Biography: Milton Friedman
Nobel Prize in Economics

Milton Friedman was born in New York City, the fourth child and only son of working class Jewish immigrants from a Hungarian community in what is now Ukraine. When he was a year old, the family moved to Rahway, New Jersey, where Friedman's parents kept a dry-goods store. Although their financial position was precarious, and no member of the family had been to university before, it was decided early that Milton would attend college. He read voraciously, enjoyed school and showed a particular talent for mathematics. He earned a degree in mathematics from Rutgers University, graduating in 1932 during the very depths of the great Depression. Although scholarships covered his tuition costs, he worked throughout his student years to meet his living expenses.

After graduation, Friedman was interested in pursuing further studies in mathematics, but the dire state of the national economy inspired him to pursue economics instead, and he accepted a scholarship from the University of Chicago. While earning a master's degree in a single year at the University, he met a fellow economics student, Rose Director. The two hoped to marry, but were long dissuaded by the financial difficulties of starting a family during the Depression. Friedman was awarded a year's fellowship to continue postgraduate studies at Columbia University. After another year in Chicago as a research assistant in the economics department, he was then hired by the National Resources Committee in Washington to work on a large consumer budget survey.

In 1937, Friedman joined the research staff of the National Bureau of Economic Research in New York City. With a steady income finally assured, Milton Friedman and Rose Director were married in 1938. They have collaborated on many books and projects over the years. Friedman's studies of income from independent professional practice served as his doctoral dissertation for Columbia University, but publication of his dissertation was delayed until after World War II. In 1940, Friedman accepted a job at the University of Wisconsin but was forced to resign within a year. Friedman had fallen into conflict with other members of the faculty over America's entry into World War II, which Friedman favored and others opposed. During World War II, he worked in the Treasury Department, where he helped create the federal withholding tax system. Prior to that time, Americans had paid their taxes in a single lump sum each year. During the last years of the war, he suspended economic research and was employed as a mathematical statistician by a special projects group at Columbia University, concentrating on problems of weapons design, military tactics and metallurgical experiments.

After the war, Friedman's dissertation was finally published, and he was awarded his Ph.D. from Columbia University. The resulting book, Incomes from Independent Professional Practice introduced the concepts of permanent and transitory income. This study of professional income, integrated with his prior work on consumer budgets, served as the basis of his landmark Theory of the Consumption Function. After one year at the University of Minnesota, Friedman accepted an appointment at the University of Chicago, where he taught for the next 30 years, while simultaneously maintaining a staff position with the Bureau of Economic Research.

At the Bureau, Friedman conducted a long-term study of the role of money in the business cycle. At the University, he established a "Workshop in Money and Banking," which led a revival of interest in monetary studies in the United States. Friedman made a name as one of the University's exponents of neo-classical economics, opposed to the Keynesian economics then in favor at most universities in Europe and America. Within the larger grouping of the Chicago School, Friedman and like-minded colleagues are regarded as monetarists. They see money supply as the major determinant in the business cycle and inflation and regard it as the most effective instrument of government economic policy. Rather than the fine-tuning of Keynesian fiscal policy, Friedman recommended that central banks such as the Federal Reserve adopt a general rule of controlling the money supply to suppress inflation and allow prices to find their natural level. Friedman long argued that most other forms of government intervention in the economy are not only counterproductive in economic terms, but are fundamentally contrary to the values of a free society.

In the early 1960s, Friedman's ideas began to gain adherents beyond the fraternity of academic economists, largely through a series of persuasive books for the general reader, including Capitalism and Freedom (1962), written in collaboration with his wife, Rose D. Friedman. The following year saw the publication of his monumental Monetary History of the United States, written in collaboration with Anna J. Schwartz.

The success of his works with the general public brought him into a more prominent role in public policy debate. Friedman served as an informal economic adviser to the 1964 presidential campaign of Senator Barry Goldwater. Goldwater was defeated, but Friedman's ideas were reaching a wider audience. From 1966 to 1983, he wrote a regular column for Newsweek magazine.

Friedman advised the successful presidential campaign of Richard Nixon in 1968. During the Nixon presidency, Friedman served on a committee to study the feasibility of returning to an all-volunteer armed force for the first time since before World War II; the recommendations of this committee led to the abolition of the military draft in 1973. Despite his interest in public policy, Friedman consistently refused appointments to full-time government positions, preferring to concentrate on his scientific work and to promote his public policy beliefs outside of government.

In 1975, Friedman made a controversial visit to Chile during the military dictatorship of General Augusto Pinochet to give a series of lectures on economics. Other University of Chicago professors and graduates later served as advisers to the Chilean government. Although Friedman never advised the regime directly, he believed the adoption of free-market policies helped prepare the country for its eventual return to democratic rule. Friedman gave similar lectures in South Africa and Rhodesia (now Zimbabwe) in the 1970s. He was later to travel as far as China to speak on his free market ideas.

Friedman's earlier scientific work now received international recognition. He was awarded the 1976 Nobel Prize in Economics "for his achievements in the fields of consumption analysis, monetary history and theory and for his demonstration of the complexity of stabilization policy." That year, he retired from the University of Chicago, although he retained the title of Paul Snowdon Russell Distinguished Service Professor Emeritus of Economics at the University. From 1977 until his death he was a Senior Research Fellow at the Hoover Institution on War, Revolution and Peace at Stanford University.

In 1980, Milton Friedman's ideas were featured in a 10-part public television series, Free to Choose. Friedman and his wife Rose published a popular companion volume to the series; it became the best-selling nonfiction book of the year. That same year, Friedman advised presidential candidate Ronald Reagan, whose views closely reflected Friedman's laissez faire philosophy. In the first year of the Reagan administration, Friedman served as a member of the President's Economic Policy Advisory Board.

The 1980s were a watershed decade for the acceptance of Friedman's ideas. His views of monetary policy, taxation, privatization and deregulation informed the policy of governments around the globe, especially the administrations of Ronald Reagan in the United States and Margaret Thatcher in the United Kingdom. His ideas were studied throughout the world, and played a major role in the transformation of China's economy. At the same time, his libertarian views on social issues such as the decriminalization of drugs sometimes put him at odds with conservative admirers of his economic thinking. Many of his magazine essays decrying activist government were collected in the 1983 book, Bright Promises, Dismal Performance.

A second television series and accompanying book by the Friedmans, Tyranny of the Status Quo, appeared in 1984. In 1988 Friedman was awarded the National Medal of Science and the Presidential Medal of Freedom. In that year of honors, Milton Friedman and his wife Rose published a joint memoir of their life together, Two Lucky People. In later years, the Friedmans made their home in San Francisco, where Milton Friedman died in 2006, at age 94.

Since his death -- and the financial crisis of 2008 -- Friedman's ideas on government regulation of business and finance have been hotly debated, but his teachings retain strong support among economists and policy makers around the world. Since 2002, the Cato Institute, a Libertarian think tank, has awarded a Milton Friedman Prize of $500,000 to the person who has done the most in the previous two-year period to advance the cause of economic freedom, a fitting tribute to the man and to the cause he championed.