DEFINITION of Merton Miller

Merton Miller is a prominent Chicago school economist who was awarded the Nobel Memorial Prize in Economics in 1990. He shared the award with Harry Markowitz and William Sharpe for their combined efforts on the Modigliani-Miller theorem, which deals with the relationship between the value of a company and its debt-equity structure. Throughout his career, Miller’s research focused on corporate finance and on the economic and regulatory problems of the financial services industry.


Merton Miller was born in Boston in 1923. As an undergraduate, Miller attended Harvard University and graduated magna cum laude. An early colleague at Harvard was Robert M. Solow, who also later became a Nobel Prize in Economics laureate. Early in his career and during World War II, Miller worked as an economist for the federal government in the Division of Tax Research of the U.S. Treasury Department and subsequently in the Division of Research and Statistics of the Board of Governors of the Federal Reserve System (FRS).

'Merton Miller' and Francisco Modigliano

In 1949, Miller returned to graduate school at Johns Hopkins to further his research and study in the field of economics. He received his PhD in 1952 from Johns Hopkins and then spent a year as a Visiting Guest Lecturer at the London School of Economics before taking on a long-term post at Carnegie Mellon’s Graduate School of Industrial Administration, where fellows were engaged in the research of business and corporations. There he would meet Francisco Modigliano, and the two began to publish papers together on the economics of corporate finance, long before either of them would reach the pinnacle of their profession as Nobel Prize laureates. 

In 1958, the Modigliano and Miller collaborated on a paper titled The Cost of Capital, Corporate Finance and the Theory of InvestmentIt was here that the Modigliano-Miller theorem was first discussed. The theorem later appeared in the papers and writings of both men, and was elaborated upon by others as well.

In 1961, Miller left Carnegie Mellon to join the faculty at the University of Chicago and he remained there for the rest of his career, later becoming a public director of the Chicago Mercantile Exchange (CME), a post he held while working concurrently at the University of Chicago. In his lifetime, Miller wrote or co-authored eight books, including Merton Miller on Derivatives for the popular press John F. Wiley & Sons.

Throughout his career and into retirement, Miller continued to be involved in the study and articulation of interesting problems within corporate finance, and in 1995, he was retained as a consultant by the NASDAQ to help looking into issues of price fixing on the exchange.