Newswise — Costas Azariadis, professor of economics in Arts & Sciences at Washington University in St. Louis, offers the following comments on the passing of Milton Friedman, a path-breaking conservative economist who passed away today at age 94.
Milton Friedman was a giant among 20th-century American economists and the founding father of modern monetary theory. Regarded once as a member of a radical anti-government fringe of free market advocates, he eventually found a many of his ideas and views accepted as mainstream economics and sensible public policy. From the lifting of rent controls in big US cities and reduced tariffs under the Doha Round to the free movement of goods and capital around the world, Friedman was instrumental in shaping public debate about the proper role of markets and governments.
His book "Capitalism and Freedom" catapulted him to the front rank of those who favored competition and individual choice over large unions, megacorporations and central planning. In the last twenty years he saw many of his suggestions accepted in this country and abroad. The British Labor Party kept in place many Friedman-inspired reforms originally adopted by the conservative Thatcher government in the 1980's. And market reforms have been spreading like wildfire throughout the former Soviet block, from Poland and Slovakia to China and Vietnam.
As a scientist, Friedman will be remembered for his 1950's work on the "permanent income" hypothesis, which asserted that consumption is influenced by future income almost as much as it is by current income.
Also in the 1950's he advocated what became known for the "Friedman Rule" in monetary policy: the Federal Reserve System is to keep its eyes focused on the all-important supply of liquid assets which should be growing slowly and steadily to guarantee low interest rates, zero inflation, and a stable credit environment.
Above all, Friedman is likely to be remembered for his magisterial book " A Monetary History of the United States", co-authored with Anna Schwartz in 1963, in which he documents the role of money and credit in every recession that hit the U.S. economy between 1867 and 1960.
A few of Friedman's policy prescriptions have not met with luck. The Fed has given up on attempts to control liquidity. And school vouchers, one of Friedman's all-time favorite ideas meant to foster competition in public education, has made little or no progress in the US. But his leadership in shaping public debate about economic policy is recognized by friend and foe alike.
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