A Toast — and Debt of Gratitude — to Milton Friedman

Published July 31, 2009

It’s my pleasure and honor to participate with you in this celebration of the life and ideas of Milton Friedman, one of the greatest economists of the twentieth century.

Dr. Friedman was born on July 31, 1912, and passed away on November 16, 2006, at the age of 94.

We are celebrating the 97th anniversary of his birth.

The Friedman Foundation for Educational Choice has declared July 31to be “Milton Friedman Day,” and it has kindly offered to help organizations like The Heartland Institute host meetings like this. Fifty events are taking place across the country to commemorate this day.

Milton Friedman is best known for winning the Nobel Prize in Economics in 1976; for being the author of Capitalism and Freedom, and (with Anna Jacobson Schwartz) A Monetary History of the United States, and with Rose Friedman, Free to Choose and Two Lucky People: A Memoir.

He was a long-time columnist in Newsweek and for many years was on the faculty of the University of Chicago, where he was a founder of the Chicago School of Economics, which he once defined as “an approach that insists on the empirical testing of theoretical generalizations and that rejects alike facts without theory and theories without facts.”

“… facts without theory and theories without facts.”

It’s a terrific insight into economics, I think, and one that The Heartland Institute has tried to follow as it applies economics to a wide range of public policy issues.

Milton Friedman played an important role in the creation of The Heartland Institute. In 1976, as a freshman student at The University of Chicago, I read Capitalism and Freedom. It was assigned reading during one of three quarters of what was called “Political Order and Change,” part of the university’s “common core” curriculum requirement.

My classmates and I read this book shortly after reading excerpts of Das Kapital, the utterly turgid tome by Karl Marx. The difference could not have been more dramatic. Virtually everyone in that class were classical liberals by our sophomore year.

(In case you think my conversion to libertarianism was too sudden or based only on first impressions, let me also report that the following year I read all three volumes of Das Kapital in a tutorial with a socialist professor and one other student, who was also a socialist. At the end of it, I was even more emphatically a classical liberal!)

David Friedman, Milton and Rose’s remarkable son, was at the University at the time and somewhat active with the campus libertarian club, as were David Ramsey Steele, Gary Becker, Sam Peltzman, and some other libertarians who are still active and in Chicago to this very day.

I had the pleasure of meeting Milton and Rose Friedman on several occasions, and Milton and I often traded emails on books, policy studies, and other work of The Heartland Institute. Maybe it goes without saying, but he was a brilliant man, a man without pretense or arrogance, a man who knew how to communicate with other people with wit and wisdom and patience.

Friedman’s ideas were vindicated in his lifetime:

  • He and Anna Schwartz argued, in A Monetary History of the United States, that monetary policy — mainly the supply of money — is the main driver of inflation and a potent source of business cycles. This was at odds with Keynesianism’s focus on government fiscal and budget policy, and it led to major changes in policy beginning in 1980.
  • He argued, in Capitalism and Freedom and Free to Choose, that personal freedom requires free markets, and that deviations from free markets invariably lead to less personal freedom as well as less prosperity. He lived to see the election and reelection of Ronald Reagan — a president who explicitly and repeatedly cited his work and ideas — in 1980 and 1984, the collapse of the Berlin Wall in 1989, and the collapse of the Soviet Union itself in 1991.
  • He recommended deregulation, tax cuts, and entitlement reforms during the 1980s and 1990s that won public and political support and breathed new life into a conservative movement that had no principles, and a libertarian movement that was all principles but had no realistic policy recommendations.

His greatest contribution was to bring economic thinking and reasoning to the public in plain language, with real-world examples and humor and a cleverness that could win over even the smartest and most cynical people. In his Newsweek columns and television series, Free to Choose, he covered the entire waterfront of social, economic, and political issues, explaining how maximizing freedom could solve virtually any problem, while relying on coercion could only make problems worse.

He was the source of an almost endless number of clever quips and aphorisms, such as:

“If you put the federal government in charge of the Sahara Desert, in five years there would be a shortage of sand.”

“Nothing is so permanent as a temporary government program.”

“Only government can take perfectly good paper, cover it with perfectly good ink, and make the combination worthless.”

… and of course,

“There’s no such thing as a free lunch.”

Friedman’s ideas are more relevant and more important today than ever before. I think we know that Friedman would have opposed the “stimulus plan,” hundreds of billions of dollars in federal spending designed to “prime the pump” and lift the economy out of a steep recession. Eventually that spending has to come from the earnings of productive workers and investors. We can’t spend or borrow enough to hold everyone harmless from the costs of un-leveraging the economy as a massive bubble collapses.

Similarly, Friedman would have opposed “cap and trade” and “ObamaCare,” the ever-changing plan to nationalize the nation’s health care system.

What would he have said about the “bail-out” plan”? Randall Kroszner, a governor of the Federal Reserve System from 2003 until January of this year, and now once again a professor at the University of Chicago, spoke at a Heartland event in June. He said that he and his colleagues, who designed the bail out, were following Friedman’s teaching to avoid deflation at all costs. With all due respect to Dr. Kroszner, I just don’t believe Milton Friedman would have approved of that interpretation of his research.

The election of Barack Obama may seem to have been a rejection of Milton Friedman’s lifetime of thinking and advocacy. I suppose the president himself may think that is so. But once again, and with all due respect to the president, that has to be wrong.

The election was not a referendum on ideology. It was, as Obama said over and over again and his friends in the media amplified into a deafening chorus, about change … in age, political party, rhetoric, and color. Obama created at least the appearance of being to the right of John McCain on several issues, including taxes and health care, resulting in a considerable amount of buyers’ remorse right now. His approval ratings are dropping fast, and voter approval of his policies is falling even faster than approval of the man.

One area where Milton Friedman has not won in the political arena is school choice. In Capitalism and Freedom, Friedman called government funding and operation of K-12 schools “an indiscriminate extension of governmental responsibility” and called for replacing the current government school monopoly with vouchers, allowing parents to choose whatever schools they wanted for their children, whether private, public, or religious. The idea is popular with voters, especially black and Hispanic voters, but it is fiercely resisted by teachers unions.

In their memoirs, titled Two Lucky People, Milton and Rose wrote that their long involvement in the school choice movement “has been frustrating because we have had so little success, nearly every effort being derailed by the special interests of the educational establishment, notably the teachers’ unions. The more we have learned about our educational system,” they wrote, “the greater has become our confidence that an unrestricted voucher system would lead to enormous improvements in the schooling available to our children, especially those in the most disadvantaged families.”

With a former University of Chicago lecturer and Illinois senator in the White House, and a former Chicago Public Schools CEO, Arne Duncan, serving as secretary of education, one might think this favorite idea of one of Chicago’s favorite sons might be getting some favorable attention. Alas, it is not. Teachers unions own the Chicago Public Schools, they still own Arne Duncan, and at the end of the day, they own the President of the United States.

Thankfully, financing or operating schools is not one of the enumerated powers of the federal government. This hasn’t stopped the feds from pouring hundreds of billions of taxpayer dollars into failing public schools, but it does, at least, mean reform doesn’t depend on actors in Washington DC. Reform is still possible and is occurring slowly around the country, though not in Illinois. It will be slower for the next four years, thanks to Illinois’ gifts to the country, Obama and Duncan.

But we are here to celebrate a life and a legacy, not to complain or wallow in self-pity. Milton Friedman was a gift from God to a world that desperately needed a brilliant advocate of freedom and limited government. He freed hundreds of millions of people from the bonds of totalitarian governments and enhanced the prosperity of billions of people. He changed the lives of every person in this room, all of our children, and all of their children.

The limits of mortal life prevent us from ever repaying the debt we owe to Milton Friedman. But we can pledge, all of us, to keep his memory alive, to teach his ideas to others, and to fight for the ideals that he devoted his entire life to advancing.

So I propose a toast to Milton Friedman, a friend, scholar, and advocate, that his ideas may continue to change the world for the better, and live on in the minds of all men and women of good will until the ends of time.

Joseph Bast is president of The Heartland Institute, a nonprofit research organization based in Chicago. He can be reached at [email protected].