Merton Miller

American economist

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.


  • What is the "cost of capital" to a firm in a world in which funds are used to acquire assets whose yields are uncertain; and in which capital can be obtained by many different media, ranging from pure debt instruments, representing money-fixed claims, to pure equity issues, giving holders only the right to a pro-rata share in the uncertain venture? This question has vexed at least three classes of economists: (1) the corporation finance specialist concerned with the techniques of financing firms so as to ensure their survival and growth; (2) the managerial economist concerned with capital budgeting; and (3) the economic theorist concerned with explaining investment behavior at both the micro and macro levels.
    • Franco Modigliani and Merton H. Miller. "The cost of capital, corporation finance and the theory of investment." The American economic review (1958): 261-297.
  • Think of the firm as a gigantic tub of whole milk. The farmer can sell the whole milk as it is. Or he can separate out the cream, and sell it at a considerably higher price than the whole milk would bring. (Selling cream is the analog of a firm selling debt securities, which pay a contractual return.) But, of course, what the farmer would have left would be skim milk, with low butter-fat content, and that would sell for much less than whole milk. (Skim milk corresponds to the levered equity.) The Modigliani-Miller proposition says that if there were no cost of separation (and, of course, no government dairy support program), the cream plus the skim milk would bring the same price as the whole milk.
    • Merton Miller. Financial Innovations and Market Volatility, 1991. p. 269; as cited in Merton H. Miller (1923–2000). Library of Economics and Liberty (2nd ed.). Liberty Fund. 2008. 

Investment Gurus: A Road Map to Wealth from the World's Best Money Managers. 1999Edit

Merton Miller in: Peter J. Tanous. Investment Gurus: A Road Map to Wealth from the World's Best Money Managers. 1999.

  • When I started worrying about stocks, it was the late 1930s and early 1940s and it didn't seem like a good way to make money then, either.
    • p. 263
  • What counts is what you do with your money, not where it came from.
  • p. 267
  • Most people might just as well buy a share of the whole market, which pools all the information, than delude themselves into thinking they know something the market doesn't.
    • p. 269.

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