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Nobel Prize-Winning Economist Milton Friedman Dies at Age 94

November 16, 2006 at 2:50 PM EDT

RAY SUAREZ: Finally tonight, remembering influential economist Milton Friedman. Jeffrey Brown has our look.

JEFFREY BROWN: Milton Friedman, who died today at age 94, was a lifelong champion of free markets, an adviser to presidents, and for decades one of the nation’s most prominent economic thinkers. He made numerous appearances on the NewsHour, speaking on such things as inflation and job growth. Here’s a small sampling.

MILTON FRIEDMAN, Nobel Prize-Winning Economist: So far, as 1985 is concerned, that depends a little bit on what happens to the money supply from here on out. If it continues to go up at a fairly rapid rate, then I think we are likely to be back in double-digit inflation in 1985.

JIM LEHRER: That’s a tough prediction.

MILTON FRIEDMAN: I know it is. I don’t like it. Inflation has been a terrible scourge on this country. Few things have done us more harm, and yet you have to look the facts in the face.

ROBERT MACNIEL, Former NewsHour Host: Milton Friedman, do any of the candidates have a plan for job growth that gives you confidence?

MILTON FRIEDMAN: No, they don’t. The fact is that governments don’t create jobs, and the most they do is shift jobs. There’s a lot of talk about how infrastructure programs will create jobs. But the fact of the matter is that the money spent on that is taken from somewhere else and jobs are destroyed elsewhere.

Friedman's inspiration

JEFFREY BROWN: And we talk about the life and legacy of Milton Friedman now with Edward Snyder, dean of the Graduate School of Business at the University of Chicago and once a student of Milton Friedman's, and David Warsh, editor of the Web site and a former longtime economics columnist for the Boston Globe.

Dean Snyder, how would you define the key insight that Milton Friedman had and that he advanced in his work?

EDWARD SNYDER, Graduate School of Business, University of Chicago: Well, Milton pushed a couple big ideas. He said that individuals made better decisions than governments and that markets perform better than governments. And those ideas, armed with a lot of facts and optimism and patience, were the things that made him a force throughout his life.

George Will in 1989 wrote that, "The Cold War is over; the University of Chicago has won." And then I think, if you ask the question, who led the University of Chicago? It was General Friedman.

JEFFREY BROWN: The University of Chicago school of economic thought that is, correct?

EDWARD SNYDER: That's right.

JEFFREY BROWN: David Warsh, where did his ideas come from? Because he was developing these ideas during the Depression, and there was a very different economic model then in vogue.

DAVID WARSH, A good question, Jeffrey. They came from Adam Smith. They came from Alfred Marshall. Alfred Marshall was the great textbook author and innovator in England in the 19th century, and Milton Friedman went to school on those ideas. He made them his own, and then he took them and applied them to a wide range of things, but nothing more fundamental than the role of monetary policy in a modern economy.

JEFFREY BROWN: Well, fill that in a bit, applying it to a wide range of things. Where would you say he had the most impact, even up to our own time?

DAVID WARSH: Well, I think up to our own time he had the most impact in persuading people that money really mattered. Friedman took that position starting in the early '50s, and he kept at it relentlessly. He published a powerful history called "The Monetary History of the United States" in 1962 that argued that Central Bank tightening was at the heart of the deepening of the Great Depression.

And he argued throughout the '50s, '60s, '70s even, until really at the end of the '70s, Paul Volcker, as chairman of the Fed, took Friedman's ideas and implemented them, really took them seriously, and brought inflation under control.

Why money matters

JEFFREY BROWN: Dean Snyder, where do you see his greatest impact? You better explain why money really matters for us, because I think we all think money really matters.

EDWARD SNYDER: Well, what Milton pushed was that money supply was so important, money aggregates were important to inflation. And I think within economics, you would say that was his biggest legacy.

But I think you can make a strong case that Milton Friedman's biggest legacy was due to his role as a public intellectual, not so much as an economist, traditionally defined. And when I say that, what I mean is he enhanced the personal freedoms of more people around the world than I believe any other economist in history.

And it goes back to those core ideas that he believed that individuals make better decisions than governments. And he pushed those ideas in a variety of ways. He didn't win all his battles. It's interesting. I'm sure if you'd asked him a month ago, he'd still be talking about school choice, he'd still be talking about legalizing drugs.

But when you look at the big pictures, in terms of his influence, getting the idea that markets do good things and that governments can't outperform markets, those, I think, were really the engine for his biggest impact.

JEFFREY BROWN: Well, David Warsh, pick up on this public intellectual side, because there were great debates. There were lions on the other side. There was Galbraith; there was Paul Samuelson. Certainly, Friedman didn't convince all the time.

DAVID WARSH: Oh, absolutely. But, boy, he really -- at a certain point, say 1980, he convinced with a vengeance. That was the year that his television, his PBS series, "Free to Choose," with his wife, Rose, who was also an economist, aired.

And it was six months after Margaret Thatcher had taken over as prime minister in England. It was on the eve of Reagan's election in the United States. It was a year-and-a-half after Deng Xiaoping had let it be known that mainland China was going to take what he called the capitalist road.

And Friedman just absolutely captured the tide of the flood at that point. Not personally, not so much -- he was a friend of Thatcher, a friend of Reagan's. He gave lots of advice behind the scenes, but the impact of that television series is hard to exaggerate.

Ken Galbraith had a series himself called "The Age of Uncertainty" at the same time, and it just fell off a cliff in terms of impact. It persuaded the people who were already persuaded, but Friedman really carried the day. But the remarkable...

JEFFREY BROWN: I'm sorry, but the critique -- I was going to say -- that we would even hear on this show often was that he would be underplaying the role of government in helping those who needed it the most.

DAVID WARSH: Absolutely. The clip you played at the beginning, the second clip about the government doesn't create jobs, that was 1992, if I remember correctly. There was this enormous boom around the Internet in those years -- I don't know how many jobs -- but almost all of that was the result of government R&D funding, most of it spent by the Defense Department, but trying to create communication systems in the late '50s, '60s, timesharing for mainframe computers growing into the ARPANET, growing into the Internet.

That was all done by government. And I think even Milton, if he were here, would agree that there was a central place for government in R&D funding. He was against Social Security, but in the end, as Tad says, that was a battle he seems to have lost.

Milton Friedman: the man

JEFFREY BROWN: Well, Dean Snyder, I mentioned that you had him as a teacher. Tell us a little bit about Milton Friedman the man.

EDWARD SNYDER: Well, as a teacher, you knew you were in trouble when Milton would say, "Well, let's go slow," because he was going to pick you apart.

But one of the great things I learned from watching Milton Friedman over the years was that he always stayed within that respectful frame and, no matter what the debate was, no matter who his opponent was, who his adversary was, he was respectful. And he never questions a person's motives.

And I think, even though a lot of people view him as very strident, for those of us who had a chance to see him more often, he was a very warm person, optimistic, and always respectful of the people around him.

JEFFREY BROWN: David Warsh, we only have about 30 seconds. I understand you talked to him a couple of times even in the last year.

DAVID WARSH: I did, and he was sharp as ever at that time. I asked him -- practically the last thing I asked was, "Do you feel as good as you look?" And he said, "No."

But he was sharp until the end, and he really was a remarkable person. He was relentless. He lost the economics profession. I think it's correct, the way to understand him is as a public intellectual, that's the way he'll be remembered. But he was a bookend to John Maynard Keynes in his time.

JEFFREY BROWN: All right. David Warsh and Dean Edward Snyder, thank you both very much.