Milton Friedman
Milton Friedman was born in Brooklyn on 31 July 1912. Being a leader of the Chicago School of Economics, in the years 1965-1990 he gained renown for challenging the Keynesian model and the quantity theory of money. In 1976, Friedman won the Nobel Prize in Economic Sciences.
Some of his main achievements include:
- Monetary Economics: Friedman developed the theory of monetarism, which emphasizes the role of money in the economy and argues that the money supply should be managed by the central bank to achieve stable economic growth and low inflation. He also proposed the "k-percent rule," which recommends that the money supply should be increased at a steady rate, regardless of the state of the economy.
- Statistical Methods: Friedman made important contributions to the field of statistics, particularly in the development of the method of regression analysis. He also developed techniques for using data from sample surveys to estimate population parameters.
- Critique of Keynesian Economics: Friedman was a vocal critic of the Keynesian economic model, which emphasized the role of government intervention in the economy. He argued that markets, rather than government, should play the primary role in allocating resources.
- Free Market Capitalism: Friedman was a strong advocate of free market capitalism and limited government intervention in the economy. He believed that government should play a minimal role in economic affairs and that individuals and businesses should have the freedom to make their own economic decisions.
- Public Intellectual: Friedman was a highly influential public intellectual, and his books, articles, and television show "Free to Choose" helped to popularize economic ideas and spread awareness of the principles of free-market capitalism to a wider audience.
- Awarded with the Nobel Prize in Economic Sciences in 1976 for his research on consumption analysis, monetary history and theory, and the complexity of stabilization policy.
Theory of the Consumption Function
In his work entitled "A Theory of the Consumption Function" published by the Princeton University Press in 1957, Friedman starts this war against the Keynesian function of consumption. Contrary to traditional neoclassical economists, he does not negate the Keynesian idea of the relation between the level of income and consumption. However, he tries to show that the consumption level of an individual is not a function of its income in a given period but its "fixed income", i.e. an average income forecast in the long run.
Monetary policy
The main object of Friedman's analyses is recommended by the Keynesian supporters budget policy, which, in his opinion, is ineffective and dangerous. History teaches us that the recession and inflation result from the mistakes of economic policy. In the long run there is no dilemma between inflation and unemployment but getting closer to the natural rate of unemployment. According to Friedman, the crisis of 1929 can be explained by mistakes made in the monetary policy.
Major works
- A Theory of the Consumption Function (1957)
- Capitalism and Freedom (1962)
- Inflation: Causes and Consequences (1963)
- Price theory (1967)
- Studies in the quantity theory of money (1973)
- Free to Choose: A Personal Statement (1980)
| Milton Friedman — recommended articles |
| John Maynard Keynes — Thorstein Veblen — Arthur Okun — Alban William Phillips — John Stuart Mill — IS-LM model — Interventionism — Joseph Stiglitz — Gary S. Becker |
References
- Pressman S. (1999), Fifty major economists, Routledge.
- Milton Friedman @ Wikipedia.
Author: Sławomir Pytel
