When Milton Friedman Ran the Show
Well before Milton Friedman died in 2006 at 94, he was the rare economist who had become a household name. A longtime professor at the University of Chicago, he had been writing a column for Newsweek for a decade when he won the 1976 Nobel Prize in economics. Then, in 1980, his PBS series, Free to Choose—a didactic, yet not at all dry, paean to the free market—made the diminutive, bald economist something of a star.
The weirdness of the show is hard to convey, but “Created Equal,” the fifth of 10 episodes, is representative of its blunt, unwonky approach. The episode opens with shots of wealth and poverty in India. Friedman’s voice-over reminds us that inequality has been a topic of human concern for hundreds of years, courtesy of do-gooders who claim that the wealth of the rich rests on the exploitation of the poor. “Life is unfair,” he says. The camera then zooms in on Friedman, sitting in a seminar room. “There’s nothing fair about Muhammad Ali having been born with a talent that enables him to make millions of dollars one night. There’s nothing fair about Marlene Dietrich having great legs that we all want to watch.” His voice drops just a bit, and he gazes directly at the camera as though peering into the viewer’s soul. “But on the other hand, don’t you think a lot of people who like to look at Marlene Dietrich’s legs benefited from nature’s unfairness in producing a Marlene Dietrich?”
Today, Friedman might seem to belong to a bygone world. The Trumpian wing of the Republican Party focuses on guns, gender, and God—a stark contrast with Friedman’s free-market individualism. Its hostility to intellectuals and scientific authority is a far cry from his grounding within academic economics. The analysts associated with the Claremont Institute, the Edmund Burke Foundation, and the National Conservatism Conference (such as Michael Anton, Yoram Hazony, and Patrick Deneen) espouse a vision of society focused on preserving communal order that seems very different from anything Friedman, a self-defined liberal in the style of John Stuart Mill, described in his work.
Many of Friedman’s core policy arguments about the virtues of markets were ultimately influential among neoliberals such as Bill Clinton, not just on the right. But by now, his central claims (in particular about inflation and the money supply) have been widely criticized by economists. And at least some policy makers have distanced themselves from his anti-regulatory stances. As Joe Biden declared on the campaign trail in 2020, “Milton Friedman isn’t running the show anymore!”
Jennifer Burns, a Stanford historian, sets out to make the case in her intriguing biography Milton Friedman: The Last Conservative that Friedman’s legacy cannot be shaken so easily. As she points out, some of his ideas—the volunteer army, school choice—have been adopted as policy; others, such as a universal basic income, have supporters across the political spectrum. Friedman’s thought, she argues, is more complex and subtle than has been understood: He raised pressing questions about the market, individualism, and the role of the state that will be with us for as long as capitalism endures.
Burns’s effort to recast the brash economist as a nuanced analyst usefully situates him in his 20th-century context. His career, it turns out, owed a surprising amount to the New Deal institutions he spent much of his life critiquing, and to collaborations that complicate his commitment to unencumbered individualism. But Burns skirts the 21st-century legacy of the Friedmanite view of the world: His libertarian ethos helped seed the far more openly hierarchical social and political conservatism that fuels much of our present-day political dysfunction.
Friedman was born in Brooklyn in 1912, the only son of Eastern European immigrants who soon moved to Rahway, New Jersey, where they owned a dry-goods store. His was one of the few Jewish families in town, and Friedman was observant as a young child, but by the time he was a teenager, he had largely abandoned religion. He stood out as a math whiz in high school and discovered economics as an undergraduate at Rutgers University. Heading on to graduate school at the University of Chicago, he arrived just in time for the Great Depression.
Economics as a discipline was then in the throes of a transformation. In the early years of the 20th century, reformers were at the forefront of the field, eager to build a social science that would inform government policy. Many economists focused primarily on historical statistics, determined to capture how the economy worked through detailed institutional analysis. But by the 1930s, the leading figures at the University of Chicago were deeply committed to what had become known as price theory, which analyzed economic behavior in terms of the incentives and information reflected in prices. The economists who left their mark on Friedman sought to create predictive models of economic decision making, and they were politically invested in the ideal of an unencumbered marketplace.
Friedman was also shaped by older traditions of economic thought, in particular the vision of political economy advanced by thinkers such as Adam Smith and Alfred Marshall. For them, as for him, economics was not a narrow social science, concerned with increasing productivity and efficiency. It was closely linked to a broader set of political ideas and values, and it necessarily dealt with basic questions of justice, freedom, and the best way to organize society.
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Just as important, his time at Chicago taught Friedman about the intertwining of political, intellectual, and personal loyalties. He became a regular in an informal group of graduate students and junior faculty trying to consolidate the department as a center of free-market thought—the “Room Seven gang,” so named for its meetings in “a dusty storeroom in the economics building.” This group, Burns suggests, anticipated the later rise of a “counter-establishment” opposed to the regulatory state created by the New Deal. Not that the Chicago economists were unaffected by the tumult of the ’30s; shaken by the bank failures of the winter of 1932, they wrote a memorandum to President Franklin D. Roosevelt shortly after his election that laid out a plan for federal economic intervention to stabilize the financial system.
Friedman (who went on to write his dissertation at Columbia) headed to Washington, D.C., in 1935, one of the many economists for whom the bleak economy of Depression-era America created a job boom. During World War II, he was hired by the Treasury Department, where he helped introduce the system of federal tax withholding that swelled the nation’s tax base to pay for the war.
But his fundamental commitments were consistent. In his early work on consumption habits, Friedman sought to puncture the arrogance of the postwar Keynesian economists, who claimed to be able to manipulate the economy from above, using taxes and spending to turn investment, consumption, and demand on and off like so many spigots. Instead, he believed that consumption patterns were dependent on local conditions and on lifetime expectations of income. The federal government, he argued, could do much less to affect economic demand—and hence to fight recessions—than the Keynesian consensus suggested.
In 1946, Friedman was hired by the University of Chicago, where he shut down efforts to recruit economists who didn’t subscribe to free-market views. He was also legendary for his brutal classroom culture. One departmental memo, trying to rectify the situation, went so far as to remind faculty to please not treat a university student “like a dog.” What had started as a freewheeling, rebellious culture among the economists in Room Seven wound up as doctrinal rigidity.
Yet, as Burns’s research has revealed, the intensely personal nature of the economics field also fostered unexpected alliances in Friedman’s case: Women colleagues—a rarity at the time—came to play an underappreciated role in his development. Then, even more than now, having a powerful mentor was a great asset in the process of writing a dissertation and finding a job—an asset less available to the few female graduate students in a department that had a single woman professor. Rose Director, one of those few and the intellectually precocious younger sister of Friedman’s close friend and colleague Aaron Director, went the all-but-dissertation route, recognizing the obstacle-strewn path to finishing her degree and getting hired. She and Friedman had fallen in love, and after marrying him in 1938, she went on to play a central part in Friedman’s intellectual life as transcriber, interlocutor, reader, and editor.
Friedman’s inner circles included other women colleagues, thanks to his early focus on consumption economics—an area that, given the gendered assumption that household expenses fell within women’s purview, attracted an unusual proportion of female economists. Burns notes that Friedman’s work on the permanent income hypothesis drew on their 1940s research into the social factors that influence individual consumer’s decisions. Evidence leads her to argue more pointedly that Rose (credited only with providing “assistance”) essentially co-wrote Capitalism and Freedom (1962). She also calls attention to Friedman’s long and fruitful collaboration with Anna Jacobson Schwartz, who had gotten her master’s degree in economics from Columbia and had the same academic adviser as Friedman. Schwartz helped spur his interest in monetary economics and shared her research with him, even while struggling to find a sponsor for her own dissertation. She was awarded her Ph.D. only when Friedman intervened on her behalf after the publication, in 1963, of their co-authored A Monetary History of the United States, which boosted his career when it was in a lull.
Highlighting these dynamics, Burns implicitly exposes some of the limitations of Friedman’s focus on the economic benefits of innate individual talent. He had more than nature to thank for producing associates of such high caliber, ready to benefit him in his career. Culture and institutions clearly played a large role, and sexual discrimination during the 1930s, ’40s, and ’50s ensured that professional paths were anything but fair.
Even as Friedman criticized the core principles of Keynesianism, he understood the impossibility of simply reverting to the pre-Depression order, as some of the truly reactionary conservatives of the 1940s would have liked. The state, he acknowledged, would have to take some responsibility for managing economic life—and thus economists would be thrust into a public role. The question was what they would do with this new prominence.
Almost as soon as the Second World War ended, Friedman began to stake out a distinctive rhetorical position, arguing that the policy goals of the welfare state could be better accomplished by the free market. Earlier skeptics of social reform had argued on the grounds of principle—asserting, for example, that minimum wages were unconstitutional because they violated liberty of contract. By contrast, in Capitalism and Freedom, Friedman made the case that the real problem lay in the methods liberals employed, which involved interfering with the competitive price mechanism of the free market. Liberals weren’t morally wrong, just foolish, despite the vaunted expertise of their economic advisers.
In a rhetorical move that seemed designed to portray liberal political leaders as incompetent, he emphasized efficiency and the importance of the price system as a tool for social policy. Rent control, for example, aimed to create affordable housing; in fact, Friedman maintained, it would restrict the housing supply and thus drive rents upward. The minimum wage was supposed to benefit workers by creating better-paying jobs; instead, employers would hire fewer workers, increasing unemployment. Licensing for doctors and dentists was designed to ensure quality. The effect, though, was to create a monopoly that could raise prices and would ensure inflated incomes. Even people who endorsed liberal goals needed to recognize that regulations, by ignoring the power of the price system, were doomed to failure: Instead of protecting people from private exploitation, they would leave them at the mercy of the state.
For Friedman, the competitive market was the realm of innovation, creativity, and freedom. In constructing his arguments, he envisioned workers and consumers as individuals in a position to exert decisive economic power, always able to seek a higher wage, a better price, an improved product. The limits of this notion emerged starkly in his contorted attempts to apply economic reasoning to the problem of racism, which he described as merely a matter of taste that should be free from the “coercive power” of the law: “Is there any difference in principle,” he wrote in Capitalism and Freedom, “between the taste that leads a householder to prefer an attractive servant to an ugly one and the taste that leads another to prefer a Negro to a white or a white to a Negro, except that we sympathize and agree with the one taste and may not with the other?”
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When Friedman wrote about school vouchers (his alternative to universal public schools), he knew that white southerners might use their vouchers to support all-white private schools and evade integration. Although he personally rejected racial prejudice, he considered the question of whether Black children could attend good schools—and whether, given the “taste” for prejudice in the South, Black adults could find remunerative jobs—less important than the “right” of white southerners to make economic decisions that reflected their individual preferences. In fact, Friedman compared fair-employment laws to the Nuremberg Race Laws of Nazi Germany. Not only was this tone-deaf in the context of the surging 1960s civil-rights movement; it was a sign of how restricted his idea of freedom really was.
As the conservative movement started to make electoral gains in the ’70s, Friedman emerged as a full-throated challenger of liberal goals, not just methods. He campaigned for “tax limitation” amendments that would have restricted the ability of state governments to tax or spend. In a famous New York Times Magazine essay, he suggested that corporations had no “social responsibility” at all; they were accountable only for increasing their own profits. His PBS series was right in step with Ronald Reagan’s arrival in office—which, predictably, he celebrated. Friedman’s free-market certainties went on to win over neoliberals. By the time he and Rose published their 1998 memoir, Two Lucky People, their ideas, once on the margin of society, had become the reigning consensus.
That consensus is now in surprising disarray in the Republican Party that was once its stronghold. The startling rise in economic inequality and the continued erosion of middle-class living standards have called into question the idea that downsizing the welfare state, ending regulations, and expanding the reach of the market really do lead to greater economic well-being—let alone freedom. Stepping back, one can see how thoroughly Friedman—despite being caricatured as a key intellectual architect of anti-government politics—had actually internalized an underlying assumption of the New Deal era: that government policy should be the key focus of political action. Using market theory to reshape state and federal policy was a constant theme of his career.
Still, Friedman—and the libertarian economic tradition he advanced—bears more responsibility for the rise of a far right in the United States than Burns’s biography would suggest. His strategy of goading the left, fully on display in the various provocations of Free to Choose and even Capitalism and Freedom, has been a staple for conservatives ever since. He zealously promoted the kind of relentless individualism that undergirds parts of today’s right, most notably the gun lobby. The hostile spirit that he brought to civil-rights laws surfaces now in the idea that reliance on court decisions and legislation to address racial hierarchy itself hems in freedom. The opposition to centralized government that he championed informs a political culture that venerates local authority and private power, even when they are oppressive. Perhaps most of all, his insistence (to quote Capitalism and Freedom) that “any … use of government is fraught with danger” has nurtured a deep pessimism that democratic politics can offer any route to redressing social and economic inequalities.