Milton Friedman
Milton Friedman (1912-2006) was an American economist and political theorist who became a leader of American Conservatism in its libertarian aspects and is known in the History of economic thought as one of the most highly influential economists, political commentators and essayists of the 20th century. He was a leader of the Chicago School of Economics where he taught for many years until decamping for the Hoover Institution at Stanford. Friedman was laureated with the Nobel Prize in Economics in 1976 "for his achievements in the fields of consumption analysis, monetary history and theory and for his demonstration of the complexity of stabilization policy". A highly proficient statistician, theorist, and public communicator, he rejected key elements of Keynesian economics and promoted his own "monetarist" [1] theories of macroeconomics. Monetarism reached the peak of its influence on economy policy-making in the late 1970s and early 1980s; since then it has faded in importance. Friedman preached vigorously the ideological doctrine that market solutions are better than government solutions. Friedman and George J. Stigler [2] led the Chicago School of Economics[3]. Stigler and Friedman were avowed followers of microeconomic theorist Alfred Marshall, promoting Neoclassical microeconomics. Through their influential journals -- notably, the Journal of Political Economy and the Journal of Law and Economics -- the research program of the Chicago School was advanced and diffused. Friedman had great influence on numerous governments, especially in the 1980s on Ronald Reagan in the U.S. and Margaret Thatcher in Britain.[4], inspiring the neoliberal political policies which became know as Reganism and Thatcherism
Friedman's contributions to Economics
Friedman's early contributions to Economics include the "Permanent Income Hypothesis" [5] (1957), his formulation of risk-aversion and risk-proclivity (1948, with L.J. Savage), and his propositions for a "positivist" methodology in economics (1953) that demanded theories closely fit the observable data.
Friedman's criticisms of Keynesian theory began with his attack on the Hicks-Hansen IS-LM model [6] dichotomy in his "restatement" of the Quantity Theory [7] in 1956 -- reminding economists that "money matters". His massive historical study with Anna J. Schwartz on the Monetary History of the United States (1963) led to a famous debate on money-income causality [8]. In his famous presidential address to the American Economic Association, Friedman (1968) then focused his attention upon the apparent breakdown of the Phillips Curve [9] relationship in the 1970s, proposing to replace it with a "Natural Rate of Unemployment" (NRU) [10] - a concept later formalized in more detail by the New Classicals [11] As Keynesian models failed to explain the economic patterns of the 1970s, the Keynesians fell from favor and economists listened more to Friedman, a scholar who came out of the wilderness as a prophet.
Friedman wrote on many aspects of economic policy. In general, he argued that government discretionary "fine-tuning" of the economy, as had been proposed by Keynesians, ought to be replaced with iron "rules" of policy - notably his "money supply growth" rule, and that central banks should be abolished[12]. The Federal Reserve for a while attempted to follow Friedman's rules, but gave it up as impossible to realize. He also wrote several popular volumes advocating laissez-faire policies more generally.
Notes
- ↑ Monetarist Economic Policy
- ↑ George J. Stigler, 1911-1991
- ↑ The Chicago School]
- ↑ Ebenstein (2007) is the only full-length biography, but see also Friedman and Friedman, Two Lucky People: Memoirs (1998)
- ↑ Integrating the Keynesian Relationships in consumption.
- ↑ The Hicks-Hansen IS-LM Model
- ↑ The Monetarist Transmission Mechanism]
- ↑ The Money-Income Causality Debate
- ↑ Phillips Curve
- ↑ The Inflation Acceleration Controversy
- ↑ New Classical Macroeconomics.]
- ↑ Brian Doherty Can We Bank on the Federal Reserve?, Reasononline, November 2006