JUST WHAT THE DOCTOR DISORDERED:

Late economist Friedman left mark on history (TERRY SAVAGE, January 29, 2007, Chicago Sun-Times)

Milton Friedman and his wife, Rose, also a renowned economist, explained that inflation was not caused by full employment and wage demands pushing prices higher. Instead they demonstrated that "inflation is always and everywhere a monetary phenomenon."

Inflation increased when the Federal Reserve, the nation's central bank, created too much money or credit. The last two decades have shown that you can have strong economic growth, the lowest unemployment rate in history, a bull market in stocks -- and low inflation, if the Fed keeps a stern watch on the appropriate level of money supply.

Leo Melamed, chairman emeritus of the Chicago Mercantile Exchange, remembers the importance of Friedman's endorsement of his concept of a financial futures market.

Says Melamed about his late good friend, "His greatest contribution worldwide was to prove that you cannot run an economy in a command form, that a government can't dictate pricing. . . . He convinced a generation of policy makers and average citizens that market forces of supply and demand can be the only determinants of fair market value." [...]

Today has been declared Milton Friedman Day, and he will be honored today at the University of Chicago Rockefeller Chapel at 2 p.m., a ceremony that will be open to the public, and is co-sponsored by the University of Chicago and the Chicago Mercantile Exchange.

If you want to know more about his formidable influence, you can watch his biography, "The Power of Choice" on PBS tonight.

Back before PBS was reduced to showing only self-help and pop reunion shows for aging boomers, it telecast Free to Choose in 1980 -- which you can stream here -- and signalled that even the liberal establishment had lost confidence in the New Deal/Great Society.

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The Power of Milton Friedman (AMITY SHLAES, January 29, 2007, NY Sun)

The first thing this excellent program reminds us is what Friedman and his Chicago friends were up against. Between the 1940s and 1970s, America's political leaders really did believe in John Maynard Keynes's old rule that "a large extension of the traditional functions of government" was necessary in the new era. In those days, too many economists (even GOP economists) believed they should manage the economy almost hour by hour, using any number of devices that have since proven to be perverse or destructive.

After the Englishman died, John Kenneth Galbraith, a nearly-Englishman from Canada, preached the Keynes message to the Yahoos in America. "The Power of Choice" contains a wonderful clip of Ambassador Galbraith on a talk show sometime in the 1970s, archly telling the audience that "wage and price controls are an indispensable part of any economic policy that this country can have."

Friedman, as this program demonstrates, attacked such thinkers first of all on the economic plane. His "Permanent Income Hypothesis" demonstrated that citizens don't respond so much to their government's short-term behavior as to their own assessments of what will happen to themselves economically during the course of their lifetimes. If voters or taxpayers expected government -- the man on the porch, as it were -- to change its mind frequently, they would be less likely to change behavior on the basis of its offers. An even more important contribution from Friedman came on the monetary side. Friedman and his partner, Anna Schwartz, showed with their landmark monetary history that the Great Depression was caused by government failure to recognize deflation --not the failure of the stock market.

But Friedman also battled successfully on the political plane, including presidents from Ford forward. Friedman judged President Nixon the most intelligent but found that President Reagan understood his arguments best -- in part, perhaps, because Reagan was old enough to have been educated before Keynes took hold. Friedman's own famous documentary, "Free To Choose," aired in 1980, the year Reagan ran for the presidency.

A million viewers crowded before TV screens to watch Friedman reach for the "STOP" button at the printing presses at the United States Mint to show how you checked inflation.

Plato's Republic or Milton Friedman's Market? (Arnold Kling, 29 Jan 2007, Tech Central Station)

Friedman's insight is that a market limits the power that others have over us; conversely, limiting the power that others have over us allows us to have markets. Friedman argued that no matter how wise the officials of government may be, market competition does a better job of protecting us from idiots.

Of course, Friedman's blindness is the belief that markets can function in the absence of government.
-TRIBUTE: Economist on a White Horse: How Milton Friedman saved the world (John O'Sullivan, National Review)
-Milton and Rose Friedman: Liberty's Couple: On Free to Choose (Lawrence B. Lindsey, December 19, 2005, National Review)
-Milton, the Affable Tactician: He knew what to say, but he also knew how to say it. (Greg Kaza, 1/29/07, National Review)

Posted by Orrin Judd at January 29, 2007 9:10 AM