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 ofthe 1976 Nobel Prize for economics and his wife of 61 years have seenmany of their once‐exotic ideas merge into the mainstream. Their schoolvoucher proposal in Capitalism and Freedom (one of fourbooks they co‐authored) must have resembled an atomic attack ongovernment education in 1962. Though still controversial, vouchers todaycan be discussed among polite company. The same applies to theFriedmans’ call for the separation of retirement and state. Republicansand even some Democrats now recommend privatizing Social Security, anotion once only whispered. Some of Milton Friedman’s former Universityof Chicago students introduced private pensions to Chile and have helpedspread them to Argentina, England, Mexico and beyond.
What’s next? In an interview at their modest office at StanfordUniversity’s Hoover Institution, the cutting‐edge Friedmans offeredthree radical ideas perhaps destined for conventional wisdom.
“We don’t need a Fed,” Milton Friedman says, twirling a letteropener as he speaks. “I have, for many years, been in favor ofreplacing the Fed with a computer,” he adds. Each year, it “wouldprint out a specified number of paper dollars” to augment the moneysupply. “Same number, month after month, week after week, year afteryear.”
“The Fed has had very few periods of relatively good performance,“he continues. “For most of its history, it’s been a loose cannon onthe deck, and not a source of stability.”
While calling today’s Fed policies “on the whole, very good,” heworries that Chairman Alan Greenspan is letting stock prices influenceinterest rates.
“I do not believe the Fed ought to let its monetary policy bedetermined by the stock market,” Friedman says. “The Fed ought todevote its attention solely to keeping a relatively stable price levelof goods and services.” He points to the bull markets in 1920sAmerica and 1980s Japan. “Both of those were brought to an end bymonetary policies adopted to bring them to an end.”
In 1928, Friedman says, the Fed tightened monetary policy “because ofits concern with the stock market boom…If there had been no Fed, therewould have been no Great Depression.” Early this decade, the Bank ofJapan similarly slammed on the brakes. Japan skidded into a ditch fromwhich it is emerging only now. “In both cases,” he says, “thecentral banks should not have been paying any attention to the stockmarket, but should have been concentrating on the price level ingeneral.”
To increase transparency, Friedman encourages “the instantaneousrelease” of the meeting minutes of the Fed’s rate‐setting FederalOpen Market Committee. The FOMC’s deliberations now remain secret untilthe Thursday after the following encounter, usually about six weekslater.
The Friedmans also support ending compulsory education. “Parents candecide if they want their kids to go to school, where and when. It’s notreally a government function,” says Rose Friedman, clad in a brightorange blouse.
Her husband notes that “both in Britain and the United States, beforeyou had compulsory schooling, you had about as large a fraction of thekids going to school as you do now. Literacy today is lower than it was100 year ago. So you don’t really need compulsory schooling, and I thinkwe’d be better off without it.”
He also argues that cutting mandatory education from age 18 to 16 wouldreduce campus violence. “You force kids who have no wish to be inschool into schools that do not arouse their interest,” Friedmanexplains. “What are they going to do? They’re going to maketrouble.”
Finally, the Friedmans want to legalize drugs. “We have spent afortune, ruined Colombia, we may ruin Mexico and we’re not gettinganywhere,” 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 “animmoral war.” Among its victims, he counts the thousands of minoritymembers who have been jailed for low‐level drug crimes. “I think it’sabsolutely disgraceful that the United States has a larger fraction ofits black population in prison today than South Africa did at the heightof apartheid.”
Prominent Americans increasingly agree. Legalization, once chieflyassociated with drug users seeking lawful highs, now is embraced by suchconservatives as author William F. Buckley, President Reagan’s secretaryof state George Shultz and Gary Johnson, New Mexico’s Republicangovernor.
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 careof itself.”