Milton Friedman 1912-2006

This week saw the passing of the great economist, Milton Friedman. There is a nice homage to him on Cato. I can proudly say that I am one of the many people influenced by Friedman. I double majored in economics for three years in college, before I wimped out and settle for a single degree in math. The economics classes at Caltech were definitely tilted to the highly analytical theories of Keynes. I would often find myself dreaming of IS-LM curves. I knew about Hayek and the Austrian School, but they seemed to be saying "it's too hard to use math on economics, so don't even try." A lot of their theories were reactionary ones to the rise of fascism and communism as well, so they seemed dated in the 90s. Then I read Friedman.

Actually it was Friedman's writings on health care and the AMA that really got to me. When I learned this was from his book Free to Choose, I had to read that. It made me question some of the "traditional" interpretations of the causes of the Great Depression. It occurred to me that it was a revisionist view that the Depression was caused by "capitalism gone wild" and that it was government regulation, particularly the Federal Reserve monetary policy, that had really aggravated the Depression. Suddenly the Depression was no longer an IS-LM consequence, and the kind of "solution" implied by that kind of analysis actually made the Depression worse.

Now I can't say that Friedman turned me into a Republican or even a Libertarian. I know he advised Regan, but I really don't think Reagan's economic policies reflected the kind of theories presented by Friedman in Free to Choose. I am still convinced that despite Friedman's opposition to communism, that his theories were totally incompatible with Reagan's policies towards the former Soviet Union. Embargo and massive military spending had no place in Free to Choose. I will say that my opposition to public education is tied to my interpretation of Friedman's theories.

So I must pay my respects to Friedman. A lot of people claim that times has shown that Friedman was wrong and that Keynes was right. What's funny to me is the revisionism at work. The great success of capitalism in the 90s has been racked up to successful monetary policy. They say that Keynes stood for this, not the fiscal policy of the New Deal or the socialist democracies of Western Europe. That's the real legacy of Friedman. He's caused history to change its version of Keynes.