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Q & A

Who is Milton Friedman?

Milton Friedman (1912-2006), received the 1976 Nobel Memorial Prize for Economic Science and was a senior research fellow at the Hoover Institution, Stanford University. Alan Greenspan, former Fed Chairman, praised Friedman as one of the 20th century's major intellects. An adviser to many government leaders and a prolific writer, Friedman is perhaps best known as an outspoken proponent of political and economic freedom and as the leader of the Chicago School of monetary economics, which stresses the importance of the quantity of money as an instrument of government policy and as a major influence on business cycles and inflation.


What were Friedman's key propositions regarding monetary policy?

He may be best known for his statement that "inflation is always and everywhere a monetary phenomenon." Friedman believed that changes in monetary growth affect only prices - not output - in the long-run. Although monetary policy affects output in the short run, this effect wears off in the long run. The rate of monetary growth matters for inflation, but not for output. In the long-run, what happens to output depends on many other factors, such as enterprise, the productivity and inventiveness of people, the extent of thrift, and the structure of industry and government.


What was Friedman's view of price controls?

When the Johnson administration continued emphasizing wage-price guidelines to restrain inflation, Friedman spoke out. "Price control by exhortation and threat and use of extra-legal powers never has worked and never will, except to disrupt the economy," he said.


Did Friedman believe that using fiscal policy to stabilize the economy was effective?

Reaffirming his skepticism about the effectiveness of fiscal policy, Friedman once asked an interviewer, "How can the government stimulate the economy by taking money out of one pocket of the public and putting it into another pocket?"


How did Friedman define an ideal inflation rate?

Friedman described the ideal rate as "a level that would make it irrelevant to individual and business decisions." This description became prevalent among policymakers in the 1990s.

The content for Q & A was largely adapted from Milton Friedman and U.S. Monetary History: 1961-2006, Working Paper 2007-002A, by Edward Nelson, assistant vice president and economist at the Federal Reserve Bank of St. Louis. For more information, go to