Milton Friedman: The Spend Management Economist

It's a sad reflection on the academy that most university economists today would rather figure out how to maximize the spending of public dollars to spur growth or directly manipulate rates and peg currencies than let the invisible hand determine appropriate, sustainable upward market direction. My thinking on this is that academic economists need to justify such meddling because without it, they would all need to get real jobs. Fortunately, this type of thinking was anathema to the late Milton Friedman, who believed that less market intervention was usually more. Yesterday, the Nobel prize winning Friedman died at the age of 94. Many credit Friedman as an architect who helped shape the free-market economic policies of some of the most effective Western leaders of the late 20th century (e.g., Reagan, Thatcher).

Friedman would probably agree with the label that he was the Spend Management economist. According to Wikipedia, "he rejected the use of fiscal policy as a tool of demand management; and he held that the government's role in the guidance of the economy should be severely restricted. Friedman wrote extensively on the Great Depression, which he called the 'Great Contraction,' arguing that it had been caused by an ordinary financial shock whose duration and seriousness were greatly increased by the subsequent contraction of the money supply caused by the misguided policies of the directors of the Federal Reserve. 'The Fed was largely responsible for converting what might have been a garden-variety recession, although perhaps a fairly severe one, into a major catastrophe. Instead of using its powers to offset the depression, it presided over a decline in the quantity of money by one-third from 1929 to 1933 ... Far from the depression being a failure of the free-enterprise system, it was a tragic failure of government' ... Friedman also argued for the cessation of government intervention in currency markets, thereby spawning an enormous literature on the subject, as well as promoting the practice of freely floating exchange rates."

In his political and economic philosophy, Friedman considered himself a classical liberal or libertarian. By advocating that government -- for the most part and wherever practical -- get out of the way of restricting business and trade, Friedman believed that all would benefit in the long run (I say that even though we all die anyway, why not enjoy life and prosper rather than spend time worrying and meddling). But perhaps more important than the free market economic and monetary policies that Reagan and Thatcher introduced -- which were certainly inspired by Friedman – we can attribute "Alan the Great's" economic philosophy that led to a prosperous and sustained period of economic growth to Friedman’s teachings and research. Dr. Friedman, we'll miss you, but I can promise that your philosophy will live on in these virtual pages.

Jason Busch

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