Friedman and Freedom

OpinionJournal - Featured Article: The man who made free markets popular again

"His thesis was that the Great Depression was not, as was once commonly presumed, a “market failure,” but a failure of government policy. Contraction of the money supply in the wake of the stock-market crash of 1929 was what turned a financial event into an economic catastrophe.

By the late 1970s, stagflation—the combination of high inflation and high unemployment—had made it obvious that the then-dominant Keynesian model had some large holes. These included the effect of the money supply on inflation and the fact that inflation and employment did not move in lockstep as some of Keynes’s disciples asserted. It was a seminal insight, creating what became known at the University of Chicago and elsewhere as the “monetarist school” and laying the intellectual basis for central bankers to break the great inflation of the 1970s.

In awarding its Nobel in 1976, the Royal Swedish Academy of Sciences cited his “achievements in the fields of consumption analysis, monetary history and theory, and for his demonstration of the complexity of stabilization policy.” The citation covers a huge swath of economic thinking, and suggests both the range and the consistency of Professor Friedman’s thought. In layman’s terms, the Swedish Academy credited him with nothing less than shredding the Keynesian consensus. "