Who was Milton Friedman and what did he say about Social Security Reform? (Part 1)

Milton Friedman congratulated by President Ronald Reagan. © 2008 Free To Choose Media, courtesy of the Power of Choice press kit

Milton Friedman – The Social Security Myth

Using Social Security as his prime example, Professor Friedman explodes the myth that the major expansions in government resulted from popular demand. In a speech delivered more than 30 years ago, he directly relates this dynamic to today’s health care debate. http://www.LibertyPen.com

Milton Friedman economist Milton Friedman
Born July 31, 1912
Brooklyn, New York City
Died November 16, 2006
San Francisco, California

Known for
Monetarism
Permanent income hypothesis
Critique of Phillips curve

Notable Prizes
John Bates Clark Medal (1951)
Nobel Memorial Prize in Economics (1976)
Presidential Medal of Freedom (1988)

Milton Friedman (July 31, 1912 – November 16, 2006) was an American economist who made major contributions to the fields of macroeconomics, microeconomics, economic history and statistics while advocating laissez-faire capitalism.

In Capitalism and Freedom (1962) he advocated minimizing the role of government in a free market in order to create political and social freedom. In 1976, he won the Nobel Prize in Economics for his achievements in the fields of consumption analysis, monetary history and theory and for his demonstration of the complexity of stabilization policy. His television series Free to Choose aired on PBS in early 1980. It became a book, co-authored with his wife, Rose Friedman. The book was widely read, as were his columns for Newsweek magazine. In statistics, he devised the Friedman test.

His political philosophy stressing the advantages of the marketplace and the disadvantages of government intervention shaped the outlook of American conservatives and had a major impact on the economic policy of the Ronald Reagan administration in the U.S. and on many other countries after 1980.

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I read Milton Friedman’s book “Free to Choose” and practically memorized his 10 part film series (with the same name). I once got to correspond with him, and I was thrilled that he took time to write me back.

Ronald Reagan was another one of my heroes and so was Francis Schaeffer. It was amazing to me that these gentlemen actually had so many connections. Francis Schaeffer’s good friend C. Everett Koop was in the Reagan Administration. Milton Friedman was good friends with Reagan as well.

Milton Friedman wrote an excellent article, “Speaking the truth about Social Security Reform,” April 12, 1999, Cato Institute and I will posting portions of that article in the next few days.  Milton Friedman, winner of the 1976 Nobel Prize in Economics, was a senior research fellow at the Hoover Institution. Originally published in the New York Times January 11, 1999. Here is the first portion:

Executive Summary

 

As support grows for transforming Social Security from a pay-as-you-go defined benefit program to a system of individually owned, privately invested accounts, critics of privatization have warned that making the transition to such a new system would impose substantial new costs on today’s young workers. However, given a proper understanding of Social Security’s current unfunded liabilities—variously estimated at from$4 trillion to $11 trillion—there are no real transition costs to privatizing Social Security, merely the explicit recognition of current implicit debt.

A privatized SocialSecurity system should not be mandatory. The fraction of a person’s income that it is reasonable for him or her to set aside for retirement depends on that person’s circumstances and values. It makes no more sense to specify a minimum fraction for all people than to mandate a minimum fraction of income that must be spent on housing or transportation. Our general presumption is that individuals can best judge for themselves how to use their resources.

The ongoing discussion about privatizing Social Security would benefit from paying more attention to fundamentals, rather than dwelling simply on nuts and bolts of privatization.

 

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