July 29, 2011

Happy Birthday, Milton Friedman!

By Happy Birthday, Milton Friedman!

Author: Jonathan Wood

Milton Friedman, one of the greatest minds of the 20th century, would have turned 99 on Sunday.  Though few individuals have been as deserving of praise, Milton Friedman was “much more interested in having people thinking about the ideas” than the person having them.  In that spirit, we celebrate his birthday by reflecting on some of his greatest ideas.  Unsurprisingly, this past year provides ample evidence of Milton Friedman’s continued genius.

Milton Friedman demonstrated that stimulus programs could not succeed because households would use the money to save or pay down debt.  In the wake of the financial crisis, the Federal Government ignored this lesson and passed a $787 billion stimulus package.  Despite extravagant promises, the stimulus package completely failed to spur demand or employment.  This past year, a paper by renowned economist John B. Taylor largely confirmed that Milton Friedman’s insights explain the failure of the stimulus:

[Stimulus] grants increased steadily from the first quarter of 2009 through the third quarter of 2010 before tapering off. But state and local government purchases hardly changed at all during this period. The biggest change during the period of the [stimulus] grants was a large decrease in state and local government net borrowing, or, equivalently, an increase in net lending.

Milton Friedman was also a vocal critic of centralized administration of education.  His groundbreaking article, “The Role of Government in Education,” set the stage for the modern school choice movement.

The result of [vouchers] would be a sizable reduction in the direct activities of government, yet a great widening in the educational opportunities open to our children. They would bring a healthy increase in the variety of educational institutions available and in competition among them. Private initiative and enterprise would quicken the pace of progress in this area as it has in so many others. Government would serve its proper function of improving the operation of the invisible hand without substituting the dead hand of bureaucracy.

This past year has shown that Milton Friedman’s criticisms are as valid today as they ever were.  The rampant cheating in the Atlanta public school system is just the most recent in a long string of events confirming that centralized education continues to fail both students and taxpayers. 

Let’s hope that when we celebrate his 100th birthday we can look back on the year and celebrate the benefits that were derived from heeding the lessons of Milton Friedman.  This past year has certainly shown the folly of ignoring his insights.

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