In his book "Knowledge and the Wealth of Nations," economic journalist David Warsh tells the story of "the most famous dinner party in the history of modern economics."
That was the night Ronald Coase came to dinner at Aaron Director's home to defend his views of transaction costs against a skeptical Chicago department. Coase had submitted a paper arguing that simply assigning property rights and then letting market processes take their course was usually a better solution than costly government regulation. The referees were certain that something was wrong with his argument. Hence the occasion of the dinner. George Stigler later recalled, "In the course of two hours of argument the vote went from twenty against and one for Coase to twenty-one for Coase." Midway, Milton Friedman opened fire, and the bullets hit everyone but Coase. "What an exhilarating event!" wrote Stigler. The guests said good night knowing that intellectual history had been made.
Warsh also writes that Friedman's "little book," "Capitalism and Freedom," published in 1962, "persuaded countless young persons ... that conservative didn't have to mean dumb."
If John Maynard Keynes is the liberal economist's hero, the man who provided intellectual cover for the basic concept that government policy could significantly influence the workings of the economy for the betterment of all, then Milton Friedman is the corresponding icon for conservatives, the economist who, more than any other single thinker in the 20th century, provided intellectual justification for "limited government." Friedman's contributions can be fairly described as the root of all modern market fundamentalism.
Milton Friedman died this morning, at age 94. As I write these words, the econoblogosphere is no doubt already exploding with assessments of Friedman's legacy, and the front-page obituaries are being rushed into print. As will be obvious, it is impossible to separate Friedman's work from its political implications. Friedman was friends with Ronald Reagan, and his 10-part television series, "Free to Choose," broadcast in 1980, provides a clear starting point for the so-called Reagan revolution. If you think the past 25 years of generally conservative ascendancy in economics as practiced in politics has been a wrong turn, then you likely hold Friedman partially responsible. If you think that the main problem with current economic policy is that we haven't gone far enough down Friedman's road (and, as many conservatives have been bemoaning since the election, their main cause for grief about George W. Bush is that he is insufficiently Friedman-esque,) then you regard Friedman as your patron saint. The one thing you probably don't think is that Friedman was dull at the edges. His work must be reckoned with.
I will try here to keep tabs on the emerging conversation about Friedman that will race across the Internet, set off by his death. But let's be clear, his death will provide no resolution. Quite the contrary, it comes at a moment when his influence is more meaningful than ever. It isn't just the recently delivered rebuke of Republican rule that will force a renewed look at what role government should play in the economy. The big, pressing issues of our time -- globalization and trade, climate change, economic development, the energy crisis; in every case the question of what the balance should be between the government and the market is foundational.
Even from his grave, Friedman's bullets will keep flying. If you want to survive the assault, not only should you wear a Kevlar vest, but you'd better bring some heavy artillery of your own.
UPDATE: So far, the early reaction from the Web has been an outpouring of adulation.
Marginal Revolution's Tyler Cowen on Friedman
I believe "Capitalism and Freedom" was the second or third book I ever read on economics and it definitely shaped my life. I knew Milton only a bit but he was always gracious and of course razor sharp and a lover of liberty and prosperity. He was one of the most important minds of the second half of the twentieth century and his influence remains felt all around the world. In purely academic terms, he easily could have won two or three Nobel Prizes from the quality and quantity of his work.
Economonitor has a roundup of links to Friedman lectures and other miscellany.