Skip to content
Nobel Jews

Sveriges Riksbank Prize in Economic Sciences · 1990

Merton H. Miller

He showed that what a company does with its money matters more than how it raises it, laying the groundwork of modern corporate finance.

The Nobel citation: “for their pioneering work in the theory of financial economics”
Born
May 16, 1923, Boston, MA, USA
Died
June 3, 2000, Chicago, IL, USA
Shared with
Harry M. Markowitz, William F. Sharpe
Affiliation at the time
University of Chicago, USA

Economics prize

1990

Shared with 2 other laureates.

Age that year

67years

Born in 1923.

Sources cited

20

Fact-checked September 24, 2026.

  • He liked to explain his Nobel-winning theorem with a Yogi Berra joke: asking for his pizza to be cut into 12 slices instead of six because he was extra hungry.
  • Professors and Wall Street first judged M&M's 1961 dividend paper to be wrong. Today every finance student learns the M&M theorems.
  • He urged Myron Scholes, then a student computer programmer, to do a PhD and helped Eugene Fama pick his thesis topic. Both later won economics Nobels.
  • He and Robert Solow, a future fellow economics laureate, sat in the same section of Harvard's introductory economics course.
  • In his Nobel lecture he rejected press reports calling him a co-inventor of the leveraged buyout, since his theorem said borrowing alone could not raise a firm's value.

The breakthrough

The M&M theorems: a firm's worth comes from its business, not its financing

Every company needs money to build factories, hire people and create products. It can borrow the money (debt) or sell pieces of ownership to investors (shares, also called equity). Before 1958, the prevailing view was that there was a "right" mix of the two that would make a company worth more. Miller and Franco Modigliani showed that in an idealized market, with no taxes and no costs of going bankrupt, the mix does not change the company's total value. What matters is how much profit its factories, people and ideas can earn. Their reasoning was simple: if a firm could become more valuable just by borrowing, investors could copy the trick by borrowing on their own, so nobody would pay extra for it. Miller liked a dairy comparison. A farmer can sell whole milk, or skim off the cream and sell cream and skim milk separately. If separating them costs nothing, the two together fetch the same price as the whole milk. Debt is the cream; the riskier shares left over are the skim milk. A 1961 companion paper showed the same holds for dividends: paying cash to shareholders does not by itself make them richer. The theorems became powerful because of what happens when the ideal conditions fail. Miller spent decades showing how taxes and bankruptcy costs change the answer, which made M&M the standard yardstick for later research on how firms should finance themselves.[1],[4],[5],[8],[9],[12]

“The M&M propositions are the finance equivalents of conservation laws.”
Merton H. Miller, From his 1990 Nobel lecture, "Leverage", explaining that borrowing only divides a firm's business risk among its investors rather than adding to it.[3]

What it meant for humanity

Corporate finance sounds remote, but it shapes how savings turn into jobs. Financial markets move money from savers to companies that build plants and buy machines, and the M&M theorems gave that process its first rigorous logic. Before Miller, corporate finance was largely a loose collection of rules of thumb. His work helped turn it into a disciplined way of asking whether a decision creates real value or only reshuffles who holds the risk, and his Chicago dean credited him with making finance an accepted part of economics. Much of his influence flowed through people. He steered Eugene Fama's thesis on stock prices, early work in what became known as tests of market efficiency, and Fama later won a Nobel. He also coaxed Myron Scholes from computer programming into a PhD; Scholes went on to help create the option-pricing method honored with the 1997 prize. With Fama he wrote The Theory of Finance (1972), and generations of business students learned the field through ideas he shaped. From the 1980s he took those ideas into the markets themselves, serving as a public director of the Chicago Board of Trade and the Chicago Mercantile Exchange and chairing the Merc's academic inquiry into the October 1987 crash. His framework still shapes public debates. After the 2008 financial crisis, economists arguing that banks should hold far more equity relied on the M&M point that shareholders demand lower returns when a firm borrows less, so safer banks need not be costly for society.

  • The Nobel committee said the M&M theorems became the natural benchmark for theoretical and empirical research in corporate finance, and that Miller had dominated that research for two decades.[4]
  • He mentored two future Nobel laureates: he helped Eugene Fama choose his thesis on stock prices and urged Myron Scholes, then a student programmer, into the PhD program.[5],[10],[11]
  • His Chicago dean, Robert Hamada, credited him with turning finance from a descriptive study of institutions into a respected branch of economics and business.[5]
  • He chaired the Chicago Mercantile Exchange's academic panel on the October 1987 crash and served as a public director of both the Chicago Board of Trade and the Chicago Mercantile Exchange.[2],[7]
  • After 2008, economists pressing for much higher bank capital argued that more equity lowers the return shareholders demand, the same logic as M&M's second proposition.[4],[20]

Impact in numbers

Miller's legacy is a way of reasoning rather than a product. The M&M theorems tell managers, investors and regulators to ask whether a financial maneuver creates real value or merely reshuffles who bears the risk, and they remain the benchmark against which theories of corporate borrowing and dividends are tested. That logic shaped how companies judge investments, how finance is taught, and how economists argue about rules for bank capital, and it spread through the people he trained, including two later Nobel laureates. None of this can honestly be turned into dollars or lives. The theorems describe an idealized world, their influence is intertwined with the work of Modigliani, Markowitz, Sharpe, Fama and many others, and we found no credible estimate of what better financing decisions have been worth. We therefore record no quantified claim for him.

EconomyFundamental scienceEducation

No number is given here on purpose. Some contributions cannot be counted honestly, and we would rather describe them than invent a figure.

The double edge

The M&M theorems themselves caused no documented harm, but Miller's public advocacy drew criticism. A committed free-market economist, he argued against new regulation of futures, derivatives and corporate borrowing. His Nobel lecture played down the social dangers of heavy borrowing; after the 2008 financial crisis, other economists argued that highly leveraged banks impose large costs on everyone. In 1995 a consulting firm working for Nasdaq retained him to review a study, by two of his own former students, that pointed to possible collusion among Nasdaq dealers; the SEC later found an anticompetitive pricing practice that raised investors' costs. He also weighed in on Metallgesellschaft's 1993 oil-futures losses, blaming managers for closing out the positions too soon. Some press accounts linked M&M to the 1980s leveraged-buyout boom, a connection he rejected. No quantifiable harm is attributed to him here.

  • Moderate

    Played down the dangers of heavy borrowing

    In his 1990 Nobel lecture Miller said public alarm about corporate borrowing bordered on hysteria in some quarters, argued that the costs of financial distress fall mainly on private parties rather than society, and warned that curbs on junk bonds and leveraged bank lending would raise the cost of capital. He did blame government deposit guarantees for the savings-and-loan crisis. After 2008, Anat Admati and colleagues argued that high bank leverage is socially costly.[3],[20]

  • Moderate

    Hired to review the Nasdaq price-fixing study

    In 1995 Nasdaq hired the consulting firm Lexecon, which retained Miller to review a study by two of his former PhD students suggesting that dealers kept trading spreads artificially wide. In 1996 the SEC found that Nasdaq market makers had widely followed an anticompetitive pricing convention that raised investors' trading costs, though the Justice Department found no evidence that the practice came from an express agreement among all the dealers.[18],[19]

  • Minor

    Champion of lightly regulated derivatives

    Miller held that futures contracts are useful products for the people who buy them and that government rules for them would probably hurt more than help. In the controversy over Metallgesellschaft's oil-futures losses, estimated at well over $1 billion, he wrote in the Wall Street Journal that the fault lay with managers who lost their nerve and closed out the positions prematurely.[7],[8],[12]

Against the odds

Miller grew up in Boston during the Great Depression, the only child of a Harvard-educated lawyer, and he did not face the persecution that Jews in Europe endured in his lifetime. The barriers in his world were quieter but real. In the 1920s Harvard, alarmed that Jews made up more than a fifth of its 1922 freshman class, began judging applicants on "character", using reference letters, photographs and questions about religion and name changes; by 1933 Jews were back down to about 15 percent of its students. Miller entered Harvard in 1940 under that system. A historian of economics describes American universities as openly antisemitic through the Second World War, with barriers to hiring Jewish professors falling only after it. Harold Burbank, the longtime chairman of Harvard's economics department, was known to dislike Jews as well as mathematical and Keynesian economics; Miller's classmate Robert Solow later said this made his own and Paul Samuelson's futures at Harvard look dim. Miller's longtime collaborator, Franco Modigliani, had fled Fascist Italy after its 1938 racial laws. We found no record of Miller himself describing antisemitic treatment. He called the death of his first wife, Eleanor, in 1969 a heavy personal blow; it left him with three young daughters.

  • 1940

    Quota

    Miller entered Harvard in 1940, under an admissions system built in the 1920s to limit Jewish students. Harvard asked applicants for photographs and about their religion and any family name changes. Jews had been more than a fifth of the 1922 freshman class; by 1933 they were about 15 percent of students.[2],[15],[16]

  • —

    Discrimination

    A historian of economics describes American universities as openly antisemitic through the Second World War, when barriers to hiring Jewish professors were still high. Harvard's longtime economics chairman was known to dislike Jews; Miller's classmate Robert Solow said this made his and Paul Samuelson's futures there look dim.[2],[15]

  • 1969

    Other

    His first wife, Eleanor, died in 1969, leaving him with three young daughters. He called her death a heavy personal blow.[1],[2]

Jewish background

Both parents JewishRelationship to Jewish identity not documented

Miller was born in Boston to Joel and Sylvia Miller, described as Jewish parents in Wikipedia, which cites the Encyclopedia of American Jewish History. His father was a Harvard-educated attorney. Jinfo lists Miller among Jewish economics laureates, citing a 1992 encyclopedia of Jewish-American history, a Jewish historical timeline, and a 1938 Who's Who in American Jewry entry his father submitted. The Jewish Virtual Library also profiles him. We found no source on his religious practice or his own statements about being Jewish, so his personal relationship to Jewish identity is recorded as unknown.[2],[12],[13],[14]

Key dates

  1. May 16, 1923

    Born in Boston, Massachusetts, the only child of attorney Joel Miller and Sylvia Miller.[1],[2]

  2. 1940

    Enters Harvard, where future laureate Robert Solow is in his section of introductory economics.[2]

  3. 1943

    Graduates from Harvard magna cum laude in three years, then works as a wartime economist at the US Treasury and later the Federal Reserve Board.[2],[5]

  4. 1952

    Earns a PhD in economics at Johns Hopkins, then spends a year as a visiting lecturer at the London School of Economics.[2]

  5. 1953

    Joins Carnegie Tech's business school, where his colleagues include Franco Modigliani, who had left Fascist Italy after its 1938 racial laws.[2],[6],[17]

  6. 1958

    Publishes "The Cost of Capital, Corporation Finance and the Theory of Investment" with Modigliani, the first M&M paper.[4],[5]

  7. 1961

    Publishes the M&M paper on dividend policy and moves to the University of Chicago's Graduate School of Business, his academic home for life.[5],[9]

  8. 1969

    His first wife, Eleanor, dies, leaving him with three young daughters.[2]

  9. 1972

    Publishes The Theory of Finance with Eugene Fama, his first Chicago PhD student.[5]

  10. 1976

    Serves as president of the American Finance Association.[6],[14]

  11. 1987

    After the October stock market crash, chairs the Chicago Mercantile Exchange's academic panel investigating it.[2],[7]

  12. October 16, 1990

    Shares the Nobel Memorial Prize in Economic Sciences with Harry Markowitz and William Sharpe for pioneering work in financial economics.[1],[4]

  13. 1993

    Retires from the Chicago faculty but goes on teaching there after retirement.[7]

  14. June 3, 2000

    Dies at his home in Chicago, aged 77.[1],[5]

Sources

  1. 1.Merton H. Miller - Facts · NobelPrize.org (Nobel Prize Outreach)
  2. 2.Merton H. Miller - Biographical · NobelPrize.org (from Les Prix Nobel 1990), 1990
  3. 3.Leverage (Nobel Lecture, 7 December 1990) · NobelPrize.org, 1990
  4. 4.Press release: The Prize in Economics 1990 · NobelPrize.org (Royal Swedish Academy of Sciences), 1990
  5. 5.Merton Miller, 77, leaves legacy of corporate finance research · The University of Chicago Chronicle, 2000
  6. 6.Merton H. Miller (Nobel laureates) · The University of Chicago Booth School of Business
  7. 7.Merton Miller · Fama-Miller Center for Research in Finance, Chicago Booth
  8. 8.Merton H. Miller (1923-2000), The Concise Encyclopedia of Economics · Econlib (Liberty Fund), 2008
  9. 9.Why Merton Miller Remains Misunderstood (Douglas W. Diamond) · Chicago Booth Review, 2015
  10. 10.Myron S. Scholes - Biographical · NobelPrize.org, 1997
  11. 11.Eugene F. Fama - Biographical · NobelPrize.org, 2013
  12. 12.Merton Miller · Wikipedia
  13. 13.Jewish Nobel Prize Winners in Economics · Jinfo.org
  14. 14.Merton Howard Miller · Jewish Virtual Library (American-Israeli Cooperative Enterprise)
  15. 15.MIT's Openness to Jewish Economists (E. Roy Weintraub), CHOPE Working Paper 2013-05 · Center for the History of Political Economy, Duke University, 2013
  16. 16.Getting In: the social logic of Ivy League admissions (Malcolm Gladwell, on Jerome Karabel's The Chosen) · The New Yorker, 2005
  17. 17.Franco Modigliani - Biographical · NobelPrize.org, 1985
  18. 18.Nasdaq Hires Nobel Laureate to Help Fend Off Allegations (Bloomberg Business News) · Los Angeles Times, 1995
  19. 19.Report Pursuant to Section 21(a) of the Securities Exchange Act of 1934 Regarding the NASD and the NASDAQ Market · U.S. Securities and Exchange Commission, 1996
  20. 20.Fallacies, Irrelevant Facts, and Myths in the Discussion of Capital Regulation: Why Bank Equity is Not Expensive (Admati, DeMarzo, Hellwig, Pfleiderer) · Stanford Graduate School of Business, Working Paper, 2013

Fact-checked on September 24, 2026 by a separate AI fact-checking pass that re-opened the sources, with 8 corrections made. How we check

Suggest a correction