Merton Miller: Biography & Nobel Prize

Instructor: Morgan Gannarelli
In this lesson, we will discuss the Nobel Prize winner and American economist, Merton Miller. We will also discuss his early life, education, and his many accomplishments.

Early Life of Merton Miller

He was born on May 16, 1923 in Boston, Massachusetts, as Merton Howard Miller. An only child, Merton decided to follow in his father's footsteps and attend Harvard University. Unlike his father, who pursued law, Merton decided to study economics. He graduated magna cum laude in just three years and was drafted into World War II. During his service, it was discovered that he had a defect in one ear, so he was sent to work in the Division of Tax Research for the U.S. Treasury Department.

Rather than pursuing his doctorate at Harvard, he chose to attend Johns Hopkins University. When you think of Johns Hopkins, you probably think of medical degrees, but the University is also known for its strong financial program.

At the age of 29, he graduated with his Ph.D in economics in 1952. Soon after, the London School of Economics appointed him the Visiting Assistant Lecturer for that year. After he was finished with the temporary position in London, he joined the Graduate School of Industrial Administration in Pennsylvania. This is where he met Franco Modigliani, and they began their work on the Modigliani-Miller theorem.

Later Work

In 1961, Merton Miller decided to pursue a career in the Graduate School of Business at the University of Chicago. Working with his first doctoral student, Eugene Fama, he co-wrote The Theory of Finance. This book was used in finance classes at the University of Chicago. He decided not to focus on capital finance any longer, and in 1983, he became the Public Director of Chicago Board of Trade.

In 1990, he took over as Public Director of the Chicago Mercantile Exchange and remained in this position until he passed away in 2000. He focused on the economic and regulatory problems with the financial industry, like the securities exchange.

Nobel Prize and Other Achievements

The Modigliani-Miller Theorem is probably what Merton Miller is most recognized for. He and Franco Modigliani collaborated on the theorem. Often referred to as the capital structure irrelevance and dividend irrelevance theorems, the Modigliani-Miller theorem explained capital structure for corporate finance. It established that there is not a right debt ratio. They suggested corporations should minimize tax liabilities and maximize net income.

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