Econbrowser is pleased to host these remarks from Stanford Professor John Taylor, which were delivered at the memorial service held at Hoover Institution and Stanford University on January 22.
Remarks by John B. Taylor at the Milton Friedman Memorial
Long before I met Milton Friedman I learned an enormous amount from him– from his books, his papers, his columns. And long after he is gone I will continue to learn from his writings, just like millions of others around the world. I keep asking myself, “What would Milton say? What would Milton do?” when various issues come up, and I hear friends and colleagues here at Hoover and Stanford and elsewhere asking the same questions. Just last Wednesday I was at the University of Chicago talking with Nobel prize-winning economist Robert Lucas about a new research idea in monetary economics. Bob recalled how Milton– the grand master of monetary economics– had ingeniously formulated a simple equation that described consumption for the whole economy. Though quite simple it captured a highly complex theory of how families made decisions about how much to consume. And Bob and I wondered together if that approach could be applied to the problem at hand– finding a simple equation that might capture the complexity of how price and wage decisions in the entire economy are made. Milton Friedman wrote down his equation in a book called A Theory of the Consumption Function in 1957 and there Bob and I were seeing if we could apply it– exactly 50 years later– in 2007. I know others will be discussing the ideas in that book in 2057, 3007, and so on.
And there are many other books. You can easily tell which books on my shelves are authored by Milton. They’re the ones with the signs of love– cracked bindings, loose pages, numerous markings.
His book Essays in Positive Economics is a favorite because it contains the papers which made his case for monetary policy rules, for inflation control, and for flexible exchange rates– the three bedrocks of modern monetary theory and policy– which is my own field of research. It is not an exaggeration to say that this theory is the reason why the United States is in a 25 year long boom, and why that boom is now global in its reach with no recessions anywhere. Central bankers found out that it was a good idea to follow Milton Friedman’s principles, and they found a way to do so.
Another favorite book is A Monetary History of the United States with Anna Schwartz. It proved, better than any modern econometric method, that money is inextricably tied to inflation, with long and variable lags.
Capitalism and Freedom, which I read in college in the 1960s, still inspires, and should be read again and again by today’s college students. And I recommend watching the tapes of Free to Choose, especially the version where Arnold Schwarzenegger does the introduction. Watch Milton at the Hong Kong border calling for economic freedom in China and you will never forget the importance of economic freedom.
It was not until I moved to Stanford and Hoover in 1984 that I had the privilege of really getting to know the person who authored these favorite books, and his wife Rose. True to legend, Milton was impressive with his sharp mind and quick debating skills, but even more impressive to me was his gregariousness, kindness, and humor. He was genuinely interested in what people had to say, no matter what their education, no matter what their position; he respected people.
He always answered letters and emails– and imagine how many emails he got from around the world. He told me that if someone took the time to write to him with a question that he felt he should find the time to answer.
He was always willing to be a guest lecturer in my Economics 1 course, speaking to hundreds of Stanford students. He would start off telling the undergraduates that two major things the government is involved in are a mess: education and drugs– and that would set off a lively round of questions with his memorable answers impressing both those on the left and the right.
He and Rose put MV=PY on their California license plates, a story I always use to help students remember that famous quantity equation.
I remember calling him from Washington in 1990 during a stint at the Council of Economic Advisers. It was my job to ask for his support for President George H.W. Bush’s “revenue enhancements” alternatively known as tax increases. I didn’t even have to ask the question before he realized why I was calling and simply said, “No!” adding “You better come back to Stanford right away, John. Washington is corrupting you.”
One of the best things about returning from Washington last year was the opportunity for my wife Allyn and me to see more of Milton and Rose, to have dinner with them in that North Beach restaurant they love so much, and for me to talk more with Milton about monetary theory.
Just about one year ago Milton wrote a technical paper on some of my monetary research, which we had been discussing at length in the previous months. He downloaded the data for the paper from the internet. He analyzed the data on his Mac. And he demonstrated, in a more convincing and sophisticated way than I had ever seen, that the improvement in economic stability in the United States in the past 25 years was mostly due to monetary policy. He did not try to give himself any credit for the theory that led to the policy, but he obviously deserved it.
I assigned the paper to my Ph.D. students in a course I taught last spring. I debated the technical parts of the paper with Milton last summer, and the debate was televised for a conference just last August. Of course, Milton won that debate, and I can’t refute it, because it’s on tape. But it was a moment for me with the grand master that I’ll never forget.