Reuters Market News Bush, Greenspan honor economist Milton Friedman
By Adam Entous
WASHINGTON, May 9 (Reuters) - Economist Milton Friedman, an inspiration for the modern conservative revolution in government, celebrated his upcoming 90th birthday at the White House on Thursday, winning praise from Alan Greenspan, who mused about putting him in charge of Federal Reserve policy.
President George W. Bush called Friedman, who preaches free enterprise in the face of government regulation and advocates a monetary policy that calls for steady growth in money supply, a "hero for freedom" whose economic "vision has changed America and it is changing the world."
Fed Chairman Greenspan said the Nobel Prize-winning adviser to Presidents Richard Nixon and Ronald Reagan was the "most formidable economist" of the 20th century and possibly the 21st. "If you can get for me a Federal Open Market Committee made up of Milton Friedmans, I would never be concerned," Greenspan said of the Fed panel that sets interest rates.
However, Greenspan does not actually back money supply targeting, which was abandoned as a policy tool in the 1980s.
Friedman advocated low taxes, school vouchers, privatizing Social Security and other conservative policies that form the core of Bush's platform.
He has been a senior research fellow at the Hoover Institute since 1977 and is professor emeritus at the University of Chicago, where he taught from 1946 to 1976. He was awarded the Presidential Medal of Freedom in 1988.
His ideas were not always popular, emerging as they did at a time when public spending was credited with helping end the worldwide Depression of the 1930s.
"When he began his work, the conventional wisdom held that capitalism's days were numbered. Free market systems were thought to be unsuited to modern problems," Bush said.
"Today we recognize that free markets are the great engines of economic development. They are the source of wealth, and the hope of a world weary of poverty and weary of oppression."
IMPACT ON MONETARY POLICY
Friedman also shares credit for helping America win the Cold War and ending the military draft in the United States.
Greenspan said Friedman's free-market philosophy had "effectively altered the construction of how monetary policymakers function."
"We in the central banks across the world have invariably concluded that you cannot ... increase employment in any permanent way by just expanding money," Greenspan said.
"And if you think about it, that has become so profoundly important a conclusion that it may well be one of the major reasons why the world at large has reached a level of price stability in a way we haven't seen for a very long period of time," he added.
Bush cast himself as Friedman devotee, although his administration has come under fire from conservatives for slapping duties on steel imports and supporting farm legislation that will increase crop and dairy subsidies.
"He has never claimed that free markets are perfect. Yet he has demonstrated that even an imperfect market produces better results than arrogant experts and grasping bureaucrats," Bush said. Friedman thanked the president and offered him some advice about government spending, which Bush has sharply increased in response to the Sept. 11 attacks.
"If you spend some money on yourself ... you're careful how much you spend and you're very careful how you spend it," Friedman said.
"If you spend your own money on somebody else, well, you're careful about how much you spend, but you don't worry so much about how well you spend it. ... If you spend somebody else's money on yourself, well, you don't care how much you spend, but you care a great deal how well you spend it."
He added: "You spend somebody else's money on somebody else ... and you don't care how much you spend and you don't care how you spend it. That's government."