Milton Friedman, the Nobel-winning monetarist economist who was an intellectual architect of the free-market policies of Republican US presidents, and an adviser to Margaret Thatcher when she was Prime Minister, died yesterday in San Francisco. He was 94.
Over half a century, Mr Friedman, the son of Hungarian Jewish immigrants, established himself as arguably the most influential economic thinker of his time. Over that post-war period, "Friedmanism" - the belief that changes in money supply dictate fluctuations in the economy - supplanted Keynesianism as the dominant economic philosophy of the industrial world.
Inflation, he believed, was caused by too much money chasing two few goods. Conversely, deflation was the result of too little money in the economy. He argued that the Depression was not a failure of capitalism, but of government, as the monetary authorities in the US and Europe reduced liquidity in the system, thus making a bad situation worse.
As Mr Friedman celebrated his 90th birthday in 2002, Ben Bernanke - then a Federal Reserve governor, now chairman of the US central bank - sought belated forgiveness for the error: "Regarding the Great Depression, you're right," Mr Bernanke acknowledged. "We did it. We're very sorry." Those monetary beliefs underpinned the 30-plus books that appeared under his name, most notably perhaps A Monetary History of the United States, 1867-1960, as well as a host of other writing including a regular column in Newsweek magazine. He urged deregulation and individual initiative as the keys to economic success - a view embraced by the US presidents Nixon, Ford and Reagan, and by Mrs Thatcher in Britain.
Mrs Thatcher said: "Milton Friedman revived the economics of liberty when it had been all but forgotten. He was an intellectual freedom fighter. Never was there a less dismal practitioner of a dismal science. I shall greatly miss my old friend's lucid wisdom and mordant humour."
Friedman, and the "Chicago School" of economics he led, helped to bring down the post-war Bretton Woods system of fixed exchange rates, as the dollar was devalued twice in the early 1970s.
In 1976 he was awarded the Nobel Prize for Economics. In subsequent years, the Fed and other central banks adopted his prescription of rigorous control of the money supply to stamp out the inflation left by the 1970s oil-shocks.
His laissez-faire philosophy extended beyond economics. Mr Friedman was a fierce opponent of the military draft, and called for the decriminalisation of prostitution and drug use. He courted controversy, not least when he and other Chicago School economists advised Augusto Pinochet in Chile, after the overthrow in 1973 of Salvador Allende, the democratically elected president. Mr Friedman defended himself by pointing to the ultimate fall of General Pinochet. "Freer markets lead to free people," he said.
"It's hard to think of anyone who's had more of a direct influence on social and economic policy in this generation," Professor Allan H Meltzer of Carnegie Mellon University, who is preparing a two-volume history of the Fed, said yesterday.