Milton Friedman (1912–2006)

Throughout the first 15 years following the end of World War II the economics profession throughout the Western world was characterized by a touching belief in the omniscience and impartiality of government as the servant of the public good and by a cynical belief in the endemic failure of free markets to maximize social welfare as defined by the Pareto Principle supplemented by the Kaldor–Hicks–Scitovsky potential compensation test. It was also characterized by the hegemony of Keynesian economics with its support for large and fiscally interventionist governments and its contempt for monetary instruments of macroeconomic intervention.

The behemoths who bestrode the economics profession throughout that period were Paul Samuelson, Kenneth Arrow, John Kenneth Galbraith, James Tobin, Robert Solow, and Joan Robinson. Classical political economy was dead, buried by the Great Depression and by the writings of John Maynard Keynes (1936). Free market economics was on the ropes, with few advocates and even those forced into perpetual defense in an environment in which public choice analysis played no role. The future for economic liberty and capitalism was bleak indeed.

This chapter is a revised and updated version of an essay that first appeared in The Encyclopedia of Public Choice edited by Charles K. Rowley and Friedrich Schneider and published in 2004 by Kluwer Academic Publishers, Volume I, pp. 146–159.