Book Review: Milton Friedman | FinanceGrabber

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

When you have been requested to determine a well-known economist primarily based on the next details, whom would you title?

• 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 fallacious.”
• Thought of the gold commonplace flawed.
• Mentioned, in reference to public welfare, “[T]listed below are necessary features that have to be carried out by the state,” too delicate to be left “totally to non-public charity or native accountability.”
• Opposed “proper to work” legal guidelines.
• Maintained that John Maynard Keynes was right in arguing that the federal government should prop up demand throughout crises.
• Criticized supply-side economics and denied that tax cuts have been constantly self- financing.

Milton Friedman (1912–2008) is probably not the primary title 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 reveals, nonetheless, that Friedman’s views on varied points developed over time and that his libertarian outlook generally put him at odds with conservative orthodoxy, as in his advocacy of government-provided common fundamental revenue.

Friedman unquestionably influenced public coverage, notably by his campaigns to abolish the draft and institute college vouchers. The rationale for reviewing this ebook in Enterprising Investor, nonetheless, springs from Friedman’s financial contributions reasonably than his political beliefs. Most famously, Friedman, working with Anna Schwartz, discovered that controlling the amount of cash was the important thing to sustaining steady 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 distinguished economists rejected the Friedman–Schwartz thesis or included it right into a synthesis dubbed the New Keynesianism. The Fed, for its half, alternated between managing rates of interest and managing financial aggregates. In brief, 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 at least one’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 working the present anymore!”

Friedman achieved his enduring place within the dialogue in no small half by forceful protection of his propositions and skewering of opposing views. Burns maintains that Kenneth Arrow, Paul Samuelson, and James Tobin all declined alternatives to affix the College of Chicago school as a result of they dreaded the considered having to face Friedman day by day. Tjalling Koopmans informed 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 concept by learning 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 operate, 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 writer’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 excellent competitors “an unrealistic but helpful assumption.” She doesn’t level out that Friedrich Hayek, a distinguished determine within the ebook, strenuously argued that excellent competitors was in reality ineffective as a heuristic level of departure. Good competitors assumes excellent data, thereby ignoring the important characteristic of fragmented data and the all-important acquisition of data by the market course of.

Burns depicts Frank Knight explaining earnings, which might not exist underneath circumstances of excellent competitors, on the idea of uncertainty. No much less necessary, 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 count on to be compensated for deferring the consumption that their cash might alternatively fund.

In the long run, although, it’s Friedman’s financial interpretations, reasonably than the writer’s, that matter most to the reader. At 575 pages together with her prolonged Notes and Index sections, Burns’s ebook just isn’t a fast learn, however it’s a full of life one. She adorns the textual content with the form of verbal play for which her topic was recognized. “However in the long term,” she writes, “Bretton Woods was useless,” alluding to a often cited — and extensively misunderstood — comment by Keynes.

Burns embeds allusions in chapter titles, as effectively. 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 necessary 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 preferred this submit, don’t neglect to subscribe to Enterprising Investor and the CFA Institute Research and Policy Center.

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

All posts are the opinion of the writer. As such, they shouldn’t be construed as funding recommendation, nor do the opinions expressed essentially replicate the views of CFA Institute or the writer’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 document credit simply utilizing their online PL tracker.