Economic History: Milton Friedman, Dissenter

At an event in 2002 in honor of Milton Friedman's 90th birthday, then-Fed chair Ben Bernanke offered him an olive branch of sorts on behalf of the Fed. "Regarding the Great Depression. You're right, we did it," Bernanke conceded. "We're very sorry. But thanks to you, we won't do it again." Bernanke's comment was an allusion to the 1963 book A Monetary History of the United States 1867-1960 by Friedman and economist Anna Schwartz, in which they argued that monetary policy led by the Fed had an enormous influence on the recessionary periods of the U.S. economy, including the Great Depression. That view, although contradictory to the general belief of the time that money had little role in economic fluctuations, became increasingly important and influenced policy responses of the Fed during the 2008 financial crisis. Throughout his career, Friedman was an advocate for monetarism and free markets. He believed that a stable monetary framework, characterized by steady growth in the money supply, was essential for fostering economic stability and prosperity. Moreover, he considered free markets to be the best way to allocate resources and deliver economic prosperity, and he thought they went hand in hand with individual freedom. These ideas were long out of favor in academic circles but turned out to be another area in which, over time, Friedman would see much of mainstream thought move toward his views.