Political views
Friedman was the leading proponent of the
monetarist school of economic thought. He maintained that there is a close and stable link between
inflation and the
money supply, mainly that the phenomenon of inflation is to be regulated by controlling the amount of money poured into the national economy by the Federal Reserve Bank; 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."
[6] 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. Friedman's macroeconomic theories were soon displaced. His close friend
George Stigler explained, "As is customary in science, he did not win a full victory, in part because research was directed along different lines by the theory of rational expectations, a newer approach developed by Robert Lucas, also at the University of Chicago."
[7]
Friedman worked at the Treasury Department during
World War II and played an important role in designing the United States
withholding tax system.
[8] Before 1942, there was no withholding system; those wealthy enough to pay income taxes did so in one lump sum on
March 15 of the following year.
Friedman also supported various
libertarian policies such as decriminalization of
drugs and
prostitution. In addition, he headed the
Reagan administration committee that researched the possibility of a move towards a paid/volunteer armed force, and played a role in the abolition of the
draft that took place in the 1970s in the U.S. He would later state that his role in eliminating the draft was his proudest accomplishment.
[9] He served as a member of
President Reagan's
Economic Policy Advisory Board in 1981. In 1988, he received both the
Presidential Medal of Freedom and the
National Medal of Science. He said that he was a libertarian philosophically, but a member of the U.S.
Republican Party for the sake of "expediency" ("I am a libertarian with a small l and a Republican with a capital R. And I am a Republican with a capital R on grounds of expediency, not on principle.") But, he said, "I think the term
classical liberal is also equally applicable. I don't really care very much what I'm called. I'm much more interested in having people thinking about the ideas, rather than the person."
[10]
Friedman made headlines by proposing a
negative income tax to replace the existing
welfare system and then opposing the bill to implement it because it merely supplemented the existing system rather than replace it. In recent years, Friedman devoted much of his effort to promoting
school vouchers that can be used to pay for tuition at both
private and public schools, saying, "
What is needed in America is a voucher of substantial size available to all students, and free of excessive regulations." His idea was that vouchers would allow private schools to compete with the public school monopoly.
Friedman allowed the
Cato Institute to use his name for its
Milton Friedman Prize for Advancing Liberty in 2001. His wife Rose, sister of
Aaron Director, with whom he founded the
Milton and Rose D. Friedman Foundation for School Choice, served in the international selection committee. Friedman's son,
David D. Friedman, has carried on his tradition of arguing in favor of free markets, but to a further extreme, advocating
anarcho-capitalism.
At a ceremony celebrating Friedman's achievements,
Alan Greenspan said "There are many Nobel Prize winners in economics, but few have achieved the mythical status of Milton Friedman."
[11]
According to Harry Girvetz and Kenneth Minogue, Friedman was co-responsible with
Friedrich von Hayek for providing the intellectual foundations for the revival of classical liberalism in the 20th century.
[12]
In 2005, Friedman and more than 500 other economists called for discussions regarding the economic benefits of the
legalization of marijuana.
[13]
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