Merton Miller

Who Is 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.

Key Takeaways

  • Merton Miller is an economist and winner of the Nobel prize for his work in corporate finance.
  • Miller is most well known for his development and application of the Modigliani-Miller Theorem.
  • In addition to his academic work, Miller has written popular books on finance and commodities markets.

Investopedia / Bailey Mariner

Understanding Merton Miller

Merton Miller was born in Boston in 1923. As an undergraduate, Miller attended Harvard University and graduated magna cum laude. He was an early colleague at Harvard of 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 Modigliani

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 he and other fellows were engaged in the research of business and corporations. There he would meet Franco Modigliani, 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 Modigliani and Miller collaborated on a paper titled "The Cost of Capital, Corporate Finance and the Theory of Investment." It was here that the Modigliani-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 look into issues of price fixing on the exchange.


Miller wrote and contributed to a handful of academic and popular texts in corporate finance and macroeconomics as well as numerous original research articles. His principal contribution is the influential Modigliani-Miller Theorem, which challenged traditional theories of capital structure in corporate finance. The Theorem states that with well-functioning capital markets, the mix of equity and debt used to finance a company is irrelevant to the firm's value, since equity holders can finance their equity by leveraging themselves; if some optimal mix of debt and equity could be found to minimize the cost of capital and increase firm value, then equity holders could simply achieve the same ratio by borrowing themselves regardless of the firm's own capital structure.

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  1. The Nobel Prize. "The Sveriges Riksbank Prize in Economic Sciences in Memory of Arthur Nobel 1990." Accessed Nov. 10, 2020.

  2. The Nobel Prize. "Merton H. Miller, Biographical." Accessed Nov. 10, 2020.

  3. American Economic Association. "The Cost of Capital, Corporation Finance and the Theory of Investment." Accessed Nov. 10, 2020.