Today Carolina Journal Radio’s Mitch Kokai discusses the legacy of famed economist Milton Friedman with Dan Hammond, Hultquist Family Professor of Economics at Wake Forest University. He joins us now with more insight about Milton Friedman. (Go to http://www.carolinajournal.com/cjradio/ to find a station near you or to learn about the weekly CJ Radio podcast.)
Kokai: Professor, what is Milton Friedman’s most important legacy?
Hammond: Well, his work on monetary economics and, over years and years and years, doing research — historical research, quantitative research — on the role of money and business cycles. And then, taking the message that the Federal Reserve was powerful, and anytime an organization, a government agency has power, they have power to do good and to do harm. And, making the argument that they had, in fact, made what was a normal recession a Great Depression. Friedman’s persistence, not only in doing the careful, painstaking research, but in taking that message to the public and to government officials, has had a tremendous influence on how policymakers think about the role of the Federal Reserve.
Kokai: When I think about Milton Friedman, I remember the famous series “Free to Choose” — economics I could understand.
Hammond: He was a master teacher, communicator. He insisted, for himself and for his graduate students, when they were writing their theses, that no matter how sophisticated the math was, or the statistics was, that they were using in their thesis, that when they wrote it, they had to write it so anyone could understand it.
Kokai: What about his work with the public?
Hammond: Being the master teacher, being the figure that people know about from “Free to Choose,” the television series, he believed, really believed, that the most important economics is common sense, and it can be explained in a way that anyone can understand it. So that, I think, is a very important part of his legacy. Now, his political views are important — small government. But he would have never had the influence that he had there, if he hadn’t been willing and able to communicate with anybody who wanted to communicate with him.
Kokai: You have an interesting story about your initial dealings with Milton Friedman.
Hammond: I wrote a paper about Friedman’s monetary economics, in which I compared the way he tried to sort out cause/effect relationships between money and prices, for instance, with one of the Keynesian opponents of monetarism. And, I argued in the paper that they were using the same causal framework. I was sort of taking a philosophical — philosophy of science approach. And I sent the paper to Friedman, and I remember sitting at our department administrative assistant’s desk, addressing the envelope — she was out. A colleague came in, said, “Dan, what are you doing?” I said, “I’m sending my paper to Milton Friedman.” And he just laughed, and he said, “Don’t waste our postage. You’re not going to hear from Milton Friedman.” Well, two weeks later, I got a two-page letter from Milton Friedman. And what he said to me was, “I feel that I have been stuffed with straw and attacked by you.” And the content of the letter puzzled me, and I thought, “What is it about what I’m saying about him that strikes, hits a nerve?” So I did some reading, some work, and thought about it for a while, and then I decided, well, I’m going to see if I can go out and talk with him. So I wrote him and asked him if I could come out and interview him. He said sure. He took me to lunch. This was out at Stanford, after he was retired. He took me to lunch. This was in 1988. He took me to lunch, spent the better part of an afternoon with me. In the course of preparing for the interview, I had become interested in his biography and trying to fit him, figure out how he came to the views he had on cause/effect relationships and other things. So I asked a lot of biographical questions that afternoon. And when we finished the interview, he said, “You know, I just happen to have occasion to pull out my graduate school notes from the 1930s for someone else. If you are really interested in this, I’m not going to be in tomorrow, nor is Gloria, my assistant, but I’ll give you a key to my office, and you can come in and make yourself at home. And here is where the photocopy machine is.” So, I’ve been going back virtually every year since then. So it was Friedman being willing to open himself up, and his papers, to someone he didn’t know at all. So, yes, that is the kind of person he was.
Kokai: What should people know about the way Milton Friedman approached economics?
Hammond: Friedman believed that economics could be a science that was very difficult. We are dealing with social problems, so you don’t explain everything. But he thought that most of the disputes people have about economic policy were over differences over matters of fact, not value. And he insisted, for himself and for students, on presuming that people who are on the other side of us, from us, in an issue, they and we are not seeing the facts the same way. And we can get the facts out, and, ultimately, we will agree. So he believed in building — that economics could be used to build consensus, which is terribly important in a democracy. Sad to say, in the world today, it seems that people would often rather fight than try to find answers to problems — take sides. But that was a very important part of the way Friedman approached using economics to understand public policy issues.
Kokai: What is Milton Friedman’s lasting impact on economics?
Hammond: Monetary policy, monetary policy, where the Federal Reserve is first and foremost, and almost exclusively, concerned with keeping the inflation rate down, is largely due to Friedman’s influence. Now, they might not use the techniques that he would prefer — pursuing a constant growth rate in the money stock — but the ultimate goal is the goal that he thought all along is all the central bank can count on doing. In terms of social policy, the school choice initiative is —vouchers — is something Friedman started working on in the 1950s, and he continued. And now we see there is a Milton and Rose Friedman Foundation supporting schools — giving students vouchers. So that’s a terribly important legacy, and it’s a sign that Friedman’s interest was in the common person.
Kokai: Friedman died last year, of course. Does he have many followers who will carry on his work and his ideas?
Hammond: There sure are, and many of the people are right here in the John Locke Foundation. And there are organizations like the Locke Foundation all over the country. And so there are public policy advocacy groups and research groups that very much are following Milton Friedman’s ideas and trying to put them into place. And then the other wonderful thing about Friedman’s influence is that so many of his ideas have become mainstream now, that even though we might not — our policies might not look like they are influenced by Friedman, his ideas are always out there, and they are not going to go away.