Who was 'Milton Friedman'
Milton Friedman was an American economist and statistician best known for his strong belief in free-market capitalism. During his time as professor at the University of Chicago, Friedman developed numerous free-market theories that opposed the views of traditional Keynesian economists. In his book "A Monetary History of the United States, 1867-1960", Friedman illustrates the role of monetary policy in creating and arguably worsening the Great Depression.
BREAKING DOWN 'Milton Friedman'
Milton Friedman was born on July 31, 1912, in New York and died on Nov. 16, 2006, in California. Friedman grew up on the east coast and attended Rutgers University, studying both mathematics and economics. He graduated from college in 1932 and went on to earn a Ph.D. in economics at the University of Chicago in 1946. During this time, Friedman took a position at the National Bureau of Economic Research to study income distribution in the United States. After his work on income inequality, he then focused on tax research and statistical analysis. In 1946, after graduating with a Ph.D., Friedman took an economics position at the University of Chicago, where he conducted his most impactful work.
Friedman's Contribution to Economics
Milton Friedman's first big breakthrough in the field of economics was his Theory of the Consumption Function in 1957. This theory championed the idea that a person's consumption and savings decisions are more greatly impacted by permanent changes to income rather than changes to income that are perceived as ephemeral. This theory produced the permanent income hypothesis, which explained why short-term tax increases actually decrease savings and keep consumption levels static, all else equal.
However, Friedman's seminal contribution to economics came through his analysis of prevailing macroeconomic theories. During his time as a professor, macroeconomics was dominated by Keynesian economists. This school of economic thought, pioneered by John Maynard Keynes, believes that fiscal policy is more important than monetary policy, that government spending should be used to neutralize the volatility of the business cycle and that prices are inherently sticky.
Friedman opposed these macroeconomic Keynesian views with his own economic theory of free-market monetarism. Through this theory, Friedman expressed the importance of monetary policy and pointed out that changes in the money supply have real short-term and long-term effects. Specifically, the money supply affects price levels. Further, Friedman used monetarism to openly contradict the Keynesian principles of the Keynesian multiplier and the Philips curve. Milton Friedman was awarded the Nobel Prize in Economics in 1976. Over the course of his career, he published pioneering books on the modern economy as well as numerous influential articles, changing the way economics is taught.