The philosophy of one century is the common sense of the next.” So advised a slip of paper I once pried from a fortune cookie.
Milton and Rose Friedman embody that Chinese proverb. The 1976 winner of the 1976 Nobel Prize for economics and his wife of 61 years have seen many of their once‐exotic ideas merge into the mainstream. Their school voucher proposal in Capitalism and Freedom (one of four books they co‐authored) must have resembled an atomic attack on government education in 1962. Though still controversial, vouchers today can be discussed among polite company. The same applies to the Friedmans’ call for the separation of retirement and state. Republicans and even some Democrats now recommend privatizing Social Security, a notion once only whispered. Some of Milton Friedman’s former University of Chicago students introduced private pensions to Chile and have helped spread them to Argentina, England, Mexico and beyond.
What’s next? In an interview at their modest office at Stanford University’s Hoover Institution, the cutting‐edge Friedmans offered three radical ideas perhaps destined for conventional wisdom.
“We don’t need a Fed,” Milton Friedman says, twirling a letter opener as he speaks. “I have, for many years, been in favor of replacing the Fed with a computer,” he adds. Each year, it “would print out a specified number of paper dollars” to augment the money supply. “Same number, month after month, week after week, year after year.”
“The Fed has had very few periods of relatively good performance,” he continues. “For most of its history, it’s been a loose cannon on the deck, and not a source of stability.”
While calling today’s Fed policies “on the whole, very good,” he worries that Chairman Alan Greenspan is letting stock prices influence interest rates.
“I do not believe the Fed ought to let its monetary policy be determined by the stock market,” Friedman says. “The Fed ought to devote its attention solely to keeping a relatively stable price level of goods and services.” He points to the bull markets in 1920s America and 1980s Japan. “Both of those were brought to an end by monetary policies adopted to bring them to an end.”
In 1928, Friedman says, the Fed tightened monetary policy “because of its concern with the stock market boom…If there had been no Fed, there would have been no Great Depression.” Early this decade, the Bank of Japan similarly slammed on the brakes. Japan skidded into a ditch from which it is emerging only now. “In both cases,” he says, “the central banks should not have been paying any attention to the stock market, but should have been concentrating on the price level in general.”
To increase transparency, Friedman encourages “the instantaneous release” of the meeting minutes of the Fed’s rate‐setting Federal Open Market Committee. The FOMC’s deliberations now remain secret until the Thursday after the following encounter, usually about six weeks later.
The Friedmans also support ending compulsory education. “Parents can decide if they want their kids to go to school, where and when. It’s not really a government function,” says Rose Friedman, clad in a bright orange blouse.
Her husband notes that “both in Britain and the United States, before you had compulsory schooling, you had about as large a fraction of the kids going to school as you do now. Literacy today is lower than it was 100 year ago. So you don’t really need compulsory schooling, and I think we’d be better off without it.”
He also argues that cutting mandatory education from age 18 to 16 would reduce campus violence. “You force kids who have no wish to be in school into schools that do not arouse their interest,” Friedman explains. “What are they going to do? They’re going to make trouble.”
Finally, the Friedmans want to legalize drugs. “We have spent a fortune, ruined Colombia, we may ruin Mexico and we’re not getting anywhere,” Mrs. Friedman says. “It’s time to try something else. Somewhere along the way, you have to admit failure.”
Mr. Friedman calls the government’s fight against narcotics “an immoral war.” Among its victims, he counts the thousands of minority members who have been jailed for low‐level drug crimes. “I think it’s absolutely disgraceful that the United States has a larger fraction of its black population in prison today than South Africa did at the height of apartheid.”
Prominent Americans increasingly agree. Legalization, once chiefly associated with drug users seeking lawful highs, now is embraced by such conservatives as author William F. Buckley, President Reagan’s secretary of state George Shultz and Gary Johnson, New Mexico’s Republican governor.
Still, drug legalization — like the other reforms the Friedmans advocate — must await the 21st Century to become reality.
Meanwhile, asked for a few words of wisdom as the year 2000 approaches, Milton Friedman laughs reassuringly. “The millennium will take care of itself.”