On Economics: Selected Papers

by Milton Friedman, Gary S. Becker (Afterword)

On his death in the autumn of 2006, Milton Friedman was lauded as “the grandmaster of free-market economic theory in the postwar era” by the New York Times and “the most influential economist of the second half of the 20th century” by the Economist . Winner of the Nobel Prize in Economics in 1976, Friedman was both a highly respected economist and a prominent public intellectual, the leader of a revolution in economic and political thought that argued robustly in favor of virtues of free markets and laissez-faire policies.

Milton Friedman on Selected Papers collects a variety of Friedman’s papers on topics in economics that were originally published in the Journal of Political Economy . Opening with Friedman’s 1977 Nobel Lecture, the volume spans nearly the whole of his career, incorporating papers from as early as 1948 and as late as 1990. An excellent introduction to Friedman’s economic thought, Milton Friedman will be essential for anyone tracing the course of twentieth-century economics and politics. 

Genres: Economics, Business, Philosophy, Nonfiction

180 pages, Paperback

First published February 1, 2007

About the author

Milton Friedman was an American economist who became one of the most influential and controversial figures of the twentieth century, widely recognized for his profound contributions to monetary economics, consumption theory, and the defense of classical liberalism. A leading figure of the Chicago School of Economics, Friedman challenged the prevailing Keynesian consensus that dominated mid-century policy and instead placed monetary policy at the center of economic stability, arguing that changes in the money supply were the primary drivers of inflation and fluctuations in output. His groundbreaking permanent income hypothesis reshaped the study of consumer behavior by suggesting that individuals make spending decisions based on long-term expected income rather than current earnings, a theory that profoundly influenced both academic research and practical policymaking. Alongside Anna Schwartz, Friedman coauthored A Monetary History of the United States, 1867–1960, a monumental work that emphasized the role of Federal Reserve mismanagement in deepening the Great Depression, a thesis that redefined historical understanding of the period and helped establish monetarism as a major school of thought. His broader philosophy was articulated in works such as Capitalism and Freedom, where he argued that political and economic liberty are interdependent and advanced ideas like educational vouchers, voluntary military service, deregulation, floating exchange rates, and the negative income tax, each reflecting his conviction that society functions best when individuals are free to choose. Together with his wife Rose Friedman, he later brought these ideas to a global audience through the bestselling book and television series Free to Choose, which made complex economic principles accessible to millions and expanded his influence beyond academia. Awarded the Nobel Prize in Economic Sciences in 1976 for his achievements in consumption analysis, monetary history, and stabilization policy, Friedman became a prominent public intellectual, sought after by policymakers and leaders around the world. His ideas strongly influenced U.S. policy in the late twentieth century, particularly during the administration of Ronald Reagan, and found resonance in the economic reforms of Margaret Thatcher in the United Kingdom, both of whom embraced aspects of his prescriptions for free markets and limited government intervention. Friedman’s policy recommendations consistently opposed measures he regarded as distortions of market efficiency, including rent control, agricultural subsidies, and occupational licensing, while he proposed alternatives such as direct cash transfers through a negative income tax to replace complex welfare bureaucracies. His teaching career at the University of Chicago shaped generations of economists, many of whom extended his research and helped institutionalize the Chicago School as a major force in global economic thought, while his later role at the Hoover Institution at Stanford University provided him with a platform to continue his scholarship and public advocacy. Beyond technical economics, Friedman’s clarity of expression and ability to frame debates in terms of individual freedom versus state control made him one of the most recognizable intellectuals of his era, admired by supporters for his defense of personal liberty and market efficiency, and criticized by detractors who accused him of underestimating inequality, social costs, and the complexities of government responsibility. Despite the controversies, his impact on the development of modern economics was immense, reshaping debates about inflation, unemployment, fiscal policy, and the role of the central bank. His writings, lectures, and media appearances consistently reinforced his belief that competitive markets, voluntary exchange, and limited government intervention offer the most effective means of promoting prosperit

Reviews

[Joseph DeBolt]

I actually wanted to read Free To Choose. In retrospect, I would have tweaked my random choice system here because that audiobook is also available on Libby.

Nobel Lecture: The relationship between unemployment and inflation is not a stable, long-term trade-off.

From this first section, I learned that using monetary policy to raise inflation rates leads workers to feel like they’re making more money, but eventually they realize their purchasing power has decreased, so they seek higher wages. Raising rates often leads to higher unemployment as workers leave their jobs to find new ones with higher incomes.

The Utility Analysis of Choices Involving Risk by Friedman and L. J. Savage

This piece analyzes the likelihood of people making choices involving risk, where it is generally held that people will choose a lower risk over a higher one. The likelihood of choosing the higher risk rises as the cost of the risk becomes a smaller and smaller percentage of the potential gain. However, the book doesn't say that people like to gamble in the stock market and elsewhere, so any choice could really be made on any given day. You might buy a lottery ticket on Saturday for a set amount at a certain risk factor, but on Monday, ceteris paribus, you might not. So I don’t see the utility of this analysis. And what is the percentage of people who act rationally at any given time? They didn’t answer that one.

The Expected-Utility Hypothesis and the Measurability of Utility. With L. J. Savage

OK, I admit they lost me on this one. My mind wandered. But I agree that “any scale of measurement is arbitrary.”

. . . My mind wandered through the rest of the book as well. I’ll end this now, to your and my relief, after a personal summation refuting the book’s more specific equations.

Economics is a “discipline” on the level of astrology. It all hinges on an economist guessing how a person would react in his environment to various conditions and variables, giving more or less weight to certain variables, while subjectively omitting conditions and variables the economist thinks aren’t useful. But if the person decides on a transaction based on surrounding variables and conditions on, say, January 13, it does not mean that the person will make the same decision on June 4. You can make all the equations you want, but they will only be true sometimes.

Listening to an audiobook on economics is a questionable choice (my specialty!), with all the equations and separate graphics referred to in the text. But I just wanted to get the general sense of what was being said. Just a takeaway to remember or enough to write a miniature book review. 🙂But I recommend reading a print version.

And I disagree with E(U(X)) = 3 P(X=x)*U(x). Wouldn’t you?

Semi-random pull quote: “This analysis is, of course, oversimplified.”

(audiobook–Libby)

[Jacob · Rating 4 out of 5]

So that’s my bad in attempting to consume essentially a diagram textbook in audio book format.

Regardless Friedman brilliantly demonstrates the necessity of economics in the existential progress towards certainty in life. I had never considered the juxtaposition of insurance and gambling as similars in the risk/reward/ likeliness of desired outcome metric.

Additionally the case for a bimetal monetary standard was very interesting.

[Frederick Hammill · Rating 1 out of 5]

Yaaaaaaawn

[Craig Bolton]

Milton Friedman on Economics: Selected Papers by Milton Friedman (2008)