- Person
- Milton Friedman
- Lived
- 1912–2006
- Field
- Economics
- From
- American
The story
When the United States entered the Second World War, its armed forces needed answers to statistical problems on a scale never seen before: how to test weapons, how to inspect huge quantities of ammunition and equipment, how to judge new materials. Universities set up research teams to help, funded through the Office of Scientific Research and Development.
From 1943 to 1945 Milton Friedman worked at Columbia University in the Statistical Research Group of the Division of War Research, headed by Harold Hotelling and W. Allen Wallis. It was a remarkable team of 18 researchers that also included Abraham Wald, George Stigler, Frederick Mosteller and Leonard Savage. As a mathematical statistician Friedman worked on problems of weapon design, military tactics and metallurgical experiments, including a regression model for new alloys for aircraft engines, and he was consulted during the Battle of the Bulge as an expert on the proximity fuses of air-burst shells.
One of the most lasting achievements of the group was sequential sampling, or sequential analysis. Traditional testing fixed the size of a sample in advance. The new method instead evaluated results as each item was inspected and stopped as soon as the evidence was clear enough to accept or reject a batch. That meant a decision could often be reached far earlier, saving time and money. The idea applied basic economic reasoning about the costs and benefits of gathering more information. The technique is first attributed to Wald, working with Wolfowitz, Wallis and Friedman, and its value to the war effort was so obvious that it was immediately classified as restricted.
After the war Wald published the method in his 1947 book Sequential Analysis. The New Palgrave Dictionary of Economics described it as "the standard analysis of quality control inspection" and noted that, like many of Friedman's contributions, it seems remarkably simple and obvious in retrospect. Friedman joked in his Nobel autobiography that his capacity as a statistician reached its zenith on VE Day in 1945.
The method spread well beyond factories. The statistician Peter Armitage introduced sequential analysis into medical research, and today clinical trials often use planned interim analyses so that a study can stop early once a treatment is clearly working or clearly failing, at lower financial and human cost.
Why it matters
Sequential sampling made factory inspection faster and cheaper and is still used in quality control around the world.
About Milton Friedman
Chicago economist and 1976 Nobel laureate whose monetarism and free-market advocacy reshaped central banking, ended the US draft and influenced governments worldwide.
More about Milton Friedman
- Milton Friedman made the case for floating exchange ratesMilton Friedman's 1953 essay The Case for Flexible Exchange Rates argued for floating currencies at a time when most experts thought the idea unrealistic.
- Milton Friedman showed what caused the Great DepressionIn their 1963 Monetary History of the United States, Milton Friedman and Anna Schwartz argued that a collapse in the money supply turned a downturn into the Great Depression.
- Milton Friedman foresaw the problem of stagflationIn 1968 Milton Friedman argued that inflation cannot permanently reduce unemployment, a theory that anticipated the stagflation of the 1970s.
- Milton Friedman explained how families plan their spendingIn his 1957 book A Theory of the Consumption Function, Milton Friedman introduced the permanent income hypothesis, which he considered his best scientific work.
Sources
- Milton Friedman Wikipedia
- Milton Friedman: Biographical NobelPrize.org
- Sequential analysis Wikipedia
- Statistical Research Group Wikipedia
Another act of tikkun olam. This is part of tikkun olam, the Jewish idea of repairing the world, and every one of us can add to it.