Milton Friedman, psychic?

By proclamation of several cities and states, Monday was Milton Friedman Day. CEI was one of many free-market groups that joined in this celebration with events celebrating the great economist’s life. But really, especially for the governments concerned, shouldn’t every day be Milton Friedman Day? We should try our best not to interfere or advocate interfering with the free market.

In that spirit, I want to share a passage of Dr. Friedman’s from The Book of Predictions published in 1980. It turns out that Friedman was not just a a sage of free-market economics, but a sage,  period. He was four out of five in his prediction of future fellow recipients of the Nobel Prize in economics, and there is still time for him to be five for five.

Reading prediction books from the past is a fun exercise, and this Book of Predictions is no exception. Most of the people quote in this book, written by People’s Almanac compiler David Wallechinsky, were not psychics, but experts in their fields taking educated guesses. Still, most of the predictions range from silly, in retrospect, to flat wrong.
Among the predictions made for the 1980s is a “steady downward trend” in car ownership and skyrocketing oil prices. Oil prices went down a year after the book was published, when Ronald Reagan lifted price controls. Since “peak oil” predictions are again in vogue, I quote some of these statements from the ’80s in my new book Eco-Freaks.

But Dr. Friedman, by contrast, has a batting average of 800 for his 1980 Nobel predictions — and may even hit 1000. He predicted future Nobel choices George Stigler, Gary Becker, Robert Lucas, and Franco Modigliani.

These choices show that while Dr. Freidman may not have been psychic, he was extremely far-sighted. It wasn’t a sure thing in 1980 that Gary Becker would be nominated for his novel human capital theories and applying economics to organizations like the family. Dr. Friedman also saw how Robert Lucas’ work on “rational expectations” of economic actors would transform how we study everything from inflation to stock prices.

Friedman’s fifth choice was Martin Feldstein, who has done seminal work on tax and retirement policy. Feldstein has also been a great advocate for giving workers the ability to save a portion of their Social Securituy payroll taxes. It would be one more great vindication of Friedman if his final prediction were to come true. It would be an even better vindication if we could follow Friedman and Feldstein’s advice and remove the payroll tax’s burden to saving.