astronomy

Merton Miller

Merton Miller is a astronomy topic covered in the lgStudy science library. This page brings together a partial reference excerpt, illustrations, worked examples, real-world applications and a short study plan, so you can understand Merton Miller rather than just read about it. In short: Merton Howard Miller (May 16, 1923 – June 3, 2000) was an American economist, and the co-author of the Modigliani–Miller theorem (1958), which proposed the irrelevance of debt-equity structure. He shared the Nobel Memorial Prize in Economic Sciences in 1990, along with Harry Markowitz and William F.

Key takeaways

Merton Miller belongs to astronomy; place it in that map before memorising details.
Learn the definition first, then one example that makes the definition concrete.
Connect Merton Miller to a quantity you can measure, compute or draw — that is where exam questions come from.
Reproduce the core statement of Merton Miller from memory before moving on to harder problems.

Reference excerpt

Merton Howard Miller (May 16, 1923 – June 3, 2000) was an American economist, and the co-author of the Modigliani–Miller theorem (1958), which proposed the irrelevance of debt-equity structure. He shared the Nobel Memorial Prize in Economic Sciences in 1990, along with Harry Markowitz and William F. Sharpe. Miller spent most of his academic career at the University of Chicago's Booth School of Business.

Biography

Early years Miller was born in Boston, Massachusetts to Jewish parents Sylvia and Joel Miller, a housewife and attorney. He attended Harvard University as an undergraduate student. He worked during World War II as an economist in the division of tax research of the Treasury Department, and received a Ph.D. in economics from Johns Hopkins University, 1952. His first academic appointment after receiving his doctorate was Visiting Assistant Lecturer at the London School of Economics.

Career In 1958, at Carnegie Institute of Technology (now Carnegie Mellon University), he collaborated with his colleague Franco Modigliani on the paper The Cost of Capital, Corporate Finance and the Theory of Investment. This paper urged a fundamental objection to the traditional view of corporate finance, according to which a corporation can reduce its cost of capital by finding the right debt-to-equity ratio. According to the Modigliani–Miller theorem, on the other hand, there is no right ratio, so corporate managers should seek to minimize tax liability and maximize corporate net wealth, letting the debt ratio chips fall where they will. The way in which they arrived at this conclusion made use of the "no arbitrage" argument, i.e. the premise that any state of affairs that will allow traders of any market instrument to create a riskless money machine will almost immediately disappear. They set the pattern for many arguments based on that premise in subsequent years. Miller wrote or co-authored eight books. He became a fellow of the Econometric Society in 1975 and was president of the American Finance Association in 1976. He was on the faculty of the University of Chicago's Booth School of Business from 1961 until his retirement in 1993, although he continued teaching at the school for several more years. His works formed the basis of the "Modigliani-Miller Financial Theory". He served as a public director on the Chicago Board of Trade 1983–85 and the Chicago Mercantile Exchange from 1990 until his death in Chicago on June 3, 2000. In 1993, Miller waded into the controversy surrounding $2 billion in trading losses by what was characterized as a rogue futures trader at a subsidiary of Metallgesellschaft, arguing in the Wall Street Journal that management of the subsidiary was to blame for panicking and liquidating the position too early. In 1995, Miller was engaged by Nasdaq to rebut allegations of price fixing.

Personal life Miller was married to Eleanor Miller, who died in 1969. He was survived by his second wife, Katherine Miller, and by three children from his first marriage: Pamela (1952), Margot (1955), and Louise (1958), and two grandsons.

Bibliography Merton H. Miller (1991). Merton Miller on Derivatives. New York: John Wiley & Sons. ISBN 0471183407. Merton H. Miller (1991). Financial Innovations and Market Volatility. Cambridge, MA: Blackwell Publishing. ISBN 1557862524. Merton, Miller H.; Charles W. Upton (1986). Macroeconomics: A Neoclassical Introduction. Chicago: University of Chicago Press. ISBN 0226526232. Kessel, Reuben A.; R.H. Coase; Merton H. Miller (1980). Essays in Applied Price Theory. Chicago: University of Chicago Press. ISBN 0226432009. Fama, Eugene F.; Merton H. Miller (1972). The Theory of Finance. New York: Holt, Rinehart & Winston. ISBN 0030867320. Merton H. Miller (1997). "The Private Interest & the Public Interest". The Green Bag.

See also List of economists List of Jewish Nobel laureates

References

External links

Henderson, David R., ed. (2008). "Merton H. Miller (1923–2000)". The Concise Encyclopedia of Economics. Library of Economics and Liberty (2nd ed.). Liberty Fund. pp. 567–568. ISBN 978-0865976665. Appearances on C-SPAN Merton H. Miller on Nobelprize.org including the Prize Lecture December 7, 1990 Leverage Guide to the Merton H. Miller Papers 1941–2002 at the University of Chicago Special Collections Research Center

Worked examples

Example 1 — a first encounter with Merton Miller

Start with the simplest possible case. Write down what Merton Miller claims or describes in one sentence, then invent the smallest concrete situation in which that sentence is true. In astronomy, the smallest case is usually a single object, a single equation or a single measurement. Check that every symbol or term in your sentence has a meaning in that case.

Example 2 — changing one variable

Take the situation from Example 1 and change exactly one quantity: double it, halve it, or set it to zero. Predict what should happen to Merton Miller before you calculate. Comparing your prediction with the result is the fastest way to find out whether you understand the idea or only the words.

Example 3 — an exam-style question

Typical questions about Merton Miller ask you to (a) state it precisely, (b) apply it to given data, and (c) explain a limitation. Practise writing all three answers in under five minutes; the third part is what separates a full-mark answer from an average one.

Applications of Merton Miller

In research: Merton Miller appears in astronomy research whenever the underlying quantities have to be modelled precisely. Papers usually cite it as a starting assumption and then explore where it breaks down.
In technology and industry: Engineering practice reuses Merton Miller in design rules, simulations and safety margins. Knowing the idea lets you read a specification sheet and understand why the numbers look the way they do.
In the classroom: Merton Miller is common in secondary-school and first-year university syllabi. It links to neighbouring topics 1923 births, 2000 deaths, 20th-century American economists, so understanding it makes those chapters shorter.
In everyday life: Look for Merton Miller outside the textbook — in sport, cooking, traffic, electronics or the sky above you. An example you found yourself is remembered far longer than one you were given.

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How to study Merton Miller in 20 minutes

Read the reference excerpt below once, without taking notes.
Close the page and write down what Merton Miller means in your own words.
Compare your version with the excerpt and mark what you missed.
Work through the three examples above with pen and paper.
Explain Merton Miller out loud to somebody else — or to Teacher Smith in the lgStudy chat.

Frequently asked questions

What is Merton Miller in simple terms?

Why does Merton Miller matter?

Because it connects several astronomy ideas at once: it gives you a definition you can apply, a quantity you can calculate, and a way to check whether a result is plausible.

How should I study Merton Miller?

Read the excerpt, restate it from memory, then work through the examples and applications listed on this page. The five-step study plan above takes about twenty minutes.

What does this page cover?

It gives you a compact reference excerpt plus original lgStudy explanations, examples, applications and study material on Merton Miller.