Updated: May 3, 2013 12:14PM
When Nobel Prize-winning economist Milton Friedman died last November at age 94, tributes came from all over the world. Friedman, who spent a large part of his career at the University of Chicago, demonstrated convincingly that governments cannot be successful at running economies, and that economic decisions are best left to free markets.
One of Friedman's distinguishing qualities was intellectual bravery. He spoke up when few would contradict the "common wisdom" that developed after the Great Depression -- the belief that government could guide the economy to prosperity through its tax and spending policies.
Friedman believed that only the free interchange of goods and services at prices set by informed buyers and sellers could bring economic growth and prosperity.Proven correct by history
In the 1970s the world was busy proving him right. The Soviet Union, with its succession of failed 10-year plans, saw its citizens standing in line for basic necessities. Socialism was tested to death in that huge country. In the United States, decades of government manipulation of taxes and spending also had failed convincingly.
By the early 1970s the U.S. economy had deteriorated into "stagflation" with high unemployment, high inflation and slow growth. The resulting wage and price controls instituted by President Richard Nixon and the "WIN" (whip inflation now) buttons of President Gerald Ford demonstrated the inability of our government to create real economic growth.
After Friedman won the Nobel Prize in 1976, America was ready to listen.
Milton Friedman and his wife, Rose, also a renowned economist, explained that inflation was not caused by full employment and wage demands pushing prices higher. Instead they demonstrated that "inflation is always and everywhere a monetary phenomenon."
Inflation increased when the Federal Reserve, the nation's central bank, created too much money or credit. The last two decades have shown that you can have strong economic growth, the lowest unemployment rate in history, a bull market in stocks -- and low inflation, if the Fed keeps a stern watch on the appropriate level of money supply.
Leo Melamed, chairman emeritus of the Chicago Mercantile Exchange, remembers the importance of Friedman's endorsement of his concept of a financial futures market.
Says Melamed about his late good friend, "His greatest contribution worldwide was to prove that you cannot run an economy in a command form, that a government can't dictate pricing. . . . He convinced a generation of policy makers and average citizens that market forces of supply and demand can be the only determinants of fair market value."
Friedman didn't just concentrate on financial markets to demonstrate the importance of choice.
His belief that government intervention created waste and poor performance led him to support school choice. He pointed out the worst schools were in poor neighborhoods where parents could not afford alternatives.
Friedman's thinking has inspired economies around the world, from Chile to Estonia.
Friedman's impact on history isn't limited to economic prosperity. Joseph Bast, president of the Heartland Institute, explains Friedman's legacy: "It was explaining the relationship between economic freedom and all our other civil freedoms. What Milton Friedman taught was that without economic freedom, all the other liberties that we take for granted either cannot exist or are easily swept away."Rockefeller Chapel honor
Today has been declared Milton Friedman Day, and he will be honored today at the University of Chicago Rockefeller Chapel at 2 p.m., a ceremony that will be open to the public, and is co-sponsored by the University of Chicago and the Chicago Mercantile Exchange.
If you want to know more about his formidable influence, you can watch his biography, "The Power of Choice" on PBS tonight.
Milton Friedman's ideas changed America for the better, helping create the prosperity we enjoy today. And that's The Savage Truth.
Terry Savage is a registered investment adviser. Check out Terry's answers to reader questions at suntimes.com, and click on Business.