Greatest contributions of greatest economist Milton Friedman to our modern economy

Few economists have made an impact on modern economics as Milton Friedman has done. From tax policies to the running of the Federal Reserve, Friedman’s handiwork can be seen.  The 1976 Nobel laureate for economics was an adviser to the Reagan and Clinton administrations, influencing economic policy that saw the economy do well in the years under those administrations. 

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Rule of the markets

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​Milton Friedman showed that markets are able to allocate resources with maximum efficiency. That is to say for example if there are two metals, A and B being mined, If metal A has more demand than metal B, more miners (labor) will work to produce more metal A and more money (capital) will be poured into developing industries related to metal A than metal B. this is allocation of resources in response to market demands. A good example of this in the economy is lending by banks to sectors that are booming to take advantage of the good returns from well performing businesses.

Minimal government

The good economist proposed that government regulation did more harm than good to the economy. As seen above markets are able to allocate resources without government intervention. The government should only come in to provide an enabling environment like good infrastructure and security. This is seen today where the government tries to regulate businesses as little as possible leaving the markets to chart their own path. Friedman used examples of government intervention as seen in the badly performing economies of the communist countries.

Forex rates and markets

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Friedman proposed that free trading of floating currencies was one of the best ways to facilitate international trade.  The economist’s works influenced the way money is traded and exchanged in the world. The currency market is one of the most active and largest in the world. 

Monetary policy and Quantitative easing

Friedman advised governments on how to regulate money in the economy. This influenced how the Federal Reserve controlled money in the economy. He proposed that central banks increase the amount of money in circulation as the economy grows. The government calls this increase ‘Quantitative easing’ This could be seen when the government was encouraging growth after the 2008-2009 financial crisis. Milton also proposed the use of monetary policy in controlling inflation and stagnation in the economy. 

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Conclusion

Friedman also influenced other fields that have an impact on the economy like education and military policy. Many aspects of free markets and attendant government regulations today can be attributed to the works of Friedman.