Economic theory drives most of the government's fiscal decisions. What seems to the public like mere intellectual debate can affect the lives of hundreds of millions of people. At the Mount Pelerin Society's conference in 1975, I wanted to be part of that debate, and I circulated my economic papers wherever I could.
At the conference's social gatherings, discussion centered around such topics as forecasting people's voting patterns based on economic self-interest, or how Austrian, Keynesian, and Monetarist methodologies could complement each other to help understand human behavior. My argument that statistical regression could be used to help test theories did not arouse interest, except Professor Friedman's. Everyone had read Hayek's acceptance speech at the Nobel Prize ceremony (given back in December, 1974) and its implications for methodology were debated with great intensity.
Generally, my youthful enthusiasm was treated with benign neglect, but Professor Friedman was kind: "Steve, your papers are wonderful. I enjoyed reading them." He said this loudly, within earshot of others, who just felt embarrassed for me because of my overly assertive style. During meetings, Professor Friedman would ask me to get him a glass of water or a pen or paper. I found and delivered them as fast as I could run. Eager to make a better impression with the members, my questions to panelists became more judicious and tactful.
One day, to my surprise, Professor Friedman asked me to play tennis with him the next morning, at six o'clock. He wore white shorts that, on his five-foot-two-inch frame, hung over his knees, and baggy gray socks that almost came up to his shorts. Since I hadn't planned to be playing tennis, my jeans and a dirty sweatshirt had to do. I played so badly that we ended our session with me standing at the net and throwing the ball, so that perhaps the most celebrated economist in the world could practice his backhand. We made quite a pair!
Afterwards, as we walked to breakfast, we talked about the hotly debated issue of whether insurance policies were part of the money supply. Friedman was fascinated by the question, having made part of his reputation on defining how to measure the supply of money.
That night, Professor Friedman gave a wonderful after-dinner talk on monetarism, and his views on the relationship of the supply of money to total output. When I raised my hand to ask a question, he pretended not to see me.
My plan had been to drive Professor Friedman to the airport at the conference's end and have the opportunity to lecture to a captive audience. But the administration got wind of my intentions and assigned two Hillsdale students to accompany him, instead. Disappointed, I walked Professor Friedman to the car, carrying his bag. Before he got in, he said, "Steve, relax. You're a very, very good young economist with a knack for theoretical economics. But you come on too strong and are only interested in your own thinking; let people come to you. Stay in touch and let me know if you apply to Chicago. I just don't see you enjoying the advanced mathematics." His handshake was firm and he looked me straight in the eye, as if to underline the insightful, near-fatherly advice he had given.
Twelve years went by in a flash. My career went in a different direction from theoretical economics. In 1987, I founded the Network for Teaching Entrepreneurship (NFTE), to show economically at-risk young people how to start their own small businesses. It was already beginning to receive widespread media attention.
In 1988, the National Federation for Independent Business gave me their award as the top high school business educator in America. I was flown to Colorado Springs to receive the prize, and Professor Friedman was going to present it. When I arrived at the hotel, I saw him talking to a spellbound entourage. "Professor Friedman!" I shouted. Without missing a beat and without even turning around, he responded: "Hey, Steve, we are all proud of you -- see you tonight."
Sure enough, that evening the future Nobel Prize winner introduced me at a private reception and, giving me a hug, told the guests the story of how his bag carrier of thirteen years before had changed the world by developing a program that was teaching entrepreneurship to low-income youth.
Read Part 1 here.