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Chicago School of Economics

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The Chicago school of economics is known in the History of modern economic thought as a highly influential school of thought and methodology favoring free-market economics practiced at and disseminated from the University of Chicago after 1950. The leaders included George Stigler, Milton Friedman and numerous other Nobel Prize winners.

The school closely follows neoclassical price theory (as developed by Alfred Marshall) and libertarianism. It rejected Keynesianism in favor of Friedman's monetarism, and (after 1980) later in favor of rational expectations as developed by Robert Lucas. It rejects most government regulation of business in favor of laissez-faire. In terms of methodology the stress is on "positive economics"--that is, empirically based studies using statistics, with less stress on theory and more on data. The school is noted for its very wide range of topics, from regulation to marriage, slavery and demography, that it studies.

The term "Chicago School" was coined in the 1950s to refer to economists teaching in the Economics Department at the University of Chicago, and closely related academic areas at the University such as the Graduate School of Business] and the Law School. Scholars met together in frequent, highly intense discussions that helped set a group outlook on economic issues, based on price theory.

Not all economists within the Department of Economics at the University of Chicago shared the beliefs in the "Chicago school". The department has produced more Nobel Prize winners and John Bates Clark medalists in economics than any other university. Fewer than half of the professors in the economics department were considered part of the school of thought. Friedrich Hayek, a Nobel prize winner who taught at Chicago, had similar ideas but was not part of the intense discussion groups that comprised the "school."