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Economist Milton Friedman Dies

NEAL CONAN, host:

Milton Friedman died today at the age of 94. He was a leading economist and a Nobel Prize winner, known for an ardent belief in personal freedom and in free markets. In a 1992 interview with NPR's Robert Siegel, he noted that his business was a tricky one.

Mr. MILTON FRIEDMAN (Nobel Prize Recipient): Money is a very powerful thing, which you hardly notice when it goes right, but which can create havoc when it goes wrong.

CONAN: Milton Friedman speaking in an interview in 1992. If you knew Milton Friedman, if you were his student, if you've read his books, give us a call -800-989-8255, 800-989-TALK. E-mail is talk@npr.org.

Joining us now is Russell Roberts, a professor of economics at George Mason University, with us by phone from here in Washington, D.C. Good to talk to you again.

Professor RUSSELL ROBERTS (Professor of Economics, George Mason University): Hey Neal, how are you?

CONAN: I'm good. I understand you interviewed Milton Friedman just a couple of months ago.

Prof. ROBERTS: Yes. It was an incredible privilege. He was 94, but incredibly alert. And after the interview, which went for about an hour - incredible lucid mind at 94 - when I got back home I asked him a question about some of the data he'd mentioned and he sent me two Excel spreadsheets with the support for the thesis he had put forward. So he was really a remarkable man.

CONAN: Where does he stand in the pantheon of economic scholars?

Prof. ROBERTS: I would put him - and I think most would - as one of the two most influential economists of the 20th century, with John Maynard Keynes. Keynes was the designer of government intervention being necessary to keep the economy on its right path, and Friedman really systematically undercut that position both intellectually and empirically and put money supply at the forefront of economic success, changed the way we looked at the Federal Reserve and the central banks around the world.

So his main intellectual contribution - there are many - but his main was to really make the case for free markets and the role of money in our economy. And then his other incredible accomplishment was the intellectual defense of free markets, both intellectually and empirically. And for those two reasons I think you have to put him in the top two.

CONAN: And as we look around at the world today, where do we see his influence?

Prof. ROBERTS: Well, we see it in many ways. The incredible stability in inflation is really a novel human experience. Much of that comes from the work that he did in a book called A Monetary History of the United States, an academic work with Anna Schwartz that really made the case for inflation being the result of money.

That used to be a very controversial idea. He and Anna in that work really made a decisive scholarly proof that it was due to money. And as a result the federal bankers, along with empirical experience, learned to treat the money supply very differently then they had in the past. That's created a very stable environment for our economic growth the last really 40 years. So that's one way feel it.

The other way feel it is policy proposals, which he put forward in his Newsweek columns and then in a book, Capitalism and Freedom, and initially in 1960 -Capitalism and Freedom. In 1962, that book when it came out was full of what people thought were goofy fringe ideas. Many of them became reality. The volunteer army, floating exchange rates, educational vouchers, the minimum income tax - minimum income program, which is now the earned income tax credit, so many things that he proposed.

He had other proposals that he would have liked to have seen happen. Eliminating (unintelligible) subsidies and other boondoggles, but many of the ideas in that became either reality or on the table. Privatizing social security, something that was not discussable 20 years ago, 10 years ago even, is now at least being discussed because Friedman made the intellectual case for it in that book.

CONAN: Let's get a caller on the line. This is Tom. Tom with us from San Carlos in California.

TOM (Caller): Yes. Hello.

CONAN: Hi.

TOM: I attended a lecture that Mr. Friedman gave at Stanford University probably back in '73, '74. He made several really good points. One that's always stuck with me has been his comment that a question from the audience about voting, and he pointed out that dollars vote. He said that no one could be really well informed about every issue and every politician, including the school board, for instance, or your local mayor. You didn't have the time to really be well informed. Therefore, if you really want to make an impact, use your dollars.

In light of today's events, I think that's probably pretty appropriate.

CONAN: Thanks very much for the call, Tom, appreciate it. And Mr. Russell(ph), as we look at - are there obvious Friedman pupils, people who are raised among his ideas who are around today and continue to have influence on economic policy?

Prof. ROBERTS: Well, the whole modern branch of macroeconomics was heavily influenced by his Monetary History of the United States I mentioned earlier. An earlier work, in 1957, was his Theory of the Consumption Function, which sounds daunting, but what he was doing there was taking - putting the role of expectations front and center, and his pushing of that idea and his relentless attacks on the Phillips Curve were very important, this idea that there was an inverse relationship between inflation and unemployment.

He thought that was wrong. He thought that was a result of people being fooled, and they couldn't be fooled for very long, and eventually that relationship would not hold. And of course, the 70s proved him right, when we had stagflation.

So, that insight and the role of expectations had an enormous influence on scholars like Robert Lucas and other Nobel Laureates who have really transformed macroeconomics over the last 40 years.

CONAN: Russell Roberts, appreciate your time today. Thanks very much for being with us.

Prof. ROBERTS: My pleasure.

CONAN: Russell Roberts is a professor of economics at George Mason University. You can hear his weekly podcast, including his Milton Friedman interview, at EconTalk.org.

Joining us now is Professor Allan Meltzer. He's the university professor of political economy at Carnegie Mellon, as well as a visiting scholar at the American Enterprise Institute, and he's with us today from Pittsburgh. Professor, thanks very much for being with us.

Prof. ALLAN MELTZER (Professor of Political Economy, Carnegie Mellon): Nice to be with you.

CONAN: I know you knew Milton Friedman quite well. I wonder, what kind of a man was he?

Prof. MELTZER: He was a - he had two sides. If you could - pardon me.

(Soundbite of coughing)

Prof. MELTZER: If you got into an intellectual argument with him, he was a tiger. If you had a personal conversation with him, he was a gentle, sweet person. I mean, but he did not brook incorrect arguments or people who were wrong-headed at all, at all well, and he was bound and determined to correct you.

CONAN: Was it at that point - might he get brusque, might he even raise his voice?

Prof. MELTZER: No, no, never. He never was nasty. He just was firm.

CONAN: And I wonder, say, beyond that, what do we think - what do you think we should be remembering about his scholarship?

Prof. MELTZER: Well, I think Russell Roberts covered a lot of it. I think identifying him with money and the control of inflation is certainly important. But he, in my opinion, is one of the few individuals I know who never held an important government position and yet had major influence on the direction not only of our society but of countries all over the world.

He has floating exchange rates, the volunteer army, the idea of welfare reform, the idea of vouchers for education. I mean, all those are Milton Friedman ideas, and there are many, many more. But those are very prominent ones, and we see either many of those ideas in practice or coming along, and that's quite an achievement. Not many people have that much influence, especially when they never hold government office.

CONAN: He must have had the opportunity.

Prof. MELTZER: He may have, but he was wise enough to know that his great strength was intellectual and public and not bureaucratic.

CONAN: Let's get another caller on the line. This is Tom, tom with us from Sioux City in Iowa.

TOM (Caller): Yeah, good afternoon. I wanted to ask the guest if - I was in college and studying political science and political economics when Friedman -in the 70s when Friedman was popular, and one of the things that I always thought that he did, that really has kind of been destructive, is that he gave rise to what became the Reagan revolution and morning in America. And there are no limits to what we can do, and that the market will take care of everything, including solving the deficit problem, and look at the deficits we have today because of that.

What is - I'm just wondering what the guest thought of that comment?

Prof. MELTZER: I don't think that last statement was right. I don't believe that he thought that the market would solve the deficit problem. He thought that the only way you could solve the deficit problem was to put some restrictions on the amount that Congress could spend, and he worked hard for a while to get a spending limitation amendment. He didn't succeed, but he never believed that the public, that the market would do that.

Milton Friedman was a realist to the core, and he understood, although he's often said the market can do everything - he understood that the market did some things well and some things not as well. What the market had that was most important was the ability to correct itself.

TOM: And I can't disagree with that. But I'm saying the people that took with -some of the snippets that he said and turned them into these sound bites that became gospel, they were just, I think, destructive in that regard.

Prof. MELTZER: Well, I think we might disagree. I mean, Ronald Reagan ended the Cold War, and ended the inflation and got the economy growing again. And that's a pretty good effort for one president, more than most do, and Milton Friedman had a lot of influence on Ronald Reagan, admired him greatly, still I guess to his dying day, still admired him greatly.

TOM: Thank you very much.

CONAN: Tom, appreciate the phone call.

And we're talking today about Milton Friedman, the Nobel Prize winning economist who died earlier today. Our guest is Allan Meltzer, the university professor of political economy at Carnegie Mellon. He's also a visiting scholar at the American Enterprise Institute. If you'd like to join us: 800-989-8255, 800-989-TALK. E-mail is talk@npr.org. And this is TALK OF THE NATION from NPR News.

One other thing you wanted to say about him, Professor Meltzer?

Prof. MELTZER: Yes. He was married to an economist, and he had the good fortune that the two of them lived into their 90s together, and they had a very close, warm and loving relationship.

CONAN: Let's get Paul(ph) on the line. Paul calling us from Ann Arbor, in Michigan.

PAUL (Caller): Hi, Neal.

CONAN: Yes.

PAUL: Yeah, big fan of yours, and my wife Ellen(ph) is friends with Professor Meltzer, so it's nice to talk with you. We're both economists, we're both students in the Milton Friedman era.

The main point I wanted to make, it's a good lesson for academia that Friedman wasn't easily accepted, and it was because so many of his views contrasted with accepted beliefs. And, you know, this is a group that prides itself on being objective, so I think this is a very important point to recall today.

Prof. MELTZER: That's a very good point. And he worked very hard to change their minds and convince them that his way was the more correct way, and he managed to do that in many, many areas.

CONAN: Paul, thanks very much.

PAUL: Thanks, Neal.

CONAN: Bye-bye. Let's got to Artie(ph). Excuse me, Ari(ph). Ari's with us from San Jose, California.

ARI (Caller): Yeah. I just wanted to comment. I had a high-school teacher named Mr. Cole(ph), and he was a big fan of Milton Friedman. He would always ask us: So what does Uncle Milty(ph) say? When it came time to talk about inflation, take care of the inflation first and, you know, his influence on Paul Volcker and that. I just wanted to let you guys know that I always think of Milton Friedman as Uncle Milty.

CONAN: Paul Volcker of course the former chairman of the Federal Reserve Board.

ARI: Yup.

Prof. MELTZER: Yes. Milton Friedman had the grace and good sense to recognize that he wanted to talk to the general public. He wasn't going to just lecture to the people who happened to appear in his classroom in Chicago or on some lecture circuit. He went out to talk to the general public, believing that you had to convince a democratic nation to change its ways, and he succeeded to a considerable extent.

CONAN: Ari, thanks very much.

ARI: Thank you.

CONAN: So long. Let's go to Freeman(ph), Freeman with us from Wayne, New York.

FREEMAN (Caller): Yes, good afternoon, Neal.

CONAN: Good afternoon.

FREEMAN: I'm just very excited to hear you talking about Milton Friedman, and my quick comment is that I'm an African-American who went to an all-black school, and in the 60s as I was majoring in economics, my professor and also my Vietnamese professor both assigned us to read Milton Friedman. So, I'm really, really surprised that we were assigned that particular study at that particular time. And so, I'm glad to hear you talking about him. (Unintelligible).

CONAN: All right, Freeman, you're phone's causing problems, but we wanted to thank you for the phone call. We appreciate it.

And let's see if we can wind up with one more. David(ph), David's with us from Denver, Colorado.

DAVID (Caller): Yes. Thank you for taking my call. I just want to comment that I worked internationally in South America for a number of years, and Milton Friedman had an enormous impact in Chile back in the 70s. When Augusto Pinochet took over the government down there, he asked Friedman for economic advice and counseling, and they established what became known as the Chicago Boys Program, where they sent the best and brightest from Chile to school to study under Milton Friedman in Chicago and then come back to Chile and create a free-market economy and privatize and de-regulate the economy. And, I think that, laid the basis for approximately 15 years of economic growth in excess of 7 percent. I'd be interested to hear what your guest has to say about that.

CONAN: Prof. Meltzer?

Prof. MELTZER: Very good point. And the interesting thing is that as in England when the Labour Party came into power, when the socialists took over after Pinochet and have maintained control of the government since, they have not deviated from those policies. The reason is that Chile is the brightest spot in Latin America. It has very fast growth, low unemployment. It privatized its Social Security system, which we were unable to do.

I mean, if you think about the influence that Friedman has had, Chile is certainly high on the list. But you know, they have a single tax. It's 13 percent in the former Soviet Union, Russia. I mean, those are ideas that are spread all over the world. And as I said earlier, it's a remarkable performance, unparalleled I believe in the 20th century and even earlier.

CONAN: There are other aspects of Mr. Pinochet's regime that get considerably more criticism.

Prof. MELTZER: Certainly, less attractive.

DAVID: Thank you.

CONAN: Professor Meltzer, thanks very much for being with us today. Work on that cold, if you would.

Prof. MELTZER: I will, thank you, and thank you very much.

CONAN: Okay, bye-bye. Allan Meltzer, the university professor of political economy at Carnegie Mellon, as well as a visiting scholar at the American Enterprise Institute. He joined us today from Pittsburgh to remember Milton Friedman, the Nobel Prize winning economist who died earlier today.

More on the life and accomplishments of Milton Friedman later today from NPR News. I'm Neal Conan. This is TALK OF THE NATION from NPR News. Transcript provided by NPR, Copyright NPR.

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