By Steven Landsburg
The Essential Milton Friedman is a new book about one of the most influential economists of the 20th century. It is an easily accessible overview of Friedman’s extraordinary contributions to economic theory, measurement and policy.
When economists are called “influential,” it usually means they’ve changed the way other economists think. By that standard, Milton Friedman was one of the most influential economists of all time. He revolutionized the way economists think about consumption, about money, about stabilization policy, and about unemployment. He demonstrated the power of committing oneself to a few simple assumptions about human behaviour and then relentlessly pursuing their logical implications. He developed and taught new ways of interpreting data, testing his theories by their ability to explain multiple disparate phenomena. His successes were spectacular and his techniques were widely emulated.
Born in Brooklyn, New York in 1912, Friedman’s career began in earnest at the University of Chicago where he did most of his pioneering academic work. His 1962 bestseller Capitalism and Freedom (alongside his regular column in Newsweek magazine) made him a household name, and he won the Nobel Prize for economics in 1976. He died in 2006 at the age of 94. At the time of his death, he was still researching and writing—the Wall Street Journal published his final column the day after he died.
In the United States, Friedman helped broaden educational choice, change the regulatory climate and end military conscription. Worldwide, most central banks now follow policies grounded in Friedman’s insights and recommendations, which have helped make the world richer and people more prosperous.
Written by Steven Landsburg, professor of economics at Rochester University, The Essential Milton Friedman also includes a new website www.essentialmiltonfriedman.org and a new video series exploring the ideas of Friedman.
Timothy Taylor on his blog 'The Conversable Economist' wrote:"The Essential Milton Friedman is an easy read that will make some of Friedman’s sometimes-counterintuitive ideas easy for even non-specialists to understand."
"It's a free e-book, 73 pages long, that offers an intro-level, highly readable nonspecialist overview of many of Friedman's most prominent ideas, by an author who knows this subject in much greater depth but is just hitting the high spots. The website also includes some short videos and links to other resources. Taken as a whole, the materials seem to me aimed at teachers who want to bring these ideas to their students, as well as those who would just like to learn more themselves. The topics any economist would expect are covered here"
Videos Made with the Book
- Who was Milton Friedman?
- The permanent income hypothesis
- The policy implications of the permanent income hypothesis
- Expected vs. unexpected
- The theory of money and prices
Relevant Links
- "Milton Friedman on freedom; Capitalism is not guaranteed to make you free, but for multiple reasons, the absence of capitalism is guaranteed to make you unfree" - OpEd by Landsburg on the occasion of the publication of this book, Financial Post, 29 January 2020
- You can find more resources on Milton Friedman on the website accompanying the book
- The book was published by the Fraser Institute, a libertarian think tank that according to SourceWatch has ties to the controversial Koch brothers.
About Steven Landsburg
Steven E. Landsburg is a professor of economics at the University of Rochester. He is the author of Can You Outsmart an Economist?, The Big Questions, More Sex is Safer Sex, Fair Play, The Armchair Economist, two textbooks on economics, and over 30 journal articles in mathematics, economics and philosophy. He has written regularly for Forbes and Slate and occasionally for The Wall Street Journal, The New York Times, and other publications. According to Wikipedia "Landsburg is [...] an outspoken commentator on economic, legal, and political issues whose comments have sometimes been regarded as controversial."
Table of Contents of The Essential Milton Friedman
Chapter abstracts have been copied from the website accompanying the book: https://www.essentialscholars.org/friedman The links download a pdf of the chapter from that website.
- The Permanent Income Hypothesis - Suppose you believe your economy is in the doldrums because people are somehow not spending enough. How do you get them to open up their pocketbooks? Start by perusing some data. You’ll quickly discover that spending is highly correlated with income. It’s well documented that if, in any given year, Alice out-earns Bob by a dollar, then on average she’ll outspend him by at least 90 cents.
- Money, Prices, and Inflation - The Nobel Prize-winning economist Robert Solow once observed that “Everything reminds Milton of the money supply.” It’s certainly true that Milton Friedman had a lifelong fascination with the money supply, leading to insights that profoundly changed both academic thought and practical policymaking. Actually, Friedman’s analysis begins on the other side of the market—the demand for money—as opposed to the supply. To the casual reader, the idea of studying the “demand for money” might sound absurd. Don’t we all want as much money as we can possibly get? Isn’t that all there is to say on the matter?
- Monetary Policy - Now that we’ve talked about how the price level is determined, let’s double back and ask why we should care about the price level in the first place. If the money supply doubles, and all prices (including wages) double in response, has anything important really changed? Probably not. Instead of costing $5, a hamburger now costs $10. Alice has to work just as many hours to earn that $10 hamburger today as she worked to earn a $5 hamburger yesterday. Instead of carrying $25 in her pocket (enough to buy five hamburgers), she’ll carry $50—still enough to buy five hamburgers. Instead of keeping $1,000 in her chequing account, she’ll keep $2,000—the same fraction of her income that she’s always kept.
- Monetary History - The quantity theory of money—that is, the circle of ideas surrounding the notion that prices tend to move in tandem with the money supply—has a long history going back to the astronomer Nicolaus Copernicus in the fifteenth century. After the onset of the Great Depression in the early 1930s, the new generation of “Keynesian” economists largely rejected the quantity theory, arguing that often, people don’t have strong stable preferences about how much money they hold. Therefore, said the Keynesians, when the authorities inject new money into the system, people might simply hold it, without bidding up prices.
- Unemployment - In 1958, the economist William Phillips noticed a striking correlation: Times of high inflation are times of low unemployment, and vice versa. Over the next decade, the correlation held strong.The lesson most economists drew was that policymakers face a trade-off: You can have less unemployment, provided you’re willing to tolerate (and even engineer) a bit more inflation.Milton Friedman, almost a lone voice in the wilderness, begged to differ. Not for the first time in his career, it fell to Friedman to remind the world that correlation is not the same as causation.
- Chicago Price Theory - From his arrival at the University of Chicago in 1946 until his retirement in 1977, Milton Friedman did more than anyone to set the intellectual agenda of the Chicago economics department. Though Friedman was primarily known as a monetary economist, the subject he chose to teach was price theory, or microeconomics. Microeconomics was a required first-year graduate-level course and it shaped the thinking of generations of students, giving them an extraordinarily rich set of tools for analyzing problems in all areas of economics.
- Capitalism and Freedom - In 1962, Milton Friedman burst forth from the academy into the public square with Capitalism and Freedom, subsequently ranked number 16 on Time Magazine’s list of the most influential books written in English in the years 1923–2011.25 More than half a century later, it remains in print in over a dozen languages and ranks near the very top of Amazon’s list of bestsellers in economic theory.
- Policy Analysis - Having drawn the connection between free markets and free people, Friedman moved on to specifics. The later chapters of Capitalism and Freedom make the case for limiting the role of government in education, labour markets, corporate governance, housing, old age insurance, the alleviation of poverty, and more.
- Activism - After the success of Capitalism and Freedom, Milton Friedman became the world’s most widely recognized advocate for economic freedom. His op-ed columns in Newsweek, appearing every three weeks for 18 years, reached a direct audience of about three million subscribers and were widely quoted in other media. Soon his face and his voice were familiar to many millions more, through his frequent congressional testimony, public speeches, and media appearances.
- Civil Discourse - In 1980, Milton and Rose Friedman collaborated with the visionary television producer Bob Chitester to create a television series called Free to Choose. The series aired originally on the Public Broadcasting System in the United States, where, with about three million viewers per episode, it was one of the most popular programs in PBS history. A companion volume with the same title, written by the Friedmans, was near the top of the year’s bestseller lists.
