One of the most influential and consequential economic thinkers since Adam Smith has passed away. Milton Friedman has died at the age of 94. Vivien Lou Chen writes this about Friedman at Bloomberg.com:
Milton Friedman, the Nobel laureate economist who shaped the philosophies of Ronald Reagan, Margaret Thatcher and successive Federal Reserve chairmen, has died, his daughter Janet said.
Friedman's theory that inflation results from too much money chasing too few goods inspired a generation of central bankers, beginning with Paul Volcker, who was Fed chairman from 1979 until 1987. Alan Greenspan and Ben S. Bernanke also credit Friedman's work as a blueprint for policy making.
"Friedman's monetary framework has been so influential that, in its broad outlines at least, it has nearly become identical with modern monetary theory and practice," Bernanke said at a conference in October 2003 when he was a Fed governor. He became chairman in February 2006.
Friedman wrote, co-wrote or edited 32 books, including "A Monetary History of the United States, 1867-1960" with Anna Schwarz in 1963, and argued that the goal of monetary policy should be long-term, stable growth in the supply of money. He championed individual initiative and deregulation and influenced decisions from severing the dollar's peg to gold in the early 1970s to ending the military draft.
"It's hard to think of anyone who's had more of a direct influence on social and economic policy in this generation," said Carnegie Mellon University Professor Allan H. Meltzer, who is preparing a two-volume history of the Fed and has been an adviser to the Bank of Japan. "He, along with others, promoted the idea of low inflation and a more disciplined central bank."
In his later years, Friedman advocated that the Fed adopt an inflation target, a numeric price goal which the central bank should pledge to hit over a specified period of time. He supported George W. Bush's failed effort to overhaul Social Security, counseled California Governor Arnold Schwarzenegger and predicted the demise of the euro.
With his trademark pronouncement that inflation was "always and everywhere a monetary phenomenon" Friedman was among the Fed's most vocal critics as inflation accelerated through the 1960s and 1970s. He said the central bank failed to control the supply of money, should be stripped of its autonomy and forced to focus on keeping money supply growth steady at about 3 percent.
The Fed kept its independence. Friedman's arguments were acknowledged, though, when Volcker launched an attack on inflation in 1979 by targeting money supply and pushing up interest rates to crush inflation.
The Brooklyn-born Friedman traveled the world promoting balanced budgets and limited state spending. He joined Reagan's Economic Policy Advisory Board in the early 1980s, helping guide and reinforce the president's views on government largess and tax reduction.
He served as an adviser to Thatcher, U.K. Prime Minister from 1979 to 1990, who pushed for a free-market economy, low taxation, and the sale of state-owned industries. Bush credited Friedman's ideas with bringing inflation under control in Chile, the adoption of a flat tax in Russia, and the creation of personal retirement accounts in Sweden.
Friedman's teachings at the University of Chicago helped foster the "Chicago School" of economics, known for theories associated with free-market libertarianism.
Those ideas were put to use in Chile during the 1970s and 1980s, when a group of economists trained at the University took key government positions under General Augusto Pinochet. The so- called "Chicago Boys" advocated widespread deregulation and privatization, helping Pinochet's military junta bring inflation down from as high as between 700 percent and 1,000 percent.
"He has used a brilliant mind to advance a moral vision: the vision of a society where men and women are free, free to choose, but where government is not as free to override their decisions," Bush said in a May 2002 speech at the White House to honor Friedman on his 90th birthday. "All of us owe a tremendous debt to this man's towering intellect and his devotion to liberty."
There's more at the link and also here.