[Ed. note: Milton Friedman's views are also explored in Part I of this series (worldview) and in Part III (political capitalism).]
“Economists may not know much. But we know one thing very well: how to produce surpluses and shortages. Do you want a surplus? Have the government legislate a minimum price that is above the price that would otherwise prevail…. Do you want a shortage? Have the government legislate a maximum price that is below the price that would otherwise prevail.” – Milton and Rose Friedman, Free to Choose (New York: Harcourt Brace Jovanovich, 1979), pp. 219.“It is a mark of how far we have gone on the road to serfdom that government allocation and rationing of oil is the automatic response to the oil crisis.” – Milton Friedman, “Why Some Prices Should Rise,” Newsweek, November 19, 1973.
Milton Friedman is best known for his monetary economics, Monetarism, a school of economics that challenged and largely defeated Keynesianism. “By century’s end, stated Paul Krugman in the New York Review of Books, “classical economics had regained much though by no means all of its former dominion, and Friedman deserves much of the credit.”
But as Friedman became a public intellectual, writing popular books and writing his biweekly Newsweek columns, he became conversant in different fields, including energy. And energy, and Harold Hotelling’s fixity/depletion model in particular, became the rage of applied economics in the energy-troubled 1970s.
Friedman’s harsh negative reaction to President Nixon’s wage and price control order of August 1971 is particularly important for the energy debate, for this action (and not the Arab Embargo) created the oil shortages that led to a decade of oil regulation and misery from U.S. consumers.
Friedman’s salient quotations on energy, at least what I have been able to find, are presented below. (Perhaps readers can add to this compilation in the comments section below.) For additional thoughts of Friedman on energy, see the MasterResource post, Milton Friedman on Mineral Resource Theory.
