Milton Friedman, who died today aged 94, was a widely recognized intellectual architect of Thatcherite and Reaganite economics, and so helped improve the lives of hundreds of millions around the world.
For more than half a century, Friedman influenced debates in Western societies, battling against government controls and in favor of economic freedom, which he showed to be a necessary condition for personal and political freedom.
From the 1950s to 1970s, Friedman was an economic 'heretic' in a period of Keynesian consensus that favored a government-planned economy, warning against exchange controls, submission to accelerating inflation in hope of reducing unemployment, and government attempts to control the business cycle by managing consumer demand. The longer this era progressed, however, the more his criticisms were proved correct and the more attractive his ideas became to policy-makers. In 1976, he was awarded the Nobel Prize for Economics. Within a few years, Friedman's towering credentials as an economist were supplemented by his becoming a household name through his television series 'Free to Choose', in which he demonstrated the value of a free economy.
In the 1980s, Friedman's achievements in the discovery of profound economic principles and in pioneering the policies that went with rather than against the grain of economic reality bore greatest fruit under the governments of Margaret Thatcher and Ronald Reagan.
One of the first acts of the Thatcher government was to eliminate Britain's wartime exchange controls, in line with Friedman's advocacy of floating exchange rates. The policy of previous governments managing consumer demand with fiscal fine-tuning was shown to be lacking by Friedman's demonstration that individual consumers were more far-sighted than policy-makers gave them credit, making decisions on spending and saving with reference to their long-term expectations of income. Therefore, simply increasing or reducing taxpayers' income from one year to the next with temporary changes in tax rates would be an ineffective tool for managing an economy.
In a further lesson taken to heart by the Thatcher government and its successors, Friedman showed that policies made in light of the Phillips Curve, which supposedly demonstrated a trade-off between inflation and unemployment, in the long run required ever-higher - and soon unmanageably high - rates of inflation to keep unemployment under control. The inflation the Thatcher government inherited was instead defeated with the monetarist policies Friedman advocated: retaining the value of money by reducing the increase in its supply.
The strong British economy established during the Thatcher years, which was the foundation for her many other successes, owed greatly to the insights and courage of Milton Friedman. As David Boaz wrote, "Thatcher and Reagan represented a revolution that Milton Friedman had helped to create: a shift away from central planning and the welfare state and toward a renewed appreciation for entrepreneurship, free markets, and limited government."