Miller, Merton H., 1923-2000.
Business/Financial Desk | June 5, 2000, Monday
Merton H. Miller, 77, Dies; Economist Who Won NobelBy LOUIS UCHITELLE (NYT) 948 words
Late Edition - Final , Section A , Page 26 , Column 1ABSTRACT - Prof Merton H Miller, Nobel Prize winner in economics, dies at age 77; photo (M) Merton H. Miller, a Nobel award winner in economics whose passionate belief in free markets helped him to develop what are now widely recognized guidelines for valuing corporations, died on Saturday at his home in Chicago. He was 77.
He died of lymphoma, from which he had suffered since 1997, said his wife, Katherine. While he did his pioneering work in the late 1950's as a young professor at Carnegie Mellon University in Pittsburgh, he spent most of his career, since 1961, on the faculty of the University of Chicago's Graduate School of Business, where he taught until this school year.
Nobel Memorial Prize in Economics
1990
Merton H. MillerThe prize was divided equally between: HARRY M. MARKOWITZ, MERTON H. MILLER, and WILLIAM F. SHARPE for their pioneering work in the theory of financial economics.
Merton H. Miller's (1923-2000) first academic appointment after graduation was at LSE as an Assistant Lecturer in American Economic History for the 1952-53 academic year. Miller was awarded the Memorial Prize for his contributions to the theory of corporate finance and the market evaluation of firms. Together with Franco Modigliani, Miller developed a theory to account for the relationship between capital asset structure, dividend policy, and a firm's market valuation and capital costs. The Cost of Capital, Corporation Finance and the Theory of Investment (1958) and two succeeding papers in 1963 and 1966 established the model from which their MM invariance theorems grew, and since then Miller's research has led analysis in this area.
Merton Miller, Nobel laureate, leaves legacy of pioneering work in the theory of financial economics, corporate financeMerton H. Miller, a Nobel prize-winning finance professor at the University of Chicago Graduate School of Business whose pioneering research is one of the cornerstones of modern finance, died Saturday, June 3 at his home in Chicago.
Miller, 77, and fellow Nobel laureate Franco Modigliani, developed the much cited “M&M Theorems” on capital structure and dividend policy that are the foundations of the theory of corporate finance.
In their 1958 paper, “The Cost of Capital, Corporation Finance and the Theory of Investment,” Miller and Modigliani showed a firm’s value is determined by its investment decisions and not by its financing decisions.
A companion paper, “Dividend Policy, Growth, and the Valuation of Shares,” written by Miller and Modigliani in 1961, extended the basic results by showing that, given investment decisions, dividend policy is also irrelevant.
Miller, the Robert R. McCormick Distinguished Service Professor Emeritus of Finance, and his colleagues at Chicago went on to develop in greater depth the work begun by Miller and Modigliani. Much of that work was explained by Miller and University of Chicago business school professor Eugene Fama, who co-authored the seminal book “The Theory of Finance” in 1972.
In 1990, Miller was awarded the Nobel prize in economics “for pioneering work in the theory of financial economics,” and for “fundamental contributions to the theory of corporate finance,” according to his Nobel citation by the Royal Swedish Academy of Science.
He helped revolutionize corporate financial practice, changing it from a loose collection of rules to a sophisticated approach to maximizing shareholder value.
Miller was born in Boston and graduated from Boston Latin School. He received an A.B. from Harvard University in 1943, completing his studies in three years. During World War II, he worked as an economist in the Division of Tax Research of the U.S. Treasury Department and then in the Division of Research and Statistics of the Board of Governors of the Federal Reserve System. In 1949, he entered The Johns Hopkins University and received a Ph.D. in economics in 1952.
His first academic appointment after receiving his doctorate was at London School of Economics in 1952-53. From there, he went to Carnegie Mellon University. In 1961, he joined the faculty of the University of Chicago Graduate School of Business where he remained for the rest of his career.
He continued teaching after his retirement in 1993. Recently, he taught a symposium on financial regulation for M.B.A., Ph.D. and law school students.
Miller served as a public director of the Chicago Board of Trade from 1983 to 1985, and as a public director of the Chicago Mercantile Exchange from 1990 until his death. As a result of his involvement with the exchanges, Miller’s research interests broadened to include the economic and regulatory problems of the financial services industry, and especially of the securities and options exchanges.
“Merton Miller is widely considered to be the founder of modern finance, and the person who fathered the discipline from an institutional field of study to one that is truly a legitimate and well-accepted part of economics and business,” said Robert Hamada, Dean of the University of Chicago Graduate School of Business.
“He was a strong supporter of the belief that theories are only good if they conform to the real world data,” said Hamada, who was hired by Miller in 1966 as a finance professor at Chicago. “He was the epitome of the University of Chicago Graduate School of Business, and its best spokesman.”
“He was a visionary, a man of intense curiosity, with a willingness to embrace ambiguity and use his brilliant intuition to overturn a multitude of long-held ‘truths,’” said Myron Scholes, Miller’s former research assistant who went on to become a Nobel laureate himself.
“His research exhibited a marvelous interconnectedness to once seemingly unrelated ideas. He has left us a research legacy that is unsurpassed in financial economics,” Scholes said.
Fama, the Robert R. McCormick Distinguished Service Professor of Finance, Miller’s first Ph.D. student at Chicago and a 37-year colleague, says, “Merton Miller epitomized the best of the University of Chicago Graduate School of Business. All who knew him at Chicago and elsewhere recognize him as a path-breaking, world-class scholar, a dedicated teacher who mentored many of the most famous contributors to finance and a graceful and insightful colleague who enhanced the research of all around him.”
Miller was the author of eight books, including Merton Miller on Derivatives (1997), Financial Innovations and Market Volatility (1991) and Macroeconomics: A Neoclassical Introduction (1974, with Charles Upton).
In a personal biography prepared in 1990, Miller wrote “Unlike some of my more athletic fellow laureates, the closest I get to recreational exercise these days is watching the Chicago Bears from my season-ticket seats (17 years now) in the south end-zone of frigid Soldier Field.”
Survivors include his wife, Katherine; daughters, Margot Horn and Pamela Chwedyk of Chicago, and Louise Lorber of Evanston, Ill.; and grandsons, Andrew and Eric Horn. His first wife, Eleanor, the mother of his daughters, died in 1969. Arrangements for a memorial service are pending.
June 6, 2000
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Chicago TribuneMILLER'S DEATH `HUGE LOSS'
FOR FUTURES MARKETS
By George Gunset
Tribune Staff WriterThe Chicago futures markets have lost their most
eloquent and influential academic defender.Merton Miller, who died Saturday at 77, was a Nobel
Prize winning economist at the University of Chicago's
Graduate School of Business who was counted on by
the futures industry to make the best case in the face of
criticism for floor-trading practices, big derivatives
scandals and the stock market crash."He was premier in his role," said Robert Hamada, dean
of the U. of C. business school. "This is a huge loss to
the markets."Over the years, Miller, who won the Nobel in 1990,
emerged as one of the most important allies of the
Chicago exchanges, supplying them and their leaders
with the intellectual grist to fight off regulators proposing
rules the exchanges considered burdensome and
congressmen seeking fresh tax-revenue sources.Miller not only wrote, spoke and testified about his
belief in limiting regulatory restrictions for the markets,
but gained experience and respect as a public director at
the Chicago Board of Trade and then at the Chicago
Mercantile Exchange."A Nobel Prize gets peoples' attention," said Richard
Sandor, an architect of financial futures at the CBOT.
"Merton's clarity, knowledge, and communications skills
gave the industry a voice that will be sorely missed and
hard to replace."Sandor said Miller could describe complex markets and
bridge the gap between the theoretical and the "real
world."Miller was the premier interpreter of the futures markets
to the academic community, businesses, and even
regulators, Hamada said."While other academics study and write about these
markets and market participants speak about them, only
he had the respect, the ability to meld the academic and
practical aspects in an articulate way for various
audiences," said Hamada, a public director of the Board
of Trade for 12 years.Miller's work was "monumental" for the futures markets,
according to Leo Melamed, chairman emeritus at the
Merc and chairman of Sakura Dellsher."His work showed that no business can ignore using
futures in the region of risk management," Melamed said.When the Chicago markets were being
blamed--particularly by Wall Street leaders--for the
1987 stock market plunge, Miller worked behind the
scenes to defend futures from harsh regulations.By pointing to studies put together by Miller, the
Chicago exchanges were able to deflect Wall Street
claims that volatility in the futures markets had caused
the 1987 crash.Miller contended the dispute between securities and
futures markets wasn't the crash but the realization by
Wall Street that Chicago exchanges had taken business
from them. He criticized securities industry leaders for
seeking government help: "You don't go to Washington
and say `kill my competition so we will all be better off.'"In a 1992 interview, perhaps anticipating the challenge
of electronic trading, he said that "if these markets don't
remain fast and cheap, lean without all the bells and
whistles, then they risk losing their discount chain status,
becoming instead a fancy department store, and that
would make them uncompetitive."
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