Book Review: Milton Friedman | FinanceGrabber

Milton Friedman: The Last Conservative. 2023. Jennifer Burns. Farrar, Straus and Giroux.

When you have been requested to establish a well-known economist based mostly on the next information, whom would you identify?

• Voted for Democrat Franklin Roosevelt for president in 1936.
• Supported vital parts of Roosevelt’s New Deal, which some critics deemed
  socialistic.
• Favored average Dwight Eisenhower over conservative icon Robert Taft for the 1952
  Republican presidential nomination.
• Disdained anticommunist scourge Senator Joseph McCarthy.
• Attacked the fervently right-wing John Birch Society as “essentially unsuitable.”
• Thought of the gold commonplace flawed.
• Stated, in reference to public welfare, “[T]listed below are essential features that have to be carried out by the state,” too delicate to be left “totally to personal charity or native duty.”
• Opposed “proper to work” legal guidelines.
• Maintained that John Maynard Keynes was appropriate in arguing that the federal government should prop up demand throughout crises.
• Criticized supply-side economics and denied that tax cuts have been persistently self- financing.

Milton Friedman (1912–2008) might not be the primary identify that pops to thoughts. Connecting him with these bullet factors appears particularly paradoxical in view of the subtitle of Jennifer Burns’s biography of the Nobel laureate — “The Final Conservative.”

Burns exhibits, nevertheless, that Friedman’s views on numerous points advanced over time and that his libertarian outlook generally put him at odds with conservative orthodoxy, as in his advocacy of government-provided common primary revenue.

Friedman unquestionably influenced public coverage, notably by way of his campaigns to abolish the draft and institute faculty vouchers. The rationale for reviewing this e-book in Enterprising Investor, nevertheless, springs from Friedman’s financial contributions moderately than his political opinions. Most famously, Friedman, working with Anna Schwartz, discovered that controlling the amount of cash was the important thing to sustaining secure financial progress.

This isn’t to say that the duo’s celebrated treatise on the subject settled the matter as soon as and for all. As Burns paperwork, different outstanding economists rejected the Friedman–Schwartz thesis or integrated it right into a synthesis dubbed the New Keynesianism. The Fed, for its half, alternated between managing rates of interest and managing financial aggregates. Briefly, Friedman didn’t totally remake financial coverage, but he unquestionably stays a drive to be reckoned with, somebody whose beliefs on the very least one would possibly distinction to 1’s personal. On the primary web page of her introduction, Burns quotes Joe Biden on the marketing campaign path in 2020: “Milton Friedman isn’t operating the present anymore!”

Friedman achieved his enduring place within the dialogue in no small half by way of forceful protection of his propositions and skewering of opposing views. Burns maintains that Kenneth Arrow, Paul Samuelson, and James Tobin all declined alternatives to hitch the College of Chicago school as a result of they dreaded the considered having to face Friedman each day. Tjalling Koopmans advised colleagues that Friedman’s relentless criticism threatened his sanity, main him to take a go away of absence at a therapeutic music camp.

In the end, the worth to funding professionals of Milton Friedman: The Final Conservative lies within the alternative to achieve a deeper understanding of financial idea by finding out its historical past. Burns informatively traces the event of, and conflicts between, such ideas as Austrian economics, Keynes’s and Friedman’s (developed with Margaret Reid) contrasting theories of the consumption perform, and the relative revenue and wealth-income hypotheses. Studying these narratives reminds the practitioner that any given economist’s forecast of GDP, inflation, or rates of interest rests on premises which can be removed from being universally acknowledged as certainties. Neither will each economist concur with every of the creator’s pronouncements. For example, Burns blames the Nice Despair–period bevy of financial institution failures totally on fractional reserve banking. She doesn’t point out state prohibitions of, or restrictions on, department banking. These unit banking legal guidelines led to huge numbers of banks being excessively concentrated in loans tied to a single trade that dominated the native economic system.

As well as, Burns calls the abstraction of good competitors “an unrealistic but helpful assumption.” She doesn’t level out that Friedrich Hayek, a outstanding determine within the e-book, strenuously argued that good competitors was in truth ineffective as a heuristic level of departure. Good competitors assumes good data, thereby ignoring the important characteristic of fragmented info and the all-important acquisition of information by way of the market course of.

Burns depicts Frank Knight explaining earnings, which might not exist below situations of good competitors, on the premise of uncertainty. No much less essential, although, is the time worth of cash, which is absent from her dialogue. Somebody should advance the capital to assemble the means of manufacturing items earlier than they are often bought. The suppliers anticipate to be compensated for deferring the consumption that their cash may alternatively fund.

Ultimately, although, it’s Friedman’s financial interpretations, moderately than the creator’s, that matter most to the reader. At 575 pages together with her prolonged Notes and Index sections, Burns’s e-book will not be a fast learn, however it’s a full of life one. She adorns the textual content with the kind of verbal play for which her topic was identified. “However in the long term,” she writes, “Bretton Woods was lifeless,” alluding to a continuously cited — and extensively misunderstood — comment by Keynes.

Burns embeds allusions in chapter titles, as properly. For instance, “Hidden Figures,” coping with Friedman’s underrecognized feminine collaborators, borrows the title of a 2016 movie about African-American girls who performed an essential however, on the time, largely uncredited function within the US area program.

All in all, conscientious members in funding resolution making will derive each pleasure {and professional} enrichment from Milton Friedman: The Final Conservative.

When you favored this publish, don’t neglect to subscribe to Enterprising Investor and the CFA Institute Research and Policy Center.

* The reviewer thanks Gene Epstein for his options. Any errors or omissions are solely the reviewer’s duty.

All posts are the opinion of the creator. As such, they shouldn’t be construed as funding recommendation, nor do the opinions expressed essentially mirror the views of CFA Institute or the creator’s employer.

Skilled Studying for CFA Institute Members

CFA Institute members are empowered to self-determine and self-report skilled studying (PL) credit earned, together with content material on Enterprising Investor. Members can report credit simply utilizing their online PL tracker.