For most households, the name Milton Friedman is not a household name.
Yet this Nobel-prize winning economist has changed how we view money, business, and how the government works to promote the general welfare.
As such, his views influence our everyday lives.
Economics is like spinach … in a good way
Economics is all about studying the economy. What is the economy? It's all about business, money, jobs and so on.
It's the story about how we provide for our needs.
OK, yawn you might say; I'd rather see pictures of cute animals.
Whether this topic gets you excited or not, the fact remains that knowing how economics works is important to know how things look for you in your quest to provide for your needs and that of your family.
But beyond this, for nearly a century governments have taken it upon themselves to control economies. As a voter, it is important to know how things work while making decisions on how to vote. The decisions made by those we vote for could make a difference in how we work, how much we get paid, and how much we pay at the store.
So this may be a bit like eating spinach, … go ahead and swallow since it is very good for you.
A star is born
Milton was born on July 31, 1912, in Brooklyn New York. After graduating from Rutgers University he went on to study at the University of Chicago. It was there that he met his wife, Rose director (she also was studying economics and would later work with him throughout his life).
Milton and Rose Friedman, photo by Natalia Bargel*
In 1935 he started working in Washington under the Franklin Roosevelt administration. There he played a role during world war two to set up income tax being withheld from people's pay.
Later he returned to Chicago to teach economics and develop his ideas. Strange thing though, as time went on he would change his views about money to be completely opposite to that of Roosevelt. He would continue his work until he died in 2006.
Let's learn more about them.
It's about money
Beginning in the 1930s it became popular for governments to take a view of economics later promoted by an economist named John Maynard Keynes (Keynesian Economics). The idea was that the government can control the economics (how much people spend, the number of jobs and so on) by how much it spends. When hard times come around, all the government has to do is spend more money.
If things get too out of hand the government can slow things down by spending less – people have less income.
This followed the logic used by Franklin Roosevelt in the United States as well as the Nazis in Germany.
Friedman viewed this as incorrect. To him, it was all a question of how much money there is. More money moving around means more spending, more jobs and, if there is too much, increasing prices. And the reverse is true if there isn't enough money.
To Friedman, governments stepping in to do things to “fix” a weak economy did not make sense. He was a big believer in the free enterprise system/capitalism, and as long as there is enough money floating around and lack of government interference bad times will turn to good.
The great depression
Look at any textbook about the hard times of the 1930s, the great depression, and you will see that it is said to began as a result of the Stock Market crash of 1929. The result is a period of hard times and high unemployment that ended because of the New Deal of Franklin Roosevelt.
Friedman looked over the facts and concluded the reason for the depression was that several banks in the Midwest United States failed and the Federal Reserve (the central bank) did not save them as they were supposed to. With thousands of banks failing, an untold amount of people's savings went with them. Without money, hard times hit.
Friedman also pointed out that this New Deal (government spending as described above) did not save the United States. Several times government interference dragged out the recovery. Instead of a depression lasting a year or so, it lasted for about ten years and only ended when the United States entered World War II.
Everyone can learn economics
Milton Friedman was big on education and felt that everyone should be able to learn economics. This goes along with his view and confidence in people.
He made a point of explaining his views in simple, understandable ways so people can understand.
Milton Friedman was opposed to minimum wages. A minimum wage is the lowest amount of pay an employer, by law, can pay an employee.
He reasoned that when you make an employer pay more for work, the people who get hurt by it are the ones who were supposed to be helped the most, those who don't have many skills and would be paid the lowest anyway. He reasoned that by raising how much an employer must pay for basic work would make him less able to hire on workers. They don't have the jobs they would have had.
You can see more of his explanation in a magazine interview here.
Here are some quotes by Friedman:
“Well first of all, tell me: Is there some society you know that doesn’t run on greed? You think Russia doesn’t run on greed? You think China doesn’t run on greed? What is greed? Of course, none of us are greedy, it’s only the other fellow who’s greedy. The world runs on individuals pursuing their separate interests. … In the only cases in which the masses have escaped from the kind of grinding poverty you’re talking about, the only cases in recorded history, are where they have had capitalism and largely free trade. If you want to know where the masses are worse off, worst off, it’s exactly in the kinds of societies that depart from that. So that the record of history is absolutely crystal clear, that there is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by the free-enterprise system.”
“I think that nothing is so important for freedom as recognizing in the law each individual’s natural right to property, and giving individuals a sense that they own something that they’re responsible for, that they have control over, and that they can dispose of.”
“Nothing is as permanent as a temporary government program.”
“The problem of social organization is how to set up an arrangement under which greed will do the least harm, capitalism is that kind of a system.”
“I am favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it's possible.”
Friedman changed the way people viewed how money and business work. In reality, however, it was more of a return to the roots that established prosperous societies in the United States and elsewhere. It is based on the idea that people, while hardly perfect, are quite able to grow and see their potential realized.
This idea, if nothing else, is worth being reminded of.
On the web
Milton Friedman – article on Investopedia
Investopedia is my go-to place to learn about money matters. This article goes over the views of Milton Friedman as well as the life of the man himself.
Milton Friedman - What is Monetary Policy?
Video where Friedman explains Monetary policy – the focus on money as the control of an economy.
Milton Friedman - The Minimum Wage
Video where Friedman explains his opposition to the minimum wage.
What is money? This site explains what money is, what purpose it serves, and how we came to have it.
*License shared through creative commons 4.0.
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