Audio coverage of a panel discussion on Nobel Prize winning economist Milton Friedman by former students and Chicago Booth colleagues.
Milton Friedman’s legacy ranges from the creation of the Chicago Mercantile Exchange to the thriving free markets of post-Communist Eastern Europe, a fact recalled by several speakers at a memorial service for the Nobel laureate at Rockefeller Memorial Chapel January 29.
Vaclav Klaus, president of the Czech Republic, was only able to read about Friedman before the collapse of communism. After the collapse, Friedman’s books became available, and his theories substantially influenced the opening of free markets in former communist countries, Klaus said. “For those of us who lived in the communist world, Milton Friedman was the greatest champion of freedom, of liberty and unobtrusive government, and of free markets,” he said. “Because of him, I became a true believer in the unrestricted market economy. He became one of my heroes. I consider him to be one of the greatest thinkers and economists of the 20th century.”
In one of his first-ever political statements in 1990, Klaus told the World Economic Forum that after four decades of communism, he wanted to re-establish markets in the Czech Republic, “but markets without objectives,” he said. “The journalists immediately recognized that I am ‘one of the Chicago boys,’” Klaus said.
When much of the financial community scoffed at the idea of selling financial futures in Chicago, only Friedman could confirm whether the idea had merit, said Leo Melamed, founder of financial futures and chairman emeritus of the Chicago Mercantile Exchange. The 11-page “feasibility study” Friedman wrote on the proposal proved to be its “secret weapon,” Melamed said.
“With it in hand, we criss-crossed the country innumerable times, visited every nation on the planet, addressed audiences large and small, faced government officials, bank presidents, corporate treasurers, and the brokerage community, and convinced them that a market in currency futures, a market in financial instruments, was an idea whose time had come,” he said. “It was magical.”
When Melamed and his colleagues called the International Monetary Fund a great idea, the rest of the world “yawned or laughed,” he said. “When we told them, ‘Milton Friedman said so,’ the world took notice,” Melamed said. “When we were told fixed exchanges are coming back, we told them, ‘Friedman said they’re not.’ When we were told Chicago was the wrong place, we told them, ‘Friedman is a Chicagoan.’ When we were told we were crazy, we responded, ‘Friedman is one of us.’”
Friedman was a brilliant economist, but he possessed other vital traits that “transcend professional matters,” said Arnold Harberger, Gustavus F. and Ann M. Swift Distinguished Service Professor Emeritus. In his interactions with everyone, Friedman lived life with “no frills, no pettiness, and no fear,” Harberger said.
In Friedman’s legendary course on price theory, every point was essential, he said. “That course was like the proverbial three-legged stool,” Harberger said. “Nothing could be thrown away without disturbing the integrity of the whole. Nothing in it was pompous, pretentious, or prissy.” In one of his books, Friedman quoted poet John Keats to describe the aesthetic quality of price theory, Harberger said: “Beauty is truth and truth beauty. That’s all ye know on earth and all ye need to know.”
In the 60 years he knew Friedman, Harberger said he never once saw him attack another person’s character during an argument, fight intellectually with insinuation or innuendo, or use the name of another intellectual to bolster his argument. “It is as if an iron will kept driving him to talk only about the merits of the case all of the time,” he said.
During the Keynesian wave of economic thought in the 1940s and 1950s, Friedman rose as the first and foremost prophet of monetarism, isolating himself from much of the economic profession; in fact, he was often referred to or treated as an “oddball or crank,” Harberger said. “There seemed to be some inner force within him driving him to tell the truth as he saw it, come what may,” he said. “To yield to his attackers on these matters would be nothing less than a denial of his true self.”
One of Friedman’s most endearing characteristics as a “gentle intellectual giant” was his humanity, said Michael Walker, senior fellow and president of the Fraser Institute Foundation. Friedman never embarrassed anyone who asked a silly question and treated everyone with respect, even when they assailed him for his views, Walker said. Friedman was a social handwriting analyst, competent woodworker, great tennis player, and good skier who wanted to learn in-line skating, Walker added.
“Milton’s contributions to economic understanding were driven by his ambition to change the world,” he said. “He was a student of history as well as a creator of it, and acutely aware of the extent to which human suffering and underachievement were the unintended consequences of well-meaning but incorrect policy. Perhaps that explains his tolerance.”
Friedman’s most important book on public policy, Capitalism and Freedom, outlined his best-known proposals for public policy—many which have been gradually implemented or remain crucial to debate today—45 years ago, said Nobel laureate Gary Becker, University Professor of Economics and of Sociology. Among them are school vouchers, the privatization of Social Security, a flat tax of 20 percent, flexible exchange rates, the necessity of economic freedom to gain political freedom, and a volunteer army, Becker said.
“He had a missionary zeal to convert people, no matter how unimportant to the world that conversion may have seemed,” Becker said. “I’ve seen him sit and explain to taxi drivers whey their statements about taxes made no sense while the meter was running up his fare.”
Friedman benefited from and helped recreate on a daily basis the defining academic culture of the University of Chicago, according to university president Robert Zimmer. “Milton Friedman was renowned for unrelenting argument, bringing out the best in himself and others through his insistence on rigor, and relentless argument in search of clarity,” Zimmer said at Friedman’s memorial service at Rockefeller Memorial Chapel on January 29. “Status counted for nothing; merit of argument counted for everything.”
In that respect, Friedman and the University of Chicago were “made for each other,” he said. “Perhaps no one is more identified with the value of intense, engaged argument than Milton Friedman, and no one is more identified with a willingness to stand alone against common belief,” Zimmer said. “Similarly, there is no university that holds these values as its core values as much as the University of Chicago.”