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Chapter 5: The Invention of Milton Friedman
On a warm evening in the late spring of 1962, Milton Friedman rose to address a group of dinner companions at the University of Chicago’s Quadrangle Club. They had been summoned by the student members of the Intercollegiate Society of Individualists in order to honor Friedrich Hayek before his impending departure from the university. With superior financial prospects available at the University of Freiburg, Hayek had recently, and reluctantly, decided to bring his time at Chicago to a close. Friedman—who was in the midst of the final manuscript preparations for his first mass-market book, Capitalism and Freedom—took the opportunity to reflect on the challenges that Hayek had long faced and that he was preparing to confront. Hayek was notable, Friedman informed the room, because of “the extent to which he has succeeded in straddling two kinds of worlds”: the act of “spreading ideas among the public at large” was “very seldom combined with thorough, deep, and profound scholarly work that can influence the course of science.” The scholarly world was not friendly to those who used positions of academic authority to expound minority views to the public, and Hayek’s exemplary performance as both academic and advocate had forced him to endure difficulties that were too rarely acknowledged. Such an observation might easily have been a prelude to expressions of frustration, but Friedman was adept at finding inspiration where others saw grounds for despair. Discouragement from colleagues was “a very good thing,” he concluded, “because it means that those of us who hold our views have to be better to get recognized than people who hold the other views. And in the long run, what matters is the quality of people who propose the ideas and not their number and not their position.” Friedman maintained a relentless faith in the ability of unpopular ideas to gain recognition and, over the course of decades, to effect political change.
Hayek was a living testimonial to Friedman’s confidence. The participants in the dinner recognized him as one of very few intellectuals whose career had spanned the trajectory between initial expressions of dissent and derivative signs of political change. He was, George Stigler remarked, “one of three or four economic philosophers who have had a noticeable influence on his times.” Even Hayek acknowledged that the ideas espoused in The Road to Serfdom were on the ascent. “Many who denounced the book without reading are now beginning to read it,” he told the attendees. “The top layer of intellectual leaders, those whose opinions will be effective a generation later, now have a more genuine belief in liberty than they had before.” With Hayek’s return to Europe, America was losing its most prominent and distinguished public advocate of free markets. He was departing with some lingering frustrations and uncertainties, but no little sense of satisfaction at the increasing public acceptance of his ideas.
This was a moment of transition. Hayek’s departure for Freiburg signified that his public career was beginning to draw to a close. He had been disappointed by the sales of his magnum opus, The Constitution of Liberty, following its publication in 1960. The book was not reviewed by Time or Life, and Reader’s Digest had resisted his entreaties to condense it. He was nearing a conventional age for retirement, and his retreat across the Atlantic consigned him to a peripheral role in the American academic and political spheres. By the end of the decade, he was wrestling with a personal depression and diminished productivity that further distanced him from the intellectual communities he had helped to create. Friedman, on the other hand, was on the verge of a personal and professional renaissance. In the half-decade following his remarks at the Quadrangle Club dinner, his reputation as an economist would be solidified with the publication of A Monetary History of the United States, 1867–1960 (co-written with Anna Schwartz) and an election to the presidency of the American Economic Association, and his popular profile would rapidly expand with the publication of a bestselling book and a prominent advisory role in the Goldwater campaign. He had grown into a leadership role within the Mont Pelerin Society as well.
Introduction: The End of Laissez-Faire 1
1 Market Advocacy in a Time of Crisis 12
2 Entrepreneurial Ideas 55
3 Planning against Planning 87
4 New Conservatisms 123
5 The Invention of Milton Friedman 152
6 Moral Capital 186
Conclusion: The Spirit of an Age 214