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.
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.
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.
- 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)
- Pressman S. (1999), Fifty major economists, Routledge.
- Milton Friedman @ Wikipedia.
Author: Sławomir Pytel