to see him. But Simons was not well. He talked about killing himself. A few days later, he died. He took too many sleeping pills.

Milton was very sad. He lost his friend and partner. He hoped to have a good time at Chicago. But he found a lot of problems there. Some people at the economics department liked Keynesianism. Keynesianism was a new idea that said the government should spend more money to help the economy. They worked for the Cowles Commission. They did not agree with Milton.

Milton fought with the Cowles economists. He made friends with other people at the university. He won the fight. The Cowles economists left for Yale. Milton started two new movements. They questioned the idea of market failure. Market failure is when the market does not work well.

The first movement was law and economics. It was led by Aaron Director, Milton’s brother-in-law. He used price theory to criticize the laws that stopped big companies from controlling the market. The second movement was by George Stigler, Milton’s friend. He used Chicago analysis to show how the government could fail too. He said that the government could be controlled by special interests.

Milton had his own idea of liberalism. He wanted the government to do some things, but not too much. He wanted people to have more freedom and choice. He had some new policy ideas. He suggested giving money to poor people and parents who wanted to send their kids to different schools. He also cared about values. He thought freedom was more important than equality. He was different from the people on the right and the left. He still wanted to make society better.

By the late 1950s, Milton and his friends had created a new Chicago school. It was different from the Keynesian school. It was about free markets, law, and politics.

This was the foundation of Milton’s legacy. He changed economics and the world. We will learn more about that in the next section.

Lesson 4 Friedman’s legacy

Milton Friedman was a very important economist. He challenged the old ideas of Keynesianism. He had new ideas and policies. Many people did not believe him at first. But later, they saw that he was right.

Milton’s work on money was his best work. He wrote a book with Anna Schwartz in 1963. They studied the history of money in the US. They said that the Great Depression was very bad because the Federal Reserve made bad decisions. They did not agree with Keynesianism. Keynesianism said that the problem was with private investment. The Federal Reserve later said that Milton was right.

Milton did a lot of research on money and spending. He had a famous saying: “inflation is always and everywhere a monetary phenomenon.” This means that inflation happens when there is too much money. Many people argued with him for a long time. But his idea was very strong. It is still used by the central banks today.

Milton became very influential in the late 1970s and early 1980s. Keynesianism did not work well. There was a lot of inflation. Paul Volcker was the head of the Federal Reserve. He followed Milton’s advice. He controlled the money supply instead of the interest rates. This was hard, but it worked. It stopped the inflation. In politics, Milton’s ideas matched with President Reagan’s ideas. Milton helped Reagan with his policies on taxes, regulation, and education.

Milton was also very popular outside of academia. He liked free markets and libertarianism. He made a TV show and a book called Free to Choose in 1980. He told the people why the government should be small and the economy should be free. He had a new idea for helping the poor. He wanted to give them money instead of having many programs and agencies. This idea is similar to the idea of universal basic income today.

Milton’s ideas never went away. They came back during the COVID pandemic. The government and the central bank had to make big decisions. They had to think about Milton’s ideas. Inflation also came back in 2021. It was not there for a long time. Some people said that Milton was right again.

Milton was one of the best economic thinkers in history. He had many ideas and contributions. It does not matter if you agree with him or not. You have to respect his work and his impact. He was like his hero, Adam Smith. You can learn a lot from him. You have to understand his questions and theories. They are very important for the modern economy.

Final summary

Milton Friedman was a very important economist. He worked for a long time. He changed how people think and act about the economy. Many people did not like his ideas at first. He wanted the market to be free and the government to be small. But later, more people agreed with him. Friedman helped people understand better some big problems like inflation and the Federal Reserve. The Federal Reserve is the bank of the US. Some people =still disagree with him. But they have to learn from him. His ideas are very useful for the modern economy.

About the author

Jennifer Burns is a teacher of history at a big school called Stanford. She wrote a book called Goddess of the Market. She also wrote for big newspapers, like the New York Times and the Financial Times. She was on TV shows that people like to watch, like The Daily Show and The Colbert Report.