WHO IS THE GREATEST ECONOMIST OF THE 20TH CENTURY?
“But half a century later, it is Keynes who has been toppled and (_________________), the fierce advocate of free markets, who is preeminent.” –Daniel Yergin and Joseph Stanislaw, The Commanding Heights, p. 15.
Who deserves to be the greatest economist of the 20th century? This question was debated at my session of the annual American Economic Association meetings in New York City last month. We polled the audience of about 150 economists, and John Maynard Keynes won. Keynes revolutionized the economics profession by contending that the free-market economy is inherently unstable and requires government intervention (through deficit spending, progressive taxation and monetary inflation) to keep it on the path of full employment.
Of course, the audience may have been biased since the topic of the session was on Keynes’s most famous proponent, Paul A. Samuelson. Still, Keynesian economics–the economics of government interventionism at the macro level–is very much alive, and therefore, Keynes must be regarded as the most influential economist of the 20th century.
However, influence is not the same as greatness. Milton Friedman came in second in the informal poll and in terms of greatness, he exceeds Keynes. Time magazine’s editor-in-chief, Norman Pearlstine, gives the nod to Friedman as the “economist of the century” (Time, December 7, 1998). And in a recent study of living economists most frequently cited in college textbooks, Milton Friedman came in #1 by a landslide. He was cited in all the textbooks. (Paul Samuelson came in a distant #12.) Friedman’s contributions are many: He demonstrated that government, not free enterprise, caused the Great Depression (through a disastrous monetary policy); he showed that monetary policy was more powerful than fiscal policy; he made the case against progressive taxation, deficit spending and monetary inflation. He won the Nobel Prize in 1976 for these efforts. His best books are Capitalism and Freedom and Free to Choose (both still in print, available through Laissez Faire Books, 800/326-0996).
Sharing the Prize
Milton Friedman should also share the prize of greatest economist with Friedrich A. Hayek, the Austrian who studied under Ludwig von Mises. As Yergin notes in The Commanding Heights (quoted above), Hayek made a convincing case against socialist central planning in The Road to Serfdom and other anti-socialist works. He developed a powerful tool for explaining business cycles, known as Austrian capital theory. His theory of knowledge and entrepreneurship is vital in today’s global economy. He rightly won the Nobel Prize in 1974.
So my vote goes to both Friedman and Hayek.
WHO DO YOU CONSIDER THE GREATEST INVESTOR?
As we approach the end of the 20th century, scholars are compiling lists of the greatest writers, politicians, entrepreneurs and scientists of this remarkable century.
I know who gets my vote for greatest investor: Warren Buffett. Not only has he consistently beaten the market, but his optimism about America has paid off handsomely. Too bad he doesn’t own any Internet stocks. He could have been the world’s first trillionaire!
R.I.P., THE SUPERBOWL INDICATOR
I bid a fond farewell to the Superbowl Indicator. Every so often, market players get caught up in an irrational indicator that allegedly makes it easy to predict the markets. In the 1970s it was the soybean-silver ratio. In the 1980s it was the Kondratieff Cycle. And in the 1990s it was the Superbowl Indicator. Supposedly, if the National Football Conference (NFC) won the Superbowl, stocks would rise; if the American Football Conference (AFC) won, stocks would fall. Amazingly, this indicator worked for decades. Throughout the 1990s, the NFC team won and the stock market rose. Then last year the Denver Broncos of the AFC won, and many stock market pundits exited the market or sold short. Big mistake–the S&P 500 rose 28% in 1998! And thus ended once and for all the Superbowl Indicator. Good riddance, and may it be replaced by sound strategies based on free-market economics!